STATEMENT OF AUDITOR INDEPENDENCE · frqwuro edvhg rq wkh dvvhvvhg ulvn dqg shuiruplqj vxfk rwkhu surfhgxuhv dv zh frqvlghuhg qhfhvvdu\ lq wkh flufxpvwdqfhv :h eholhyh wkdw wkh dxglw

$Page 1: STATEMENT OF AUDITOR INDEPENDENCE · frqwuro edvhg rq wkh dvvhvvhg ulvn dqg shuiruplqj vxfk rwkhu surfhgxuhv dv zh frqvlghuhg qhfhvvdu\ lq wkh flufxpvwdqfhv :h eholhyh wkdw wkh dxglw$
FEDERAL RESERVE BANK OF PHILADELPHIA | ANNUAL REPORT 2014

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2014 STATEMENT OF AUDITOR INDEPENDENCEFEDERAL RESERVE BANK OF PHILADELPHIA

The Federal Reserve Board engaged Deloitte & Touche LLP (D&T) to audit the 2014 combined and individual financial state-ments of the Reserve Banks and Maiden Lane LLC.1

In 2014, D&T also conducted audits of internal controls over financial reporting for each of the Reserve Banks. Fees for D&T’s services totaled $7 million, of which $0.4 million was for the audit of Maiden Lane LLC. To ensure auditor indepen-dence, the Board requires that D&T be independent in all matters relating to the audits. Specifically, D&T may not perform services for the Reserve Banks or others that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In 2014, the Bank did not engage D&T for any non-audit services.

1 In addition, D&T audited the Office of Employee Benefits of the Federal Reserve System (OEB), the Retirement Plan for Employees of the Federal Reserve System (System Plan), and the Thrift Plan for Employees of the Federal Reserve System (Thrift Plan). The System Plan and the Thrift Plan provide retirement benefits to employees of the Board, the Federal Reserve Banks, the OEB, and the Consumer Financial Protection Bureau.


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FINANCIAL STATEMENT CONTENTS

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 34

INDEPENDENT AUDITORS’ REPORT 35

ABBREVIATIONS 38

FINANCIAL STATEMENTS

STATEMENTS OF CONDITION AS OF DECEMBER 31, 2014, AND DECEMBER 31, 2013 39

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014, AND DECEMBER 31, 2013 40

STATEMENTS OF CHANGES IN CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2014, AND DECEMBER 31, 2013 41

NOTES TO FINANCIAL STATEMENTS 42


34

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


35

INDEPENDENT AUDITORS’ REPORT

Internal Control — Integrated Framework (2013)


36

Internal Control — Integrated Framework (2013) .

INDEPENDENT AUDITORS’ REPORT — PAGE 2


37

Financial Accounting Manual for Federal Reserve Banks,

INDEPENDENT AUDITORS’ REPORT — PAGE 3


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ABBREVIATIONS

ACH Automated clearinghouse

ASC AccountingStandardsCodification

ASU AccountingStandardsUpdate

BEP BenefitEqualizationRetirementPlan

Bureau BureauofConsumerFinancialProtection

FAM Financial Accounting Manual for Federal Reserve Banks

FASB FinancialAccountingStandardsBoard

FOMC FederalOpenMarketCommittee

FRBA FederalReserveBankofAtlanta

FRBNY FederalReserveBankofNewYork

GAAP AccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica

GSE Government-sponsoredenterprise

IMF InternationalMonetaryFund

MBS Mortgage-backedsecurities

SDR Specialdrawingrights

SERP SupplementalRetirementPlanforSelectOfficersoftheFederalReserveBanks

SOMA SystemOpenMarketAccount

TBA Tobeannounced

TDF TermDepositFacility


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2014 2013

ASSETS

Goldcertificates $ 338 $ 397Specialdrawingrightscertificates 210 210Coin 122 123 Loanstodepositoryinstitutions 7 -SystemOpenMarketAccount: Treasurysecurities,net(ofwhich$267and$497islentasof December31,2014and2013,respectively) 62,198 68,363 Government-sponsoredenterprisedebtsecurities,net(ofwhich $15and$32islentasofDecember31,2014and2013,respectively) 958 1,713 Federalagencyandgovernment-sponsoredenterprisemortgage-backed securities,net 42,861 44,442 Foreigncurrencydenominatedinvestments,net 1,571 1,835 Centralbankliquidityswaps 115 21 Accruedinterestreceivable 619 685 Otherassets 1 -Bankpremisesandequipment,net 90 87Otherassets 29 28

Total assets $ 109,119 $ 117,904 LIABILITIES AND CAPITAL

FederalReservenotesoutstanding,net $ 41,512 $ 36,063SystemOpenMarketAccount: Securitiessoldunderagreementstorepurchase 12,214 9,154 Otherliabilities 20 39Deposits: Depositoryinstitutions 47,897 48,568 Otherdeposits 28 21Interestpayabletodepositoryinstitutions 2 2Accruedbenefitcosts 121 104AccruedremittancestotheTreasury 7 84Interdistrictsettlementaccount 4,108 19,721Otherliabilities 16 12

Total liabilities 105,925 113,768 Capitalpaid-in 1,597 2,068Surplus(includingaccumulatedothercomprehensivelossof$25and$14at December31,2014and2013,respectively) 1,597 2,068

Total capital 3,194 4,136

Total liabilities and capital $ 109,119 $ 117,904

Theaccompanyingnotesareanintegralpartofthesefinancialstatements.

STATEMENTS OF CONDITIONFEDERAL RESERVE BANK OF PHILADELPHIA

AsofDecember31,2014andDecember31,2013(inmillions)


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STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFEDERAL RESERVE BANK OF PHILADELPHIA

FortheyearsendedDecember31,2014andDecember31,2013(inmillions)

2014 2013

INTEREST INCOME SystemOpenMarketAccount: Treasurysecurities,net $ 1,589 $ 1,549 Government-sponsoredenterprisedebtsecurities,net 40 66 Federalagencyandgovernment-sponsoredenterprise mortgage-backedsecurities,net 1,296 1,098 Foreigncurrencydenominatedinvestments,net 6 8 Centralbankliquidityswaps - 2

Totalinterestincome 2,931 2,723 INTEREST EXPENSE SystemOpenMarketAccount: Securitiessoldunderagreementstorepurchase 3 2Deposits: Depositoryinstitutions 146 99 TermDepositFacility 11 1

Totalinterestexpense 160 102

Netinterestincome 2,771 2,621 NON-INTEREST LOSS SystemOpenMarketAccount: Federalagencyandgovernment-sponsoredenterprise mortgage-backedsecuritiesgains,net 2 1 Foreigncurrencytranslationlosses,net (218) (98) Other - 1Compensationreceivedforservicecostsprovided 3 4Reimbursableservicestogovernmentagencies 44 39Other 3 3

Totalnon-interestloss (166) (50) OPERATING EXPENSES Salariesandbenefits 133 124Occupancy 15 16Equipment 7 7Other 47 51Assessments: BoardofGovernorsoperatingexpensesandcurrencycosts 78 81 BureauofConsumerFinancialProtection 42 43

Totaloperatingexpenses 322 322 NetincomebeforeprovidingforremittancestotheTreasury 2,283 2,249EarningsremittancestotheTreasury 2,625 2,189

Net(loss)income (342) 60 Changeinpriorservicecostsrelatedtobenefitplans 1 -Changeinactuarial(losses)gainsrelatedtobenefitplans (12) 19

Totalothercomprehensive(loss)income (11) 19

Comprehensive (loss) income $ (353) $ 79



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STATEMENTS OF CHANGES IN CAPITALFEDERAL RESERVE BANK OF PHILADELPHIA

FortheyearsendedDecember31,2014andDecember31,2013(inmillions,exceptsharedata)


Surplus Accumulated other Capital Netincome comprehensive Totalsurplus Totalcapital paid-in retained income(loss) BalanceatDecember31,2012 (42,324,391shares) $ 2,116 $ 2,149 $ (33) $ 2,116 $ 4,232

Netchangeincapitalstockredeemed (958,630shares) (48) - - - (48) Comprehensiveincome: Netincome - 60 - 60 60 Othercomprehensiveincome - - 19 19 19 Dividendsoncapitalstock - (127) - (127) (127)

Netchangeincapital (48) (67) 19 (48) (96)

BalanceatDecember31,2013 (41,365,761shares) $ 2,068 $ 2,082 $ (14) $ 2,068 $ 4,136

Netchangeincapitalstockredeemed (9,433,205shares) (471) - - - (471) Comprehensiveincome: Netloss - (342) - (342) (342) Othercomprehensiveloss - - (11) (11) (11) Dividendsoncapitalstock - (118) - (118) (118)

Netchangeincapital (471) (460) (11) (471) (942)

BalanceatDecember31,2014 (31,932,556shares) $ 1,597 $ 1,622 $ (25) $ 1,597 $ 3,194

NOTES TO FINANCIAL STATEMENTS


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1. STRUCTURETheFederalReserveBankofPhiladelphia(Bank)ispartoftheFederalReserveSystem(System)andisoneofthe12FederalReserveBanks(ReserveBanks)createdbyCongressundertheFederalReserveActof1913(FederalReserveAct),whiches-tablishedthecentralbankoftheUnitedStates.TheReserveBanksarecharteredbythefederalgovernmentandpossessauniquesetofgovernmental,corporate,andcentralbankcharacteristics.TheBankservestheThirdFederalReserveDistrict,whichincludesDelawareandportionsofNewJerseyandPennsylvania.

InaccordancewiththeFederalReserveAct,supervisionandcontroloftheBankisexercisedbyaboardofdirectors.TheFed-eralReserveActspecifiesthecompositionoftheboardofdirectorsforeachoftheReserveBanks.Eachboardiscomposedofninemembersservingthree-yearterms:threedirectors, includingthosedesignatedaschairmananddeputychairman,areappointedbytheBoardofGovernorsoftheFederalReserveSystem(BoardofGovernors)torepresentthepublic,andsixdirectorsareelectedbymemberbanks.BanksthataremembersoftheSystemincludeallnationally-charteredbanksandanystate-charteredbanksthatapplyandareapprovedformembership.Memberbanksaredividedintothreeclassesaccordingtosize.Memberbanksineachclasselectonedirectorrepresentingmemberbanksandonerepresentingthepublic.Inanyelectionofdirectors,eachmemberbankreceivesonevote,regardlessofthenumberofsharesofReserveBankstockitholds.

Inadditiontothe12ReserveBanks,theSystemalsoconsists,inpart,oftheBoardofGovernorsandtheFederalOpenMar-ketCommittee(FOMC).TheBoardofGovernors,anindependentfederalagency,ischargedbytheFederalReserveActwithanumberofspecificduties,includinggeneralsupervisionovertheReserveBanks.TheFOMCiscomposedofmembersoftheBoardofGovernors,thepresidentoftheFederalReserveBankofNewYork(FRBNY),and,onarotatingbasis,fourotherReserveBankpresidents.

2. OPERATIONS AND SERVICESTheReserveBanksperformavarietyofservicesandoperations.Thesefunctionsincludeparticipatinginformulatingandcon-ductingmonetarypolicy;participatinginthepaymentsystem,includingtransfersoffunds,automatedclearinghouse(ACH)operations,andcheckcollection;distributingcoinandcurrency;performingfiscalagencyfunctionsfortheU.S.DepartmentoftheTreasury(Treasury),certainfederalagencies,andotherentities;servingasthefederalgovernment’sbank;providingshort-termloanstodepositoryinstitutions;providingloanstoparticipantsinprogramsorfacilitieswithbroad-basedeligibilityinunusualandexigentcircumstances;servingconsumersandcommunitiesbyprovidingeducationalmaterialsandinforma-tion regardingfinancial consumerprotection rights and lawsand informationon communitydevelopmentprogramsandactivities;andsupervisingbankholdingcompanies,statememberbanks,savingsandloanholdingcompanies,U.S.officesofforeignbankingorganizations,anddesignatedfinancialmarketutilitiespursuanttoauthoritydelegatedbytheBoardofGov-ernors.Certainservicesareprovidedtoforeignandinternationalmonetaryauthorities,primarilybytheFRBNY. TheFOMC,inconductingmonetarypolicy,establishespolicyregardingdomesticopenmarketoperations,overseestheseop-erations,andissuesauthorizationsanddirectivestotheFRBNYtoexecutetransactions.TheFOMCauthorizesanddirectstheFRBNYtoconductoperationsindomesticmarkets,includingthedirectpurchaseandsaleofTreasurysecurities,government-sponsoredenterprise(GSE)debtsecurities,andfederalagencyandGSEmortgage-backedsecurities(MBS);thepurchaseofthesesecuritiesunderagreementstoresell;andthesaleofthesesecuritiesunderagreementstorepurchase.TheFRBNYholdstheresultingsecuritiesandagreementsinaportfolioknownastheSystemOpenMarketAccount(SOMA).TheFRBNYisauthorizedanddirectedtolendtheTreasurysecuritiesandGSEdebtsecuritiesthatareheldintheSOMA.



