The Federal Home Loan Bank of San Francisco announces the first
SAN FRANCISCO, April 28, 2020 (GLOBE NEWSWIRE) – The Federal Home Loan Bank of San Francisco (Bank) today announced its operating results for the first quarter of 2020. The Bank recorded a net loss of 8 million dollars for the first quarter of 2020, compared to net income of $ 104 million for the first quarter of 2019.
The decrease of $ 112 million in net income / (loss) compared to the prior year period mainly reflects a decrease of $ 95 million in net interest income, of $ 144 million for the first quarter of 2019 to $ 49 million for the first quarter of 2020. As a result of the global COVID-19 pandemic, conditions in the financial markets deteriorated significantly from late February through March 2020, causing disruption significant availability of funds in credit markets and resulting in adverse changes in interest rates, credit spreads and asset prices. The decrease in net interest income, attributable to both lower interest rates and increased credit spreads, is primarily attributable to a $ 43 million increase in net fair value losses on Designated fair value hedges, from $ 10 million for the first quarter of 2019 to $ 53 million for the first quarter of 2020. The decrease in net interest income also reflects a retrospective adjustment in effective mortgage yields of 15 million dollars, due to faster prepayments due to falling mortgage rates. Finally, the decrease in net income / (loss) also reflects a provision for expected current credit losses of $ 39 million for the first quarter of 2020 associated with certain private label residential mortgage-backed securities classified as available for sale (AFS). , resulting mainly from a significant drop in fair values.
The decrease in net interest income was partially offset by lower evaluations of the Affordable Housing Program (AHP). Due to the net loss in the first quarter of 2020, the Bank did not record any AHP valuation for the quarter. In the first quarter of 2019, the AHP valuation was $ 12 million.
Total assets increased by $ 18.1 billion in the first three months of 2020, to reach $ 124.9 billion as of March 31, 2020, from $ 106.8 billion as of December 31, 2019. Total Advances increased by $ 12.5 billion, to stand at $ 77.9 billion as at March 31, 2020, compared to $ 65.4 billion as at March 31, 2020 December 31, 2019. During the month of March 2020, The Bank has experienced increased demand for advances to meet the liquidity needs of its members in response to the pandemic and has maintained its liquidity investments in accordance with Financial Agency guidelines. As interest rates declined significantly during the quarter, investor demand for high quality fixed income investments, including the Bank’s consolidated bonds, increased, and the Bank continued to meet its expectations. financing needs during this period. Investments increased by $ 5.4 billion to $ 43.0 billion as at March 31, 2020, from $ 37.6 billion as at December 31, 2019. The increase in investments primarily reflects an increase in $ 6.5 billion in federal funds sold, a $ 2.6 billion increase in trading securities and a $ 1.3 billion increase in interest-bearing deposits, partially offset by a decrease of $ 5.0 billion dollars of securities purchased under resale agreements.
Accumulated other comprehensive income decreased by $ 502 million in the first three months of 2020 to reach accumulated other comprehensive income of $ 228 million as at March 31, 2020, compared to accumulated other Comprehensive income items of $ 274 million as at December 31, 2019, mainly due to the lower fair values of mortgage-backed securities classified as AFS.
As of March 31, 2020, the Bank met all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 5.4%, exceeding the requirement of 4.0%. The Bank had $ 6.7 billion in permanent capital, exceeding its risk-based capital requirement of $ 1.4 billion. Total retained earnings as of March 31, 2020 was $ 3.4 billion.
On April 27, 2020, the Board of Directors of the Bank declared a quarterly cash dividend on the outstanding share capital during the first quarter of 2020 at an annualized rate of 5.00%. The quarterly dividend rate is consistent with the Bank’s dividend philosophy of striving to pay a quarterly dividend at a rate between 5% and 7% annualized. The quarterly dividend will total $ 39 million, including $ 2 million of mandatory redeemable share capital dividends that will be reflected as interest expense in the second quarter of 2020. The Bank expects to pay the dividend on May 14, 2020. Due to the The COVID-19 pandemic and the measures taken to contain the spread of the virus, the US and global economies face great challenges and continuing uncertainty. In order to preserve capital in this uncertain environment, the Bank’s Board of Directors has decided to pay a quarterly dividend rate at the lower end of the range indicated in the Bank’s dividend philosophy.
Marie Long, (415) 616-2556
Mobile: (415) 572-6717
(dollars in millions)
|Selected balance sheet items|
at the end of the period
|March, 31st |
|December 31st |
|Total assets||$||124,870||$ 106,842|
|Mortgage loans held for the portfolio, net||3 239||3 314|
|Release Notes||39 102||27,376|
|Mandatory redeemable share capital||83||138|
|Share capital – Class B – Putable||3 231||3000|
|Unrestricted retained earnings||2,691||2 754|
|Restricted retained earnings||713||713|
|Accumulated other comprehensive income / (loss)||(228||)||274|
|Selection of other data at the end of the period||March, 31st |
|December 31st |
|Regulatory capital ratio2||5.38||%||6.18||%|
|Three months ended|
|Selected operating results for the period||March, 31st |
|March, 31st |
|Net interest income||$ 49||$ 144|
|Provision for / (reversal of) credit losses||39||–|
|Other income / (loss)||18||15|
|Affordable Housing Program Evaluation||–||12|
|Net income / (loss)||($ 8||)||$ 104|
|Three months ended|
|Other data selected for the period||March, 31st |
|March, 31st |
|Net interest margin3||0.18||%||0.52||%|
|