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TobepreparedtocounterdisorderlyconditionsinforeignexchangemarketsortomeetotherneedsspecifiedbytheFOMCtocarryouttheSystem’scentralbankresponsibilities,theFOMChasauthorizedanddirectedtheFRBNYtoexecutespotandforwardforeignexchangetransactionsin14foreigncurrencies,toholdbalancesinthosecurrencies,andtoinvestsuchforeigncurrencyholdings,whilemaintainingadequateliquidity.TheFRBNYholdsthesesecuritiesandobligationsintheSOMA.TheFOMChasalsoauthorizedtheFRBNYtomaintainreciprocalcurrencyarrangementswiththeBankofCanadaandtheBankofMexicointhemaximumamountsof$2billionand$3billion,respectively,andtowarehouseforeigncurrenciesfortheTrea-suryandtheExchangeStabilizationFundinthemaximumamountof$5billion.

Becauseoftheglobalcharacterofbankfundingmarkets,theSystemhasattimescoordinatedwithothercentralbankstopro-videliquidity.TheFOMCauthorizedanddirectedtheFRBNYtoestablishU.S.dollarliquidityandreciprocalforeigncurrencyliquidityswaplineswiththeBankofCanada,theBankofEngland,theEuropeanCentralBank,theBankofJapan,andtheSwissNationalBank.TheFRBNYholdsamountsoutstandingundertheseswaplinesintheSOMA.Theseswaplines,whichwereoriginallyestablishedastemporaryarrangements,wereconvertedtostandingarrangementsonOctober31,2013,andwillremaininplaceuntilfurthernotice.

AlthoughtheReserveBanksareseparatelegalentities,theycollaborateonthedeliveryofcertainservicestoachievegreaterefficiencyandeffectiveness.ThiscollaborationtakestheformofcentralizedoperationsandproductorfunctionofficesthathaveresponsibilityforthedeliveryofcertainservicesonbehalfoftheReserveBanks.VariousoperationalandmanagementmodelsareusedandaresupportedbyserviceagreementsbetweentheReserveBanks.Insomecases,costsincurredbyaReserveBankforservicesprovidedtootherReserveBanksarenotshared;inothercases,theReserveBanksarereimbursedforcostsincurredinprovidingservicestootherReserveBanks.MajorservicesprovidedbytheBankonbehalfoftheSystemforwhich thecostswerenot reimbursedbytheotherReserveBanks includeCollateralManagementSystem,GroupwareLeadershipCenter,andVideoConferencingNetwork.

3. SIGNIFICANT ACCOUNTING POLICIESAccountingprinciplesforentitieswiththeuniquepowersandresponsibilitiesofthenation’scentralbankhavenotbeenfor-mulatedbyaccountingstandard-settingbodies.TheBoardofGovernorshasdevelopedspecializedaccountingprinciplesandpracticesthatitconsiderstobeappropriateforthenatureandfunctionofacentralbank.TheseaccountingprinciplesandpracticesaredocumentedintheFinancial Accounting Manual for Federal Reserve Banks(FAM),whichisissuedbytheBoardofGovernors.TheReserveBanksarerequiredtoadoptandapplyaccountingpoliciesandpracticesthatareconsistentwiththeFAM.ThefinancialstatementshavebeenpreparedinaccordancewiththeFAM.

LimiteddifferencesexistbetweentheaccountingprinciplesandpracticesintheFAMandaccountingprinciplesgenerallyac-ceptedintheUnitedStatesofAmerica(GAAP),duetotheuniquenatureoftheBank’spowersandresponsibilitiesaspartofthenation’scentralbankandgiventheSystem’suniqueresponsibilitytoconductmonetarypolicy.TheprimarydifferencesarethepresentationofallSOMAsecuritiesholdingsatamortizedcost,adjustedforcreditimpairment,ifany,therecordingofallSOMAsecuritiesonasettlement-datebasis,andtheuseofstraight-lineamortizationforTreasurysecurities,GSEdebtsecurities,andforeigncurrencydenominated investments. Amortizedcost, ratherthanthefairvaluepresentation,moreappropriatelyreflectsthefinancialpositionassociatedwiththeBank’ssecuritiesholdingsgiventheSystem’suniqueresponsi-bilitytoconductmonetarypolicy.Althoughtheapplicationoffairvaluemeasurementstothesecuritiesholdingsmayresultinvaluessubstantiallygreaterorlessthantheircarryingvalues,theseunrealizedchangesinvaluehavenodirecteffectonthequantityofreservesavailabletothebankingsystemorontheabilityoftheReserveBanks,asthecentralbank,tomeettheirfinancialobligationsandresponsibilities.BoththedomesticandforeigncomponentsoftheSOMAportfoliomayinvolve



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transactionsthatresultingainsorlosseswhenholdingsaresoldbeforematurity.Decisionsregardingsecuritiesandforeigncurrencytransactions,includingtheirpurchaseandsale,aremotivatedbymonetarypolicyobjectivesratherthanprofit.Ac-cordingly,fairvalues,earnings,andgainsorlossesresultingfromthesaleofsuchsecuritiesandcurrenciesareincidentaltoopenmarketoperationsanddonotmotivatedecisionsrelatedtopolicyoropenmarketactivities.Accountingforthesesecu-ritiesonasettlement-datebasis,ratherthanthetrade-datebasisrequiredbyGAAP,betterreflectsthetimingofthetransac-tion’seffectonthequantityofreservesinthebankingsystem.ThecostbasesofTreasurysecurities,GSEdebtsecurities,andforeigngovernmentdebtinstrumentsareadjustedforamortizationofpremiumsoraccretionofdiscountsonastraight-linebasis,ratherthanusingtheinterestmethodrequiredbyGAAP.

Inaddition,theBankdoesnotpresentaStatementofCashFlowsasrequiredbyGAAPbecausetheliquidityandcashpositionoftheBankarenotaprimaryconcerngiventheReserveBank’suniquepowersandresponsibilitiesasacentralbank.OtherinformationregardingtheBank’sactivitiesisprovidedin,ormaybederivedfrom,theStatementsofCondition,IncomeandComprehensiveIncome,andChangesinCapital,andtheaccompanyingnotestothefinancialstatements.Otherthanthosedescribedabove,therearenosignificantdifferencesbetweenthepoliciesoutlinedintheFAMandGAAP.

PreparingthefinancialstatementsinconformitywiththeFAMrequiresmanagementtomakecertainestimatesandassump-tionsthataffectthereportedamountsofassetsandliabilities,thedisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatements,andthereportedamountsofincomeandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.

In2014,thedescriptionofcertainlineitemspresentedintheStatementsofConditionandtheStatementsofIncomeandComprehensiveIncomehavebeenrevisedtobetterreflectthenatureoftheseitems.Amountsrelatedtotheselineitemswerenotchangedfromtheprioryear,onlythenomenclatureforthelineitemwasrevised,asfurthernotedbelow:

• Theline item“SystemOpenMarketAccount:Other investments”hasbeenrevisedintheStatementsofConditionto“SystemOpenMarketAccount:Otherassets.”

• Thelineitem“SystemOpenMarketAccount:Foreigncurrencydenominatedassets,net”hasbeenrevisedintheState-mentsofIncomeandComprehensiveIncometo“SystemOpenMarketAccount:Foreigncurrencydenominatedinvest-ments,net.”

CertainamountsrelatingtotheprioryearhavebeenreclassifiedintheStatementsofIncomeandComprehensiveIncometoconformtothecurrentyearpresentation.$1millionpreviouslyreportedfortheyearendedDecember31,2013as“Non-interestloss:Other”hasbeenreclassifiedintoanewlinetitled“Non-interestloss:SystemOpenMarketAccount:Other.” Significantaccountsandaccountingpoliciesareexplainedbelow.

a. ConsolidationTheDodd-FrankWallStreetReformandConsumerProtectionActof2010(Dodd-FrankAct)establishedtheBureauofCon-sumerFinancialProtection(Bureau)asanindependentbureauwithintheSystemthathassupervisoryauthorityoversomeinstitutionspreviouslysupervisedbytheReserveBanksinconnectionwiththoseinstitutions’compliancewithconsumerpro-tectionstatutes.Section1017oftheDodd-FrankActprovidesthatthefinancialstatementsoftheBureauarenottobecon-solidatedwiththoseoftheBoardofGovernorsortheSystem.TheBoardofGovernorsfundstheBureauthroughassessments



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ontheReserveBanksasrequiredbytheDodd-FrankAct.TheReserveBanksreviewedthelawandevaluatedthedesignofandtheirrelationshiptotheBureauanddeterminedthatitshouldnotbeconsolidatedintheBank’sfinancialstatements.

b. Gold and Special Drawing Rights CertificatesTheSecretaryoftheTreasuryisauthorizedtoissuegoldcertificatestotheReserveBanks.Uponauthorization,theReserveBanksacquiregoldcertificatesbycreditingequivalentamountsindollarstotheaccountestablishedfortheTreasury.ThegoldcertificatesheldbytheReserveBanksarerequiredtobebackedbythegoldownedbytheTreasury.TheTreasurymayreac-quirethegoldcertificatesatanytime,andtheReserveBanksmustdeliverthemtotheTreasury.Atsuchtime,theTreasury’saccountischarged,andtheReserveBanks’goldcertificateaccountsarereduced.Thevalueofgoldforpurposesofbackingthegoldcertificatesissetbylawat$422/9perfinetroyounce.GoldcertificatesarerecordedbytheBanksatoriginalcost.TheBoardofGovernorsallocatesthegoldcertificatesamongtheReserveBanksonceayearbasedoneachReserveBank’saverageFederalReservenotesoutstandingduringtheprecedingtwelvemonths.

Specialdrawingrights(SDR)areissuedbytheInternationalMonetaryFund(IMF)toitsmembersinproportiontoeachmem-ber’squota inthe IMFatthetimeof issuance. SDRsserveasasupplementto internationalmonetaryreservesandmaybetransferredfromonenationalmonetaryauthoritytoanother.UnderthelawprovidingforU.S.participationintheSDRsystem,theSecretaryoftheTreasuryisauthorizedtoissueSDRcertificatestotheReserveBanks.WhenSDRcertificatesareissuedtotheReserveBanks,equivalentamountsinU.S.dollarsarecreditedtotheaccountestablishedfortheTreasuryandtheReserveBanks’SDRcertificateaccountsareincreased.TheReserveBanksarerequiredtopurchaseSDRcertificates,atthedirectionoftheTreasury,forthepurposeoffinancingSDRacquisitionsorforfinancingexchange-stabilizationoperations.AtthetimeSDRcertificatetransactionsoccur,theBoardofGovernorsallocatestheSDRcertificatesamongtheReserveBanksbaseduponeachReserveBank’sFederalReservenotesoutstandingattheendoftheprecedingcalendaryear.SDRcertifi-catesarerecordedbytheBanksatoriginalcost.TherewerenoSDRcertificatetransactionsduringtheyearsendedDecember31,2014and2013.

c. CoinTheamountreportedascoinintheStatementsofConditionrepresentsthefacevalueofallUnitedStatescoinheldbytheBank.TheBankbuyscoinatfacevaluefromtheU.S.Mintinordertofilldepositoryinstitutionorders.

d. Loans Loanstodepositoryinstitutionsarereportedattheiroutstandingprincipalbalancesandinterestincomeisrecognizedonanaccrualbasis.

LoansareimpairedwhencurrentinformationandeventsindicatethatitisprobablethattheBankwillnotreceivetheprinci-palandinterestthataredueinaccordancewiththecontractualtermsoftheloanagreement.Impairedloansareevaluatedtodeterminewhetheranallowanceforloanlossisrequired.TheBankhasdevelopedproceduresforassessingtheadequacyofanyallowanceforloanlossesusingallavailableinformationtoidentifyincurredlosses.Thisassessmentincludesmonitor-inginformationobtainedfrombankingsupervisors,borrowers,andothersourcestoassessthecreditconditionofthebor-rowersand,asappropriate,evaluatingcollateralvalues.Generally,theBankwoulddiscontinuerecognizinginterestincomeon impaired loansuntiltheborrower’srepaymentperformancedemonstratesprincipaland interestwouldbereceived inaccordancewiththetermsoftheloanagreement.IftheBankdiscontinuesrecordinginterestonanimpairedloan,cashpay-mentsarefirstappliedtoprincipaluntiltheloanbalanceisreducedtozero;subsequentpaymentsareappliedasrecoveriesofamountspreviouslydeemeduncollectible,ifany,andthenasinterestincome.



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e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and Securities LendingTheFRBNYmayengageinpurchasesofsecuritieswithprimarydealersunderagreementstoresell(repurchasetransactions).Theserepurchasetransactionsaretypicallysettledthroughatri-partyarrangement.Inatri-partyarrangement,twocom-mercialcustodialbanksmanagethecollateralclearing,settlement,pricing,andpledging,andprovidecashandsecuritiescustodialservicesforandonbehalfoftheFRBNYandcounterparty.ThecollateralpledgedmustexceedtheprincipalamountofthetransactionbyamargindeterminedbytheFRBNYforeachclassandmaturityofacceptablecollateral.Collateraldes-ignatedbytheFRBNYasacceptableunderrepurchasetransactionsprimarilyincludesTreasurysecurities(includingTreasuryInflation-ProtectedSecurities,SeparateTradingofRegisteredInterestandPrincipalofSecuritiesTreasurysecurities,andTrea-suryFloatingRateNotes);directobligationsofseveralfederalandGSE-relatedagencies,includingFederalNationalMortgageAssociation, FederalHome LoanMortgageCorporation, and FederalHome LoanBanks; andpass-through federal agencyandGSEMBS.Therepurchasetransactionsareaccountedforasfinancingtransactionswiththeassociatedinterestincomerecognizedoverthelifeofthetransaction.Thesetransactionsarereportedattheircontractualamountsas“SystemOpenMarketAccount:Securitiespurchasedunderagreementstoresell”andtherelatedaccruedinterestreceivableisreportedasacomponentof“SystemOpenMarketAccount:Accruedinterestreceivable”intheStatementsofCondition.

TheFRBNYmayengageinsalesofsecuritiesunderagreementstorepurchasewithprimarydealersandwithasetofexpandedcounterpartieswhich includesbanks, savingsassociations,GSEs,anddomesticmoneymarket funds (Overnightand termreverserepurchaseagreements).Thesereverserepurchasetransactionsaresettledthroughatri-partyarrangement,similarto repurchase transactions. Reverse repurchase transactionsmayalsobeexecutedwith foreignofficialand internationalaccountholdersaspartofaserviceoffering.ReverserepurchaseagreementsarecollateralizedbyapledgeofanamountofTreasurysecurities,GSEdebtsecurities,orfederalagencyandGSEMBSthatareheldintheSOMA.Reverserepurchasetransactionsareaccountedforasfinancingtransactions,andtheassociatedinterestexpenseisrecognizedoverthelifeofthetransaction.Thesetransactionsarereportedattheircontractualamountsas“SystemOpenMarketAccount:Securitiessoldunderagreementstorepurchase”andtherelatedaccruedinterestpayableisreportedasacomponentof“SystemOpenMarketAccount:Otherliabilities”intheStatementsofCondition.

TreasurysecuritiesandGSEdebtsecuritiesheldintheSOMAmaybelenttoprimarydealers,typicallyovernight,tofacilitatetheeffectivefunctioningofthedomesticsecuritiesmarkets.Theamortizedcostbasisofsecuritieslentcontinuestobere-portedas“SystemOpenMarketAccount:Treasurysecurities,net”and“SystemOpenMarketAccount:Government-spon-soredenterprisedebtsecurities,net,”asappropriate,intheStatementsofCondition.SecuritieslendingtransactionsarefullycollateralizedbyTreasurysecuritiesbasedonthefairvaluesofthesecuritieslentincreasedbyamargindeterminedbytheFRBNY.TheFRBNY chargestheprimarydealerafeeforborrowingsecurities,andthesefeesarereportedasacomponentof“Non-interestloss:SystemOpenMarketAccount:Other”intheStatementsofIncomeandComprehensiveIncome.

Activity related to securitiespurchasedunderagreements to resell, securities soldunderagreements to repurchase,andsecuritieslendingisallocatedtoeachoftheReserveBanksonapercentagebasisderivedfromanannualsettlementoftheinterdistrictsettlementaccountthatoccursinthesecondquarterofeachyear.

f. Treasury Securities, Government-Sponsored Enterprise Debt Securities, Federal Agency and Government-Sponsored Enterprise Mortgage-Backed Securities, Foreign Currency Denominated Investments, and Warehousing Agreements InterestincomeonTreasurysecurities,GSEdebtsecurities,andforeigncurrencydenominatedinvestmentsincludedintheSOMAisaccruedusingthestraight-linemethod.InterestincomeonfederalagencyandGSEMBSisaccruedusingtheinter-estmethodand includes amortizationofpremiums, accretionofdiscounts, andgainsor losses associatedwithprincipal



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paydowns.PremiumsanddiscountsrelatedtofederalagencyandGSEMBSareamortizedoraccretedoverthetermofthesecurity to statedmaturity,and theamortizationofpremiumsandaccretionofdiscountsareacceleratedwhenprincipalpaymentsarereceived.Gainsandlossesresultingfromsalesofsecuritiesaredeterminedbyspecificissuebasedonaveragecost.Treasurysecurities,GSEdebtsecurities,andfederalagencyandGSEMBSarereportednetofpremiumsanddiscountsintheStatementsofConditionandinterestincomeonthosesecuritiesisreportednetoftheamortizationofpremiumsandaccretionofdiscountsintheStatementsofIncomeandComprehensiveIncome.

InadditiontooutrightpurchasesoffederalagencyandGSEMBSthatareheldintheSOMA,theFRBNYentersintodollarrolltransactions(dollarrolls),whichprimarilyinvolveaninitialtransactiontopurchaseorsell“tobeannounced”(TBA)MBSfordeliveryinthecurrentmonthcombinedwithasimultaneousagreementtosellorpurchaseTBAMBSonaspecifiedfuturedate.DuringtheyearsendedDecember31,2014and2013,theFRBNY executeddollarrollstofacilitatesettlementofout-standingpurchasesoffederalagencyandGSEMBS.TheFRBNY accountsfordollarrollsaspurchasesorsalesonasettlement-datebasis.Inaddition,TBAMBStransactionsmaybepairedofforassignedpriortosettlement.Netgains(losses)resultingfromtheseMBStransactionsarereportedas“Non-interestloss:SystemOpenMarketAccount:Federalagencyandgovern-ment-sponsoredenterprisemortgage-backedsecuritiesgains,net”intheStatementsofIncomeandComprehensiveIncome.

Foreigncurrencydenominatedinvestments,whichcanincludeforeigncurrencydeposits,securitiespurchasedunderagree-mentstoresell,andgovernmentdebtinstruments,arerevalueddailyatcurrentforeigncurrencymarketexchangeratesinordertoreporttheseassetsinU.S.dollars.Foreigncurrencytranslationgainsandlossesthatresultfromthedailyrevaluationofforeigncurrencydenominatedinvestmentsarereportedas“Non-interestloss:SystemOpenMarketAccount:Foreigncur-rencytranslationlosses,net”intheStatementsofIncomeandComprehensiveIncome.

BecausetheFRBNYentersintocommitmentstobuyTreasurysecurities,federalagencyandGSEMBS,andforeigngovern-mentdebtinstrumentsandrecordstherelatedsecuritiesonasettlement-datebasisinaccordancewiththeFAM,therelatedoutstandingcommitmentsarenotreflectedintheStatementsofCondition.

ActivityrelatedtoTreasurysecurities,GSEdebtsecurities,andfederalagencyandGSEMBS, includingthepremiums,dis-counts,andrealizedgainsandlosses,isallocatedtoeachReserveBankonapercentagebasisderivedfromanannualsettle-mentoftheinterdistrictsettlementaccountthatoccursinthesecondquarterofeachyear.Activityrelatedtoforeigncur-rencydenominatedinvestments,includingthepremiums,discounts,andrealizedandunrealizedgainsandlosses,isallocatedtoeachReserveBankbasedontheratioofeachReserveBank’scapitalandsurplustotheReserveBanks’aggregatecapitalandsurplusattheprecedingDecember31.

WarehousingisanarrangementunderwhichtheFOMChasapprovedtheexchange,attherequestoftheTreasury,ofU.S.dol-larsforforeigncurrenciesheldbytheTreasuryoveralimitedperiod.ThepurposeofthewarehousingfacilityistosupplementtheU.S.dollarresourcesoftheTreasuryforfinancingpurchasesofforeigncurrenciesandrelatedinternationaloperations.Warehousingagreementsarevalueddailyatcurrentmarketexchangerates.ActivityrelatedtotheseagreementsisallocatedtoeachReserveBankbasedontheratioofeachReserveBank’scapitalandsurplustotheReserveBanks’aggregatecapitalandsurplusattheprecedingDecember31.

g. Central Bank Liquidity SwapsCentralbankliquidityswaps,whicharetransactedbetweentheFRBNYandaforeigncentralbank,canbestructuredaseitherU.S.dollarorforeigncurrencyliquidityswaparrangements.



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Centralbankliquidityswapsactivity,includingtherelatedincomeandexpense,isallocatedtoeachReserveBankbasedontheratioofeachReserveBank’scapitalandsurplustotheReserveBanks’aggregatecapitalandsurplusattheprecedingDe-cember31.Theforeigncurrencyamountsassociatedwiththesecentralbankliquidityswaparrangementsarerevalueddailyatcurrentforeigncurrencymarketexchangerates.

U.S. dollar liquidity swaps AttheinitiationofeachU.S.dollarliquidityswaptransaction,theforeigncentralbanktransfersaspecifiedamountofitscur-rencytoarestrictedaccountfortheFRBNY inexchangeforU.S.dollarsattheprevailingmarketexchangerate.Concurrentwiththistransaction,theFRBNY andtheforeigncentralbankagreetoasecondtransactionthatobligatestheforeigncentralbanktoreturntheU.S.dollarsandtheFRBNYtoreturntheforeigncurrencyonaspecifiedfuturedateatthesameexchangerateastheinitialtransaction.TheBank’sallocatedportionoftheforeigncurrencyamountsthattheFRBNY acquiresarere-portedas“SystemOpenMarketAccount:Centralbankliquidityswaps”intheStatementsofCondition.BecausetheswaptransactionwillbeunwoundatthesameU.S.dollaramountandexchangeratethatwereusedintheinitialtransaction,therecordedvalueoftheforeigncurrencyamountsisnotaffectedbychangesinthemarketexchangerate.

TheforeigncentralbankcompensatestheFRBNY basedontheamountoutstandingandtherateundertheswapagreement.TheBank’sallocatedportionoftheamountofcompensationreceivedduringthetermofthe swaptransactionisreportedas“Interestincome:SystemOpenMarketAccount:Centralbankliquidityswaps”intheStatementsofIncomeandComprehensiveIncome.

Foreign currency liquidity swaps ThestructureofforeigncurrencyliquidityswaptransactionsinvolvesthetransferbytheFRBNY,attheprevailingmarketex-changerate,ofaspecifiedamountofU.S.dollarstoanaccountfortheforeigncentralbankinexchangeforitscurrency.TheforeigncurrencyamountsthattheFRBNYreceivesarerecordedasaliability.

h. Bank Premises, Equipment, and SoftwareBankpremisesandequipmentarestatedatcostlessaccumulateddepreciation.Depreciationiscalculatedonastraight-linebasisovertheestimatedusefullivesoftheassets,whichrangefrom2to50years.Majoralterations,renovations,andim-provementsarecapitalizedatcostasadditionstotheassetaccountsandaredepreciatedovertheremainingusefullifeoftheassetor,ifappropriate,overtheuniqueusefullifeofthealteration,renovation,orimprovement.Maintenance,repairs,andminorreplacementsarechargedtooperatingexpenseintheyearincurred.

Costsincurredtoacquiresoftwarearecapitalizedbasedonthepurchaseprice.Costsincurredduringtheapplicationdevelop-mentstagetodevelopinternal-usesoftwarearecapitalizedbasedonthecostofdirectservicesandmaterialsassociatedwithdesigning,coding,installing,andtestingthesoftware.Capitalizedsoftwarecostsareamortizedonastraight-linebasisovertheestimatedusefullivesofthesoftwareapplications,whichgenerallyrangefromtwotofiveyears.Maintenancecostsandminorreplacementsrelatedtosoftwarearechargedtooperatingexpenseintheyearincurred.

Capitalizedassets, includingsoftware,buildings, leasehold improvements, furniture,andequipment,are impairedandanadjustmentisrecordedwheneventsorchangesincircumstancesindicatethatthecarryingamountofassetsorassetgroupsisnotrecoverableandsignificantlyexceedstheassets’fairvalue.

i. Interdistrict Settlement AccountEachReserveBankaggregatesthepaymentsduetoorfromotherReserveBanks.Thesepaymentsresultfromtransactions



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betweentheReserveBanksandtransactionsthatinvolvedepositoryinstitutionaccountsheldbyotherReserveBanks,suchasFedwirefundsandsecuritiestransfersandcheckandACHtransactions.ThecumulativenetamountduetoorfromtheotherReserveBanksisreflectedinthe“Interdistrictsettlementaccount”intheStatementsofCondition.

Anannualsettlementoftheinterdistrictsettlementaccountoccursinthesecondquarterofeachyear.Asaresultofthean-nualsettlement,thebalanceineachBank’sinterdistrictsettlementaccountisadjustedbyanamountequaltotheaveragebalanceintheaccountduringtheprevioustwelve-monthperiodendedMarch31.AnequalandoffsettingadjustmentismadetoeachBank’sallocatedportionofSOMAassetsandliabilities.

j. Federal Reserve NotesFederalReservenotesarethecirculatingcurrencyoftheUnitedStates.Thesenotes,whichareidentifiedasissuedtoaspe-cificReserveBank,mustbefullycollateralized.AlloftheBank’sassetsareeligibletobepledgedascollateral.Thecollateralvalueisequaltothebookvalueofthecollateraltenderedwiththeexceptionofsecurities,forwhichthecollateralvalueisequaltotheparvalueofthesecuritiestendered.Theparvalueofsecuritiessoldunderagreementstorepurchaseisdeductedfromtheeligiblecollateralvalue.

TheBoardofGovernorsmay,atanytime,calluponaReserveBankforadditionalsecuritytoadequatelycollateralizeoutstand-ingFederalReservenotes.TosatisfytheobligationtoprovidesufficientcollateralforoutstandingFederalReservenotes,theReserveBankshaveenteredintoanagreementthatprovidesforcertainassetsoftheReserveBankstobejointlypledgedascollateralfortheFederalReservenotesissuedtoallReserveBanks.Intheeventthatthiscollateralisinsufficient,theFederalReserveActprovidesthatFederalReservenotesbecomeafirstandparamountlienonalltheassetsoftheReserveBanks.Finally,FederalReservenotesareobligationsoftheUnitedStatesgovernment.

“FederalReservenotesoutstanding,net”intheStatementsofConditionrepresentstheBank’sFederalReservenotesoutstand-ing,reducedbytheBank’scurrencyholdingsof$4,940millionand$5,920millionatDecember31,2014and2013,respectively.

AtDecember31,2014and2013,allFederalReservenotesoutstanding,reducedbytheReserveBank’scurrencyholdings,werefullycollateralized.AtDecember31,2014,allgoldcertificates,allspecialdrawingrightscertificates,and$1,282billionofdomesticsecuritiesheldintheSOMAwerepledgedascollateral.AtDecember31,2014,noinvestmentsdenominatedinforeigncurrencieswerepledgedascollateral.

k. DepositsDepository InstitutionsDepositoryinstitutions’depositsrepresent thereserveandservice-relatedbalancesintheaccountsthatdepositoryinstitu-tionsholdattheBank.TheinterestratespaidonrequiredreservebalancesandexcessbalancesaredeterminedbytheBoardofGovernors,basedonanFOMC-establishedtargetrangeforthefederalfundsrate.Interestpayableisreportedasacompo-nentof“Interestpayabletodepositoryinstitutions”intheStatementsofCondition.

TheTermDepositFacility(TDF)consistsofdepositswithspecificmaturitiesheldbyeligibleinstitutionsattheReserveBanks.TheReserveBankspayinterestonthesedepositsatinterestratesdeterminedbyauction.Interestpayableisreportedasacomponentof“Interestpayabletodepositoryinstitutions”intheStatementsofCondition.TherewerenodepositsheldbytheBankundertheTDFatDecember31,2014and2013.



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OtherOtherdeposits include theBank’sallocatedportionof foreigncentralbankand foreigngovernmentdepositsheldat theFRBNY.OtherdepositsalsoincludecashcollateralheldbytheBank.

l. Capital Paid-inTheFederalReserveActrequiresthateachmemberbanksubscribetothecapitalstockoftheReserveBankinanamountequaltosixpercentofthecapitalandsurplusofthememberbank.Thesesharesarenonvoting,withaparvalueof$100,andmaynotbetransferredorhypothecated.Asamemberbank’scapitalandsurpluschanges,itsholdingsofReserveBankstockmustbeadjusted.Currently,onlyone-halfofthesubscriptionispaidin,andtheremainderissubjecttocall.AmemberbankisliableforReserveBankliabilitiesuptotwicetheparvalueofstocksubscribedbyit.

Bylaw,eachReserveBankisrequiredtopayeachmemberbankanannualdividendofsixpercentonthepaid-incapitalstock.Thiscumulativedividendispaidsemiannually.

m. SurplusTheBoardofGovernorsrequirestheReserveBankstomaintainasurplusequaltotheamountofcapitalpaid-in.Onadailybasis,surplusisadjustedtoequatethebalancetocapitalpaid-in.Accumulatedothercomprehensiveincomeisreportedasacomponentof“Surplus”intheStatementsofConditionandtheStatementsofChangesinCapital.AdditionalinformationregardingtheclassificationsofaccumulatedothercomprehensiveincomeisprovidedinNotes9and10.

n. Remittances to the TreasuryTheBoardofGovernorsrequirestheReserveBankstotransferexcessearningstotheTreasuryasinterestonFederalReservenotesafterprovidingforthecostsofoperations,paymentofdividends,andreservationofanamountnecessarytoequatesurpluswithcapitalpaid-in.Currently,remittancestotheTreasuryaremadeonaweeklybasis.Thisamountisreportedas“EarningsremittancestotheTreasury” intheStatementsof IncomeandComprehensive Income. The amount due to the Treasuryisreportedas“AccruedremittancestotheTreasury”intheStatementsofCondition.SeeNote12foradditionalin-formationonearningsremittancestotheTreasury.

Ifearningsduringtheyeararenotsufficienttoprovideforthecostsofoperations,paymentofdividends,andequatingsurplusandcapitalpaid-in,remittancestotheTreasuryaresuspended.AdeferredassetisrecordedthatrepresentstheamountofnetearningsaReserveBankwillneedtorealizebeforeremittancestotheTreasuryresume.Thisdeferredassetisperiodicallyreviewedforimpairment.

o. Income and Costs Related to Treasury ServicesWhendirectedbytheSecretaryoftheTreasury,theBankisrequiredbytheFederalReserveActtoserveasfiscalagentanddepositaryoftheUnitedStatesGovernment.Bystatute,theTreasuryhasappropriationstopayfortheseservices.DuringtheyearsendedDecember31,2014and2013,theBankwasreimbursedforsubstantiallyallservicesprovidedtotheTreasuryasitsfiscalagent.

TheBankseeksreimbursementfromtheTreasuryandothergovernmentagenciesonbehalfofallReserveBanksofcostsofperformingfiscalagencyfunctions.EachReserveBanktransfersitsTreasuryreimbursementreceivabletotheBank.There-imbursementreceivableisreportedin“Otherassets”andtotaled$2millionforeachoftheyearsendedDecember31,2014and2013.TherewasnocostofunreimbursedTreasuryservicesatDecember31,2014.ThecostofunreimbursedTreasury



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servicesisreportedin“Otherexpense”andwasimmaterialatDecember31,2013.

p. Compensation Received for Service Costs Provided TheFederalReserveBankofAtlanta(FRBA)hasoverall responsibility formanagingtheReserveBanks’provisionofcheckandACHservicestodepositoryinstitutions,theFRBNYhasoverallresponsibilityformanagingtheReserveBanks’provisionofFedwirefundsandsecuritiesservices,andtheFederalReserveBankofChicagohasoverallresponsibilityformanagingtheReserveBanks’provisionofelectronicaccessservicestodepositoryinstitutions.TheReserveBankthathasoverallresponsi-bilityformanagingtheseservicesrecognizestherelatedtotalSystemrevenueinitsStatementsofIncomeandComprehensiveIncome.TheBankiscompensatedforcostsincurredtoprovidetheseservicesbytheReserveBanksresponsibleformanagingtheseservicesandreportsthiscompensationas“Non-interestloss:Compensationreceivedforservicecostsprovided”initsStatementsofIncomeandComprehensiveIncome.

q. AssessmentsTheBoardofGovernorsassessestheReserveBankstofunditsoperationsandtheoperationsoftheBureau.Theseassess-mentsareallocatedtoeachReserveBankbasedoneachReserveBank’scapitalandsurplusbalances.TheBoardofGovernorsalsoassesseseachReserveBankforexpensesrelatedtoproducing,issuing,andretiringFederalReservenotesbasedoneachReserveBank’sshareofthenumberofnotescomprisingtheSystem’snetliabilityforFederalReservenotesonDecember31oftheprioryear.

TheDodd-FrankActrequiresthat,afterthetransferofitsresponsibilitiestotheBureauonJuly21,2011,theBoardofGover-norsfundtheBureauinanamountnottoexceedafixedpercentageofthetotaloperatingexpensesoftheSystemasreportedintheBoardofGovernors’2009annualreport,whichtotaled$4.98billion.After2013,theamountwillbeadjustedannuallyinaccordancewiththeprovisionsoftheDodd-FrankAct.ThepercentageoftotaloperatingexpensesoftheSystemfortheyearsendedDecember31,2014and2013was12.22percent($608.4million)and12percent($597.6million),respectively.TheBank’sassessment forBureau funding is reportedas“Assessments:BureauofConsumerFinancialProtection” in theStatementsofIncomeandComprehensiveIncome.

r. TaxesTheReserveBanksareexemptfromfederal,state,andlocaltaxes,exceptfortaxesonrealproperty.TheBank’srealpropertytaxeswere$1millionand$2millionfortheyearsendedDecember31,2014and2013,respectively,andarereportedasacomponentof“Operatingexpenses:Occupancy”intheStatementsofIncomeandComprehensiveIncome.

s. Restructuring ChargesTheReserveBanksrecognizerestructuringchargesforexitordisposalcostsincurredaspartoftheclosureofbusinessactivi-tiesinaparticularlocation,therelocationofbusinessactivitiesfromonelocationtoanother,orafundamentalreorganizationthataffectsthenatureofoperations.Restructuringchargesmayincludecostsassociatedwithemployeeseparations,con-tractterminations,andassetimpairments.ExpensesarerecognizedintheperiodinwhichtheBankcommitstoaformalizedrestructuringplanorexecutesthespecificactionscontemplatedintheplanandallcriteriaforfinancialstatementrecognitionhavebeenmet.

In2014,theTreasuryannouncedplanstoconsolidatetheprovisionofsubstantiallyallfiscalagentservicesfortheU.S.Trea-suryattheFederalReserveBankofCleveland,theFederalReserveBankofKansasCity,theFRBNY,andtheFederalReserveBankofSt.Louis.Theimplementationplanassociatedwiththisconsolidationisexpectedtobecompletedin2018.



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Note11describestheBank’srestructuringinitiativesandprovidesinformationaboutthecostsandliabilitiesassociatedwithemployeeseparationsandcontractterminations.Costsandliabilitiesassociatedwithenhancedpensionbenefitsinconnec-tionwiththerestructuringactivitiesforalloftheReserveBanksarerecordedonthebooksoftheFRBNY.

t. Recently Issued Accounting StandardsInApril2014,theFinancialAccountingStandardsBoard(FASB)issuedAccountingStandardsUpdate(ASU)2014-08,Presenta-tion of Financial Statements(Topic205)and Property, Plant, and Equipment (Topic360):Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.Thisupdatechangestherequirementsforreportingdiscontinuedoperations,whichmayincludeacomponentofanentityoragroupofcomponentsofanentity,orabusinessornonprofitactivity.ThisupdateiseffectivefortheBankfortheyearendingDecember31,2015,andisnotexpectedtohaveamaterialeffectontheBank’sfinancialstatements.

InMay2014,theFASBissuedASU2014-09,Revenue from Contracts with Customers(Topic606).ThisupdatewasissuedtocreatecommonrevenuerecognitionguidanceforU.S.GAAPandInternationalFinancialReportingStandards.Theguidanceisapplicabletoallcontractsforthetransferofgoodsorservicesregardlessofindustryortypeoftransaction.Thisupdaterequiresrecognitionofrevenueinamannerthatreflectstheconsiderationthattheentityexpectstoreceiveinreturnforthetransferofgoodsorservicestocustomers.ThisupdateiseffectivefortheBankfortheyearendingDecember31,2018,andisnotexpectedtohaveamaterialeffectontheBank’sfinancialstatements.

InJune2014,theFASBissuedASU2014-11,Transfer and Servicing (Topic860): Repurchase-to-Maturity Transactions, Repur-chase Financings, and Disclosures. Thisupdaterequireschangesintheaccountingforrepurchasetomaturitytransactionsandrepurchasefinancingtransactions.Additionally,thisupdateprovidesguidanceforthedisclosuresforcertaintransfersoffinancialassetsaccountedforassales,wherethetransferorretainssubstantiallyalloftheexposuretoeconomicreturnonthetransferredfinancialasset;andrepurchaseagreements,securitieslendingtransactions,andrepurchasetomaturitytransac-tionsthatareaccountedforassecuredborrowings.ThisupdateiseffectivefortheBankfortheyearendingDecember31,2015,andisnotexpectedtohaveamaterialeffectontheBank’sfinancialstatements.

4. LOANS Loans to Depository InstitutionsTheBankoffersprimary,secondary,andseasonalloanstoeligibleborrowers,andeachprogramhasitsowninterestrate.In-terest is accrued using theapplicableinterestrateestablishedatleastevery14daysbytheBank’sboardofdirectors,subjecttoreviewanddeterminationbytheBoardofGovernors.Primaryandsecondaryloansareextendedonashort-termbasis,typicallyovernight,whereasseasonalloansmaybeextendedforaperiodofuptoninemonths.

Primary,secondary,andseasonalloansarecollateralizedtothesatisfactionoftheBanktoreducecreditrisk.Assetseligibletocollateralizetheseloansincludeconsumer,business,andrealestateloans;Treasurysecurities;GSEdebtsecurities;foreignsovereigndebt;municipal,corporate,andstateandlocalgovernmentobligations;asset-backedsecurities;corporatebonds;commercialpaper;andbank-issuedassets,suchascertificatesofdeposit,banknotes,anddepositnotes.Collateralisas-signedalendingvaluethatisdeemedappropriatebytheBank,whichistypicallyfairvaluereducedbyamargin.Loanstodepositoryinstitutionsaremonitoreddailytoensurethatborrowerscontinuetomeeteligibilityrequirementsforthesepro-grams.Ifaborrowernolongerqualifiesfortheseprograms,theBankwillgenerallyrequestfullrepaymentoftheoutstandingloanor,forprimaryorseasonalloans,mayconverttheloantoasecondarycreditloan.Collaterallevelsarerevieweddailyagainstoutstandingobligations,andborrowersthatnolongerhavesufficientcollateraltosupportoutstandingloansarere-



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quiredtoprovideadditionalcollateralortomakepartialorfullrepayment.

TheloanstodepositoryinstitutionsoutstandingasofDecember31,2014was$7millionwithremainingmaturitywithin15days.TheBankhadnoloansoutstandingasofDecember31,2013.

AtDecember31,2014and2013,theBankdidnothaveanyloansthatwereimpaired,restructured,pastdue,oronnon-ac-crualstatus,andnoallowanceforloanlosseswasrequired.TherewerenoimpairedloansduringtheyearsendedDecember31,2014and2013.

5. SYSTEM OPEN MARKET ACCOUNTa. Domestic Securities HoldingsTheFRBNY conductsdomesticopenmarketoperationsand,onbehalfoftheReserveBanks,holdstheresultingsecuritiesintheSOMA.

DuringtheyearsendedDecember31,2014and2013,theFRBNYcontinuedthepurchaseofTreasurysecuritiesandfederalagencyandGSEMBSunderthelarge-scaleassetpurchaseprogramsauthorizedbytheFOMC.InSeptember2011,theFOMCannouncedthattheFederalReservewouldreinvestprincipalpaymentsfromtheSOMAportfolioholdingsofGSEdebtsecuri-tiesandfederalagencyandGSEMBSinfederalagencyandGSEMBS.InJune2012,theFOMCannouncedthatitwouldcon-tinuethisreinvestmentpolicy.InSeptember2012,theFOMCannouncedthattheFederalReservewouldpurchaseadditionalfederalagencyandGSEMBSatapaceof$40billionpermonth.InDecember2012,theFOMCannouncedthattheFederalReservewouldalsopurchase longer-termTreasurysecurities initiallyatapaceof$45billionpermonthafter itsprogramtoextendtheaveragematurityofitsholdingsofTreasurysecuritieswascompletedin2012.InDecember2013,theFOMCannouncedthat itwouldslowthepaceof itsadditionalassetpurchases. InOctober2014,theFOMCconcludeditsassetpurchaseprogramwhilemaintainingitsexistingpolicyofreinvestingprincipalpaymentsfromitsholdingsofagencydebtandagencymortgage-backedsecuritiesinagencymortgage-backedsecuritiesandofrollingovermaturingTreasurysecuritiesatauction.

TheBank’sallocatedshareofactivityrelatedtodomesticopenmarketoperationswas2.396percentand2.897percentatDecember31,2014and2013,respectively.



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TheBank’sallocatedshareofTreasurysecurities,GSEdebtsecurities,andfederalagencyandGSEMBS,net,excludingaccruedinterest,heldintheSOMAatDecember31wasasfollows(inmillions): 2014 Par Unamortized Unaccreted Totalamortized premiums discounts cost Notes $ 39,168 $ 663 $ (185) $ 39,646Bonds 19,799 2,985 (232) 22,552 TotalTreasurysecurities $ 58,967 $ 3,648 $ (417) $ 62,198 GSEdebtsecurities $ 927 $ 31 $ - $ 958 FederalagencyandGSEMBS $ 41,609 $ 1,275 $ (23) $ 42,861

2013 Par Unamortized Unaccreted Totalamortized premiums discounts cost

Notes $ 42,518 $ 967 $ (165) $ 43,320Bonds 21,480 3,724 (161) 25,043

TotalTreasurysecurities $ 63,998 $ 4,691 $ (326) $ 68,363 GSEdebtsecurities $ 1,658 $ 55 $ - $ 1,713

FederalagencyandGSEMBS $ 43,176 $ 1,297 $ (31) $ 44,442 TheFRBNYentersintotransactionsforthepurchaseofsecuritiesunderagreementstoresellandtransactionstosellsecuritiesunderagreementstorepurchaseaspartofitsmonetarypolicyactivities.Theseoperationsareforthepurposeoffurtheras-sessingtheappropriatestructureofsuchoperationsinsupportingtheimplementationofmonetarypolicyduringnormaliza-tion.Inaddition,transactionstosellsecuritiesunderagreementstorepurchaseareenteredintoaspartofaserviceofferingtoforeignofficialandinternationalaccountholders.



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TherewerenomaterialtransactionsrelatedtosecuritiespurchasedunderagreementstoresellduringtheyearsendedDe-cember31,2014and2013.Financial informationrelatedtosecuritiessoldunderagreementstorepurchasefortheyearsendedDecember31wasasfollows(inmillions):

Securitiespledgedascollateral,atDecember31,2014and2013,consistedsolelyofTreasurysecurities.

AllocatedtotheBank TotalSOMA

2014 2013 2014 2013 Overnightandtermreverserepurchaseagreements: Contractamountoutstanding,endofyear $ 9,504 $ 5,730 $ 396,705 $197,755 Averagedailyamountoutstanding,duringtheyear 3,238 121 130,281 4,161 Maximumbalanceoutstanding,duringtheyear 9,504 5,730 396,705 197,755 Securitiespledged(parvalue),endofyear 8,750 5,448 365,235 188,028 Securitiespledged(marketvalue),endofyear 9,548 5,700 398,540 196,726

Foreignofficialandinternationalaccounts: Contractamountoutstanding,endofyear $ 2,710 $ 3,424 $ 113,132 $118,169 Averagedailyamountoutstanding,duringtheyear 2,602 2,876 102,968 95,520 Maximumbalanceoutstanding,duringtheyear 3,424 3,543 122,232 118,169 Securitiespledged(parvalue),endofyear 2,596 3,547 108,355 122,424 Securitiespledged(marketvalue),endofyear 2,710 3,424 113,132 118,175 Totalcontractamountoutstanding,endofyear $ 12,214 $ 9,154 $ 509,837 $315,924



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TheremainingmaturitydistributionofTreasurysecurities,GSEdebtsecurities,federalagencyandGSEMBSboughtoutright,andsecuritiessoldunderagreementstorepurchasethatwereallocatedtotheBankatDecember31,2014and2013wasasfollows(inmillions):

Within 16days 91days Over1year Over5years Over10 15days to90days to1year to5years to10years years Total

December31,2014: Treasurysecurities(parvalue) $ - $ - $ 84 $26,662 $16,449 $15,772 $ 58,967 GSEdebtsecurities(parvalue) 26 17 94 733 - 57 927 FederalagencyandGSEMBS(parvalue)1 - - - - 155 41,454 41,609 Securitiessoldunderagreements torepurchase(contractamount) 12,214 - - - - - 12,214 December31,2013: Treasurysecurities(parvalue) $ - $ 9 $ 5 $22,117 $25,054 $16,813 $ 63,998 GSEdebtsecurities(parvalue) 67 219 251 1,051 2 68 1,658 FederalagencyandGSEMBS (parvalue)1 - - - - 74 43,102 43,176 Securitiessoldunderagreements torepurchase(contractamount) 9,154 - - - - - 9,154 1TheparamountshownforfederalagencyandGSEMBSistheremainingprincipalbalanceofthesecurities. FederalagencyandGSEMBSarereportedatstatedmaturityinthetableabove.Theestimatedweightedaveragelifeofthesesecurities,whichdiffersfromthestatedmaturityprimarilybecauseitfactorsinscheduledpaymentsandprepaymentassump-tions,wasapproximately5.7and6.5yearsasofDecember31,2014and2013,respectively.

TheamortizedcostandparvalueofTreasurysecuritiesandGSEdebtsecuritiesthatwereloanedfromtheSOMAundersecu-ritieslendingagreements,atDecember31wereasfollows(inmillions):


2014 2013 2014 2013

Treasurysecurities(amortizedcost) $ 267 $ 497 $ 11,144 $ 17,153Treasurysecurities(parvalue) 242 448 10,105 15,447GSEdebtsecurities(amortizedcost) 15 32 633 1,099GSEdebtsecurities(parvalue) 15 31 616 1,055

TheFRBNYentersintocommitmentstobuyandsellTreasurysecuritiesandrecordstherelatedsecuritiesonasettlement-datebasis.AsofDecember31,2014,therewerenooutstandingcommitments.



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TheFRBNYentersintocommitmentstobuyandsellfederalagencyandGSEMBSandrecordstherelatedsecuritiesonaset-tlement-datebasis.AsofDecember31,2014,thetotalpurchasepriceofthefederalagencyandGSEMBSunderoutstandingpurchasecommitmentswas$28,692million,noneofwhichwasrelatedtodollarrolls. ThetotalpurchasepriceofoutstandingpurchasecommitmentsallocatedtotheBankwas$687million,noneofwhichwasrelatedtodollarrolls.AsofDecember31,2014,therewerenooutstandingsalescommitmentsforfederalagencyandGSEMBS.Thesecommitments,whichhadcon-tractualsettlementdatesextendingthroughJanuary2015,areprincipallyforthepurchaseofTBAMBSforwhichthenumberandidentityofthepoolsthatwillbedeliveredtofulfillthecommitmentareunknownatthetimeofthetrade.Thesecommit-mentsaresubjecttovaryingdegreesofoff-balance-sheetmarketriskandcounterpartycreditriskthatresultfromtheirfuturesettlement.TheFRBNYrequiresthepostingofcashcollateralforMBScommitmentsaspartofitsriskmanagementpracticesusedtomitigatethecounterpartycreditrisk.

Otherassetsconsistsprimarilyofcashandshort-terminvestmentsrelatedtothefederalagencyandGSEMBSportfolio.Oth-erliabilities,whichareprimarilyrelatedtofederalagencyandGSEMBSpurchasesandsales,includestheFRBNY’sobligationtoreturncashmarginpostedbycounterpartiesascollateralundercommitmentstopurchaseandsellfederalagencyandGSEMBS.Inaddition,otherliabilitiesincludeobligationsthatarisefromthefailureofasellertodeliverMBStotheFRBNYonthesettlementdate.AlthoughtheFRBNYhasownershipofandrecordsitsinvestmentsintheMBSasofthecontractualsettle-mentdate,itisnotobligatedtomakepaymentuntilthesecuritiesaredelivered,andtheamountincludedinotherliabilitiesrepresentstheFRBNY’sobligationtopayforthesecuritieswhendelivered.TheamountofotherassetsandotherliabilitiesallocatedtotheBankandheldintheSOMAatDecember31wasasfollows(inmillions):


2014 2013 2014 2013

Otherassets: MBSportfoliorelatedcashandshortterminvestments $ 1 $ - $ 28 $ 1 Other - - 1 1

Totalotherassets $ 1 $ - $ 29 $ 2

Otherliabilities: Cashmargin $ 19 $ 38 $ 793 $ 1,320 ObligationsfromMBStransactionfails 1 1 30 11 Other - - 7 -

Totalotherliabilities $ 20 $ 39 $ 830 $ 1,331

Accruedinterestreceivableondomesticsecuritiesholdingswas$25,561millionand$23,405millionasofDecember31,2014and2013,respectively,ofwhich$613millionand$678million,respectively,wasallocatedtotheBank.Theseamountsarereportedasacomponentof“SystemOpenMarketAccount:Accruedinterestreceivable”intheStatementsofCondition.



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InformationabouttransactionsrelatedtoTreasurysecurities,GSEdebtsecurities,andfederalagencyandGSEMBSduringtheyearsendedDecember31,2014and2013,issummarizedasfollows(inmillions):

AllocatedtotheBank

Total Federal Treasury GSEdebt agencyand Notes Bonds securities securities GSEMBS BalanceatDecember31,2012 $37,759 $22,049 $59,808 $ 2,627 $ 31,416 Purchases1 10,822 6,235 17,057 - 26,256 Sales1 - - - - - Realizedgains,net2 - - - - - Principalpaymentsandmaturities - - - (586) (8,303) Amortizationofpremiumsandaccretionofdiscounts,net (181) (286) (467) (24) (211) Inflationadjustmentoninflation-indexedsecurities 8 19 27 - - Annualreallocationadjustment3 (5,088) (2,974) (8,062) (304) (4,716)

BalanceatDecember31,2013 $43,320 $25,043 $68,363 $ 1,713 $ 44,442 Purchases1 4,337 2,242 6,579 - 11,948 Sales1 - - - - (1) Realizedgains,net2 - - - - - Principalpaymentsandmaturities (13) - (13) (494) (5,070) Amortizationofpremiumsandaccretionofdiscounts,net (140) (256) (396) (15) (179) Inflationadjustmentoninflation-indexedsecurities 12 33 45 - - Annualreallocationadjustment3 (7,870) (4,510) (12,380) (246) (8,279)

BalanceatDecember31,2014 $39,646 $22,552 $62,198 $ 958 $ 42,861 Year-endedDecember31,2013 Supplementalinformation-parvalueoftransactions: Purchases4 $10,744 $ 5,572 $16,316 $ - $ 25,424 Sales - - - - - Year-endedDecember31,2014 Supplementalinformation-parvalueoftransactions: Purchases4 $ 4,400 $ 2,198 $ 6,598 $ - $ 11,548 Sales - - - - (1) 1Purchasesandsalesmayincludepaymentsandreceiptsrelatedtoprincipal,premiums,discounts,andinflationcompensationadjustmentstothebasisofinflation-indexedsecurities.Theamountreportedassalesincludestherealizedgainsandlossesonsuchtransactions.PurchasesandsalesexcludeMBSTBAtransactionsthataresettledonanetbasis. 2Realizedgains,netoffsettheamountofrealizedgainsandlossesincludedinthereportedsalesamount. 3ReflectstheannualadjustmenttotheBank’sallocatedportionoftherelatedSOMAsecuritiesthatresultsfromtheannualsettlementoftheinterdistrictsettlementaccount,asdiscussedinNote3i. 4Includesinflationcompensation.



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Total SOMA Total Federal Treasury GSEdebt agencyand Notes Bonds securities securities GSEMBS BalanceatDecember31,2012 $1,142,219 $666,969 $1,809,188 $ 79,479 $ 950,321 Purchases1 358,656 206,208 564,864 - 864,537Sales1 - - - - -Realizedgains,net2 - - - - -Principalpaymentsandmaturities (21) - (21) (19,562) (273,990)Amortizationofpremiumsandaccretionofdiscounts,net (6,024) (9,503) (15,527) (795) (7,008)Inflationadjustmentoninflation-indexedsecurities 285 645 930 - -

BalanceatDecember31,2013 $1,495,115 $864,319 $2,359,434 $ 59,122 $ 1,533,860Purchases1 165,306 85,826 251,132 - 466,384Sales1 - - - - (29)Realizedgains,net2 - - - - -Principalpaymentsandmaturities (475) - (475) (18,544) (203,933)Amortizationofpremiumsandaccretionofdiscounts,net (5,545) (10,132) (15,677) (588) (7,199)Inflationadjustmentoninflation-indexedsecurities 500 1,327 1,827 - -

BalanceatDecember31,2014 $1,654,901 $941,340 $2,596,241 $ 39,990 $ 1,789,083 Year-endedDecember31,2013 Supplementalinformation-parvalueoftransactions: Purchases3 $ 356,766 $184,956 $ 541,722 $ - $ 837,490Sales - - - - - Year-endedDecember31,2014 Supplementalinformation-parvalueoftransactions: Purchases3 $ 167,497 $ 83,739 $ 251,236 $ - $ 450,633Sales - - - - (29)

1Purchasesandsalesmayincludepaymentsandreceiptsrelatedtoprincipal,premiums,discounts,andinflationcompensationadjustmentstothebasisofinflation-indexedsecurities.Theamountreportedassalesincludestherealizedgainsandlossesonsuchtransactions.PurchasesandsalesexcludeMBSTBAtransactionsthataresettledonanetbasis. 2Realizedgains,netoffsettheamountofrealizedgainsandlossesincludedinthereportedsalesamount. 3Includesinflationcompensation.

b. Foreign Currency Denominated Investments TheFRBNYconductsforeigncurrencyoperationsand,onbehalfoftheReserveBanks,holdstheresultingforeigncurrencydenominatedinvestmentsintheSOMA.

TheFRBNY holdsforeigncurrencydepositswithforeigncentralbanksandtheBankforInternationalSettlementsandinvestsinforeigngovernmentdebt instrumentsofGermany,France,andJapan. Theseforeigngovernmentdebt instrumentsare



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backedbythefullfaithandcreditoftheissuingforeigngovernments.Inaddition,theFRBNY entersintotransactionstopur-chaseEuro-denominatedgovernmentdebtsecuritiesunderagreementstoresellforwhichtheacceptedcollateralisthedebtinstrumentsissuedbythegovernmentsofBelgium,France,Germany,Italy,theNetherlands,andSpain,whicharebackedbythefullfaithandcreditofthoseissuinggovernments.

TheBank’sallocatedshareofactivityrelatedtoforeigncurrencyoperationswas7.519percentand7.735percentatDecem-ber31,2014and2013,respectively.

InformationaboutforeigncurrencydenominatedinvestmentsvaluedatamortizedcostandforeigncurrencymarketexchangeratesatDecember31wasasfollows(inmillions):

AllocatedtoBank TotalSOMA 2014 2013 2014 2013

Euro: Foreigncurrencydeposits $ 521 $ 582 $ 6,936 $ 7,530 Securitiespurchasedunderagreementstoresell - 197 - 2,549 Germangovernmentdebtinstruments 187 185 2,494 2,396 Frenchgovernmentdebtinstruments 277 186 3,687 2,397 Japaneseyen: Foreigncurrencydeposits 194 227 2,576 2,927 Japanesegovernmentdebtinstruments 392 458 5,207 5,925

Total $ 1,571 $ 1,835 $ 20,900 $ 23,724

Accruedinterestreceivableonforeigncurrencydenominatedinvestmentswas$83millionand$88millionasofDecember31,2014and2013,respectively,ofwhich$6millionand$7million,respectively,wasallocatedtotheBank.Theseamountsarereportedasacomponentof“SystemOpenMarketAccount:Accruedinterestreceivable”intheStatementsofCondition.



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TheremainingmaturitydistributionofforeigncurrencydenominatedinvestmentsthatwereallocatedtotheBankatDecem-ber31,2014and2013,wasasfollows(inmillions):

Within 16daysto 91daysto Over1year 15days 90days 1year to5years Total

December31,2014: Euro $ 273 $ 211 $ 124 $ 377 $ 985 Japaneseyen 207 30 116 233 586

Total $ 480 $ 241 $ 240 $ 610 $ 1,571 December31,2013: Euro $ 544 $ 140 $ 167 $ 299 $ 1,150 Japaneseyen 241 29 145 270 685

Total $ 785 $ 169 $ 312 $ 569 $ 1,835

TherewerenoforeignexchangecontractsrelatedtoopenmarketoperationsoutstandingasofDecember31,2014.

TheFRBNYenters intocommitmentstobuyforeigngovernmentdebt instrumentsandrecordstherelatedsecuritiesonasettlement-datebasis.AsofDecember31,2014,therewere$137millionofoutstandingcommitmentstopurchaseforeigngovernmentdebtinstruments,ofwhich$10millionwasallocatedtotheBank.ThesesecuritiessettledonJanuary5,2015,andreplacedEuro-denominatedgovernmentdebtinstrumentsheldintheSOMAthatmaturedonthatdate.During2014,therewerepurchasesandmaturitiesofforeigngovernmentdebtinstrumentsof$5,494millionand$3,337million,respec-tively,ofwhich$414millionand$252million,respectively,wereallocatedtotheBank.Therewerenosalesofforeigngovern-mentdebtinstrumentsin2014.

Inconnectionwithitsforeigncurrencyactivities,theFRBNY mayenterintotransactionsthataresubjecttovaryingdegreesofoff-balance-sheetmarketriskandcounterpartycreditriskthatresultfromtheirfuturesettlement.TheFRBNY controls theserisksbyobtainingcreditapprovals,establishingtransactionlimits,receivingcollateralinsomecases,andperformingmonitoringprocedures.

AtDecember31,2014and2013,therewasnobalanceoutstandingundertheauthorizedwarehousingfacility.

TherewerenotransactionsrelatedtotheauthorizedreciprocalcurrencyarrangementswiththeBankofCanadaandtheBankofMexicoduringtheyearsendedDecember31,2014and2013.

ForeigncurrencyworkingbalancesheldandforeignexchangecontractsexecutedbytheBanktofacilitateitsinternationalpaymentsandcurrencytransactionsitmadeonbehalfofforeigncentralbanksandU.S.officialinstitutioncustomerswerenotmaterialasofDecember31,2014and2013.



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c. Central Bank Liquidity Swaps U.S. Dollar Liquidity Swaps TheBank’sallocatedshareofU.S.dollarliquidityswapswasapproximately7.519percentand7.735percentatDecember31,2014and2013,respectively.

ThetotalforeigncurrencyheldunderU.S.dollarliquidityswapsintheSOMAatDecember31,2014and2013,was$1,528millionand$272million,respectively,ofwhich$115millionand$21million,respectively,wasallocatedtotheBank.

TheremainingmaturitydistributionofU.S.dollarliquidityswapsthatwereallocatedtotheBankatDecember31wasasfol-lows(inmillions):

2014 2013 Within15 Within15days 16daysto days days 90days Total

Euro $ - $ 9 $ 12 $ 21 Japaneseyen 115 - - - Total $ 115 $ 9 $ 12 $ 21

Foreign Currency Liquidity Swaps AtDecember31,2014and2013,therewasnobalanceoutstandingrelatedtoforeigncurrencyliquidityswaps.

d. Fair Value of SOMA Assets and LiabilitiesThefairvalueamountsbelowarepresentedsolely for informationalpurposes. AlthoughthefairvalueofSOMAsecurityholdingscanbesubstantiallygreaterthanorlessthantherecordedvalueatanypointintime,theseunrealizedgainsorlosseshavenoeffectontheabilityoftheReserveBanks,asthecentralbank,tomeettheirfinancialobligationsandresponsibilities.BecauseSOMAsecuritiesarerecordedatamortizedcost,cumulativeunrealizedgains(losses)arenotrecognizedintheState-mentsofConditionandthechangesincumulativeunrealizedgains(losses)arenotrecognizedintheStatementsofIncomeandComprehensiveIncome.

ThefairvalueoftheTreasurysecurities,GSEdebtsecurities,federalagencyandGSEMBS,andforeigngovernmentdebtin-strumentsintheSOMA’sholdingsissubjecttomarketrisk,arisingfrommovementsinmarketvariablessuchasinterestratesandcreditrisk.ThefairvalueoffederalagencyandGSEMBSisalsoaffectedbytheexpectedrateofprepaymentsofmortgageloansunderlyingthesecurities.Thefairvalueofforeigngovernmentdebtinstrumentsisalsoaffectedbycurrencyrisk.BasedonevaluationsperformedasofDecember31,2014,therearenocreditimpairmentsofSOMAsecuritiesholdings.



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Thefollowingtablepresentstheamortizedcost,fairvalue,andcumulativeunrealizedgains(losses)ontheTreasurysecurities,GSEdebtsecurities,andfederalagencyandGSEMBSheldintheSOMAatDecember31(inmillions):

AllocatedtotheBank 2014 2013 Cumulative Cumulative Amortized unrealized Amortized unrealized cost Fairvalue gains cost Fairvalue gains(losses)

Treasurysecurities: Notes $ 39,646 $ 40,328 $ 682 $ 43,320 $ 43,432 $ 112 Bonds 22,552 25,225 2,673 25,043 24,406 (637)

TotalTreasurysecurities $ 62,198 $ 65,553 $ 3,355 $ 68,363 $ 67,838 $ (525)

GSEdebtsecurities 958 1,018 60 1,713 1,803 90FederalagencyandGSEMBS 42,861 43,615 754 44,442 43,333 (1,109)

TotaldomesticSOMAportfolio securitiesholdings $ 106,017 $ 110,186 $ 4,169 $ 114,518 $ 112,974 $ (1,544) Memorandum-Commitmentsfor: PurchasesofTreasurysecurities $ - $ - $ - $ - $ - $ - PurchasesofFederalagency andGSEMBS 687 690 3 1,720 1,713 (7) SalesofFederalagencyand GSEMBS - - - - - - Total SOMA 2014 2013 Cumulative Cumulative Amortized unrealized Amortized unrealized cost Fairvalue gains cost Fairvalue gains(losses)

Treasurysecurities: Notes $1,654,901 $1,683,377 $ 28,476 $ 1,495,115 $1,499,000 $ 3,885 Bonds 941,340 1,052,916 111,576 864,319 842,336 (21,983)

TotalTreasurysecurities $2,596,241 $2,736,293 $ 140,052 $ 2,359,434 $2,341,336 $ (18,098)GSEdebtsecurities 39,990 42,499 2,509 59,122 62,236 3,114FederalagencyandGSEMBS 1,789,083 1,820,544 31,461 1,533,860 1,495,572 (38,288)

TotaldomesticSOMAportfolio securitiesholdings $ 4,425,314 $4,599,336 $ 174,022 $ 3,952,416 $3,899,144 $ (53,272) Memorandum-Commitmentsfor: PurchasesofTreasurysecurities $ - $ - $ - $ - $ - $ - PurchasesofFederalagency andGSEMBS 28,692 28,803 111 59,350 59,129 (221) SalesofFederalagencyand GSEMBS - - - - - -



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ThefairvalueofTreasurysecuritiesandGSEdebtsecuritieswasdeterminedusingpricingservicesthatprovidemarketcon-sensuspricesbasedonindicativequotesfromvariousmarketparticipants.ThefairvalueoffederalagencyandGSEMBSwasdeterminedusingapricingservicethatutilizesamodel-basedapproachthatconsidersobservableinputsforsimilarsecurities.

Thecostbasisofsecuritiespurchasedunderagreementstoresell,securitiessoldunderagreementstorepurchase,andotherinvestmentsheldintheSOMAdomesticportfolioapproximatefairvalue.

AtDecember31,2014and2013,thefairvalueofforeigncurrencydenominatedinvestmentswas$20,996millionand$23,802million,respectively,ofwhich$1,579millionand$1,841million,respectively,wasallocatedtotheBank.Thefairvalueofforeigngovernmentdebtinstrumentswasdeterminedusingpricingservicesthatprovidemarketconsensuspricesbasedonindicativequotesfromvariousmarketparticipants.Thefairvalueofforeigncurrencydepositsandsecuritiespurchasedunderagreementstoresellwasdeterminedbyreferencetomarketinterestrates.

ThefollowingtableprovidesadditionalinformationontheamortizedcostandfairvaluesofthefederalagencyandGSEMBSportfolioatDecember31(inmillions):

2014 2013

DistributionofMBSholdingsbycouponrate Amortizedcost Fairvalue Amortizedcost Fairvalue

AllocatedtotheBank: 2.0% $ 306 $ 302 $ 411 $ 392 2.5% 2,746 2,718 3,588 3,432 3.0% 12,297 12,129 15,119 14,032 3.5% 11,531 11,724 10,132 9,804 4.0% 10,255 10,570 6,672 6,696 4.5% 3,734 4,021 5,384 5,664 5.0% 1,570 1,694 2,413 2,549 5.5% 365 393 623 658 6.0% 51 55 88 93 6.5% 6 9 12 13

Total $ 42,861 $ 43,615 $ 44,442 $ 43,333 TotalSOMA: 2.0% $ 12,788 $ 12,618 $ 14,191 $ 13,529 2.5% 114,609 113,468 123,832 118,458 3.0% 513,289 506,280 521,809 484,275 3.5% 481,305 489,390 349,689 338,357 4.0% 428,047 441,204 230,256 231,113 4.5% 155,867 167,844 185,825 195,481 5.0% 65,544 70,719 83,290 87,968 5.5% 15,232 16,414 21,496 22,718 6.0% 2,110 2,287 3,052 3,225 6.5% 292 320 420 448

Total $ 1,789,083 $ 1,820,544 $ 1,533,860 $ 1,495,572



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Thefollowingtablespresenttherealizedgains(losses)andthechangeinthecumulativeunrealizedgains(losses)relatedtoSOMAdomesticsecuritiesholdingsduringtheyearsendedDecember31,2014and2013(inmillions):

AllocatedtoBank 2014 2013 Changeincumulative unrealizedgains Changeincumulative Realizedgains1 (losses)2 Realizedgains1 unrealizedlosses2

Treasurysecurities $ - $ 4,056 $ - $ (5,286)GSEdebtsecurities - (15) - (71)FederalagencyandGSEMBS 2 1,796 1 (2,396)

Total $ 2 $ 5,837 $ 1 $ (7,753)

Total SOMA 2014 2013

Changeincumulative unrealizedgains Changeincumulative Realizedgains1 (losses)2 Realizedgains1 unrealizedlosses2

Treasurysecurities $ - $ 158,150 $ - $ (183,225)GSEdebtsecurities - (605) - (2,411)FederalagencyandGSEMBS 81 69,749 51 (81,957)

Total $ 81 $ 227,294 $ 51 $ (267,593)

1Realizedgainsarereportedin“Non-interestloss:SystemOpenMarketAccount”intheStatementsofIncomeandComprehensiveIncome. 2BecauseSOMAsecuritiesarerecordedatamoritizedcost,thechangeinthecumulativeunrealizedgains(losses)isnotreportedintheStatementsofIncomeandComprehensiveIncome.

Theamountofchangeincumulativeunrealizedgains(losses)position,net,relatedtoforeigncurrencydenominatedinvest-mentswasagainof$18millionandalossof$90millionfortheyearsendedDecember31,2014and2013,respectively,ofwhich$1millionand$7million,respectively,wereallocatedtotheBank.

AccountingStandardsCodification(ASC)Topic820(ASC820)definesfairvalueasthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.ASC820



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establishesathree-levelfairvaluehierarchythatdistinguishesbetweenassumptionsdevelopedusingmarketdataobtainedfromindependentsources(observableinputs)andtheBank’sassumptionsdevelopedusingthebestinformationavailableinthecircumstances(unobservableinputs).ThethreelevelsestablishedbyASC820aredescribedasfollows:

• Level1–Valuationisbasedonquotedpricesforidenticalinstrumentstradedinactivemarkets.• Level2–Valuation isbasedonquotedpricesforsimilar instruments inactivemarkets,quotedpricesfor identicalor

similar instruments inmarketsthatarenotactive,andmodel-basedvaluationtechniquesforwhichallsignificantas-sumptionsareobservableinthemarket.

• Level3–Valuationisbasedonmodel-basedtechniquesthatusesignificantinputsandassumptionsnotobservableinthemarket.TheseunobservableinputsandassumptionsreflecttheBank’sestimatesofinputsandassumptionsthatmarketparticipantswoulduseinpricingtheassetsandliabilities.Valuationtechniquesincludetheuseofoptionpricingmodels,discountedcashflowmodels,andsimilartechniques.

Treasurysecurities,GSEdebtsecurities,federalagencyandGSEMBS,andforeigngovernmentdebtinstrumentsareclassifiedasLevel2withintheASC820hierarchybecausethefairvaluesarebasedonindicativequotesandotherobservableinputsobtainedfromindependentpricingservices.ThefairvaluehierarchylevelofSOMAfinancialassetsisnotnecessarilyanindi-cationoftheriskassociatedwiththoseassets.

6. BANK PREMISES, EQUIPMENT, AND SOFTWARE

BankpremisesandequipmentatDecember31wereasfollows(inmillions):

2014 2013

Bankpremisesandequipment: Landandlandimprovements $ 8 $ 8 Buildings 119 113 Buildingmachineryandequipment 28 25 Constructioninprogress 1 1 Furnitureandequipment 50 53

Subtotal 206 200 Accumulateddepreciation (116) (113) Bankpremisesandequipment,net $ 90 $ 87 Depreciationexpense,fortheyearsendedDecember31 $ 9 $ 10



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TheBankleasesspacetooutsidetenantswithremainingleasetermsrangingfrom3to10years.Rentalincomefromsuchleaseswas$2millionforeachoftheyearsendedDecember31,2014and2013,andisreportedasacomponentof“Non-interestloss:Other”intheStatementsofIncomeandComprehensiveIncome.FutureminimumleasepaymentsthattheBankwillreceiveundernoncancelableleaseagreementsinexistenceatDecember31,2014,areasfollows(inmillions):

2015 $ 2 2016 2 2017 2 2018 2 2019 3 Thereafter 4

Total $ 15

TheBankhadcapitalizedsoftwareassets,netofamortization,of$7millionand$6millionatDecember31,2014and2013,respectively.Amortizationexpensewas$2millionforeachoftheyearsendedDecember31,2014and2013.Capitalizedsoftwareassetsarereportedasacomponentof“Otherassets”intheStatementsofConditionandtherelatedamortizationisreportedasacomponentof“Operatingexpenses:Other”intheStatementsofIncomeandComprehensiveIncome.

7. COMMITMENTS AND CONTINGENCIESInconductingitsoperations,theBankentersintocontractualcommitments,normallywithfixedexpirationdatesortermina-tionprovisions,atspecificratesandforspecificpurposes.

AtDecember31,2014,theBankwasobligatedundernoncancelableleasesforpremisesandequipmentwithremainingtermsrangingfrom1toapproximately5years.Theseleasesprovideforincreasedleasepaymentsbaseduponincreasesinrealestatetaxes,operatingcosts,orselectedpriceindexes.

Rentalexpenseunderoperatingleasesforcertainoperatingfacilities,warehouses,anddataprocessingandofficeequipment(includingtaxes,insurance,andmaintenancewhenincludedinrent),netofsubleaserentals,was$1millionforeachoftheyearsendedDecember31,2014and2013.CertainoftheBank’sleaseshaveoptionstorenew. TheBankhasnocapitalleases.

Futureminimumleasepaymentsundernoncancelableoperatingleases,netofsubleaserentals,withremainingtermsofoneyearormore,atDecember31,2014,areasfollows(inthousands):

Operatingleases

2015 $ 457 2016 468 2017 480 2018 492 2019 41

Futureminimumleasepayments $ 1,938



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AtDecember31,2014,therewerenomaterialunrecordedunconditionalpurchasecommitmentsorobligationsinexcessofoneyear.

UndertheInsuranceAgreementoftheReserveBanks,eachoftheReserveBankshasagreedtobear,onaper-incidentbasis,ashareofcertainlossesinexcessofonepercentofthecapitalpaid-inoftheclaimingReserveBank,upto50percentofthetotalcapitalpaid-inofallReserveBanks.LossesareborneintheratioofaReserveBank’scapitalpaid-intothetotalcapitalpaid-inofallReserveBanksatthebeginningofthecalendaryearinwhichthelossisshared.NoclaimswereoutstandingundertheagreementatDecember31,2014and2013.

TheBankisinvolvedincertainlegalactionsandclaimsarisingintheordinarycourseofbusiness.Althoughitisdifficulttopredicttheultimateoutcomeoftheseactions,inmanagement’sopinion,basedondiscussionswithcounsel,thelegalactionsandclaimswillberesolvedwithoutmaterialadverseeffectonthefinancialpositionorresultsofoperationsoftheBank.

8. RETIREMENT AND THRIFT PLANSRetirement PlansTheBankcurrentlyoffersthreedefinedbenefitretirementplanstoitsemployees,basedonlengthofserviceandlevelofcompensation.SubstantiallyalloftheemployeesoftheReserveBanks,BoardofGovernors,andOfficeofEmployeeBenefitsoftheFederalReserveSystemparticipateintheRetirementPlanforEmployeesoftheFederalReserveSystem(SystemPlan).UndertheDodd-FrankAct,newlyhiredBureauemployeesareeligibletoparticipateintheSystemPlan.Inaddition,employ-eesatcertaincompensationlevelsparticipate intheBenefitEqualizationRetirementPlan(BEP)andcertainReserveBankofficersparticipateintheSupplementalRetirementPlanforSelectOfficersoftheFederalReserveBanks(SERP).

TheFRBNY,onbehalfoftheSystem,recognizesthenetassetornetliabilityandcostsassociatedwiththeSystemPlaninitsconsolidatedfinancialstatements.DuringtheyearsendedDecember31,2014and2013,certaincostsassociatedwiththeSystemPlanwerereimbursedbytheBureau.

TheBank’sprojectedbenefitobligation,fundedstatus,andnetpensionexpensesfortheBEPandtheSERPatDecember31,2014and2013,andfortheyearsthenended,werenotmaterial.

Thrift PlanEmployeesoftheBankparticipateinthedefinedcontributionThriftPlanforEmployeesoftheFederalReserveSystem(ThriftPlan).TheBankmatches100percentofthefirstsixpercentofemployeecontributionsfromthedateofhireandprovidesanautomaticemployercontributionofonepercentofeligiblepay.TheBank’sThriftPlancontributionstotaled$5millionforeachoftheyearsendedDecember31,2014and2013andarereportedasacomponentof“Operatingexpenses:Salariesandbenefits”intheStatementsofIncomeandComprehensiveIncome.

9. POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITSPostretirement Benefits Other Than Retirement PlansInadditiontotheBank’sretirementplans,employeeswhohavemetcertainageandlength-of-servicerequirementsareeli-gibleforbothmedicalandlifeinsurancebenefitsduringretirement.



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TheBankfundsbenefitspayableunderthemedicalandlifeinsuranceplansasdueand,accordingly,hasnoplanassets.Followingisareconciliationofthebeginningandendingbalancesofthebenefitobligation(inmillions):

2014 2013

AccumulatedpostretirementbenefitobligationatJanuary1 $ 91.3 $ 103.6Servicecostbenefitsearnedduringtheperiod 3.0 3.3Interestcostonaccumulatedbenefitobligation 4.5 3.9Netactuarialloss(gain) 13.0 (16.3)Curtailmentloss (0.9) -Contributionsbyplanparticipants 1.9 1.9Benefitspaid (6.6) (5.9)MedicarePartDsubsidies 0.4 0.4Planamendments - 0.4

AccumulatedpostretirementbenefitobligationatDecember31 $ 106.6 $ 91.3

AtDecember31,2014and2013,theweighted-averagediscountrateassumptionsused indevelopingthepostretirementbenefitobligationwere3.96percentand4.79percent,respectively.

Discountratesreflectyieldsavailableonhigh-qualitycorporatebondsthatwouldgeneratethecashflowsnecessarytopaytheplan’sbenefitswhendue.TheSystemPlandiscountrateassumptionsettingconventionusesanunroundedrate.

Followingisareconciliationofthebeginningandendingbalanceoftheplanassets,andtheunfundedpostretirementbenefitobligationandaccruedpostretirementbenefitcosts(inmillions):

2014 2013

FairvalueofplanassetsatJanuary1 $ - $ -Contributionsbytheemployer 4.3 3.6Contributionsbyplanparticipants 1.9 1.9Benefitspaid (6.6) (5.9)MedicarePartDsubsidies 0.4 0.4

FairvalueofplanassetsatDecember31 $ - $ - Unfundedobligationandaccruedpostretirementbenefitcost $ 106.6 $ 91.3 Amountsincludedinaccumulatedothercomprehensivelossareshownbelow: Priorservicecost $ (0.5) $ (1.2)Netactuarialloss (24.7) (13.2)

Totalaccumulatedothercomprehensiveloss $ (25.2) $ (14.4)



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Accruedpostretirementbenefitcostsarereportedasacomponentof“Accruedbenefitcosts”intheStatementsofCondition.

Formeasurementpurposes,theassumedhealth-carecosttrendratesatDecember31areasfollows:

2014 2013

Health-carecosttrendrateassumedfornextyear 6.60% 7.00%Ratetowhichthecosttrendrateisassumedtodecline (theultimatetrendrate) 4.75% 5.00%Yearthattheratereachestheultimatetrendrate 2019 2019

Assumedhealth-carecosttrendrateshaveasignificanteffectontheamountsreportedforhealth-careplans.Aonepercent-agepointchangeinassumedhealth-carecosttrendrateswouldhavethefollowingeffectsfortheyearendedDecember31,2014(inmillions): Onepercentage Onepercentage pointincrease pointdecrease

Effectonaggregateofserviceandinterestcostcomponents ofnetperiodicpostretirementbenefitcosts $ 0.2 $ (0.8)Effectonaccumulatedpostretirementbenefitobligation 2.1 (9.6)

ThefollowingisasummaryofthecomponentsofnetperiodicpostretirementbenefitexpensefortheyearsendedDecember31(inmillions): 2014 2013

Servicecost-benefitsearnedduringtheperiod $ 3.0 $ 3.3Interestcostonaccumulatedbenefitobligation 4.5 3.9Amortizationofpriorservicecost 0.6 0.4Amortizationofnetactuarialloss 0.7 2.9

Totalperiodicexpense 8.8 10.5

Curtailment 0.1 -

Netperiodicpostretirementbenefitexpense $ 8.9 $ 10.5

Estimatedamountsthatwillbeamortizedfromaccumulatedothercomprehensivelossintonetperiodicpostretirementben-efitexpensein2015areshownbelow:

Priorservicecost $ 0.1Netactuarialloss 2.0

Total $ 2.1



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NetpostretirementbenefitcostsareactuariallydeterminedusingaJanuary1measurementdate.AtJanuary1,2014and2013,theweighted-averagediscountrateassumptionsusedtodeterminenetperiodicpostretirementbenefitcostswere4.79percentand3.75percent,respectively.

Netperiodicpostretirementbenefitexpenseisreportedasacomponentof“Operatingexpenses:Salariesandbenefits”intheStatementsofIncomeandComprehensiveIncome.AcurtailmentlossassociatedwithrestructuringprogramsthataredescribedinNote11wasrecognizedinnetincomeintheyearendedDecember31,2014.

TheMedicarePrescriptionDrug,ImprovementandModernizationActof2003establishedaprescriptiondrugbenefitunderMedicare(MedicarePartD)andafederalsubsidytosponsorsofretireehealth-carebenefitplansthatprovidebenefitsthatareatleastactuariallyequivalenttoMedicarePartD.ThebenefitsprovidedundertheBank’splantocertainparticipantsareatleastactuariallyequivalenttotheMedicarePartDprescriptiondrugbenefit.Theestimatedeffectsofthesubsidyarereflectedinactuariallossintheaccumulatedpostretirementbenefitobligationandnetperiodicpostretirementbenefitex-pense.

FederalMedicarePartDsubsidyreceiptswere$408thousandand$331thousandintheyearsendedDecember31,2014and2013,respectively.Expectedreceiptsin2015,relatedtobenefitspaidintheyearsendedDecember31,2014and2013,are$195thousand.

Followingisasummaryofexpectedpostretirementbenefitpayments(inmillions):

Withoutsubsidy Withsubsidy

2015 $ 5.1 $ 4.8 2016 5.4 5.0 2017 5.7 5.2 2018 5.9 5.4 2019 6.2 5.6 2020-2024 33.3 30.1 Total $ 61.6 $ 56.1

Postemployment Benefits TheBankoffersbenefitstoformerorinactiveemployees.PostemploymentbenefitcostsareactuariallydeterminedusingaDecember31measurementdateandincludethecostofprovidingdisability;medical,dental,andvisioninsurance;andsur-vivorincomebenefits.TheaccruedpostemploymentbenefitcostsrecognizedbytheBankatDecember31,2014and2013,were$6.7millionand$7.2million,respectively.Thiscostisincludedasacomponentof“Accruedbenefitcosts”intheState-mentsofCondition.Netperiodicpostemploymentbenefitexpense(credit)includedin2014and2013operatingexpenseswere$0.3millionand$1.6million,respectively,andarerecordedasacomponentof“Operatingexpenses:Salariesandben-efits”intheStatementsofIncomeandComprehensiveIncome.



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10. Accumulated Other Comprehensive Income And Other Comprehensive IncomeFollowingisareconciliationofbeginningandendingbalancesofaccumulatedothercomprehensiveincome(loss)asofDe-cember31(inmillions): 2014 2013

Amount related to Amount related to postretirement postretirement benefitsotherthan benefitsotherthan retirementplans retirementplans

BalanceatJanuary1 $ (14.4) $ (33.5)Changeinfundedstatusofbenefitplans: Priorservicecostsarisingduringtheyear 0.11 (0.4)Amortizationofpriorservicecost 0.62 0.42

Changeinpriorservicecostsrelatedtobenefitplans 0.7 -Netactuarial(loss)gainarisingduringtheyear (12.2)3 16.2Amortizationofnetactuarialloss 0.72 2.92

Changeinactuarial(losses)gainsrelatedtobenefitplans (11.5) 19.1

Changeinfundedstatusofbenefitplans-othercomprehensive(loss)income (10.8) 19.1

BalanceatDecember31 $ (25.2) $ (14.4)

1Netcurtailmentlossduetoaccelerationofpriorservicecostrelatedtobusinessrestructuring.SeeNote11forfurtherinformation.

2Reclassificationisreportedasacomponentof“OperatingExpenses:Salariesandbenefits”intheStatementsofIncomeandComprehensiveIncome.

3Includesanactuarialgainoncurtailmentof$0.8millionrelatedtobusinessrestructuring.SeeNote11forfurtherinformation.

AdditionaldetailregardingtheclassificationofaccumulatedothercomprehensivelossisincludedinNote9.

11. Business Restructuring Charges

In2014,theTreasuryannouncedaplantoconsolidatethenumberofReserveBanksprovidingfiscalagentservicestotheTreasuryfromtentofour.Asaresultofthisinitiative,theGovernmentEntityAccountingandReportingSystemandTreasuryCollateralManagementandMonitoringoperationsperformedbytheBankwillbetransitionedtotheFederalReserveBankofSt.Louisin2015.Additionally,thePostPaymentSystemandTreasurySoftwareQualityAssuranceoperationsperformedbytheBankwilltransitioninphasestotheFederalReserveBankofKansasCityoverthenextseveralyears.TheBankhadnomaterialbusinessrestructuringchargesin2013.

Inyearspriorto2013,theReserveBanksannouncedtheaccelerationoftheircheckrestructuringinitiativestoalignthecheckprocessinginfrastructureandoperationswithdecliningcheckprocessingvolumes.Thenewinfrastructureconsolidatedpa-perandelectroniccheckprocessingattheFRBA.



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Followingisasummaryoffinancialinformationrelatedtotherestructuringplans(inmillions):

2014 restructuringplans Information related to restructuring plans as of December 31, 2014: Totalexpectedcostsrelatedtorestructuringactivity $ 2.9 Expectedcompletiondate June2014 Reconciliation of liability balances: BalanceatDecember31,2013 $ - Employeeseparationcosts 2.1 Adjustments 0.8

BalanceatDecember31,2014 $ 2.9

Employeeseparationcostsareprimarilyseverancecostsfor identifiedstaffreductionsassociatedwiththeannouncedre-structuringplans.Separationcoststhatareprovidedundertermsofongoingbenefitarrangementsarerecordedbasedontheaccumulatedbenefitearnedbytheemployee.Separationcoststhatareprovidedunderthetermsofone-timebenefitarrangementsaregenerallymeasuredbasedontheexpectedbenefitasoftheterminationdateandrecordedratablyovertheperiodtotermination.Restructuringcostsrelatedtoemployeeseparationsarereportedasacomponentof“Operatingexpenses:Salariesandbenefits”intheStatementsofIncomeandComprehensiveIncome. AdjustmentstotheaccruedliabilityareprimarilyduetochangesintheestimatedrestructuringcostsandareshownasacomponentoftheappropriateexpensecategoryintheStatementsofIncomeandComprehensiveIncome.

CostsassociatedwithenhancedpostretirementbenefitsaredisclosedinNote9.

12. DISTRIBUTION OF COMPREHENSIVE INCOMEInaccordancewithBoardpolicy,ReserveBanksremitexcessearnings,afterprovidingfordividendsandtheamountneces-sarytoequatesurpluswithcapitalpaid-in,totheU.S.TreasuryasearningsremittancestotheTreasury.Thefollowingtablepresents thedistributionof theBank’s comprehensive income inaccordancewith theBoard’spolicy for theyearsendedDecember31(inmillions):

2014 2013 Dividendsoncapitalstock $ 118 $ 127Transferfromsurplus-amountrequiredtoequatesurpluswithcapitalpaid-in (471) (48)EarningsremittancestotheTreasury 2,625 2,189

Totaldistribution $ 2,272 $ 2,268

DuringtheyearendedDecember31,2014,theBankrecordedareductionintheamountofcapitalpaid-inandacorrespond-ingreductionofsurplus,whichispresentedintheabovetableas“Transferfromsurplus–amountrequiredtoequatesurplus



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withcapitalpaid-in.”Thereductionofsurplusresultedinanequivalentincreasein“EarningsremittancestotheTreasury”andareductionin“Comprehensiveincome”fortheyearendedDecember31,2014.

13. SUBSEQUENT EVENTSTherewerenosubsequenteventsthatrequireadjustmentstoordisclosuresinthefinancialstatementsasofDecember31,2014.SubsequenteventswereevaluatedthroughMarch11,2015,whichisthedatethatthefinancialstatementswereavail-abletobeissued.

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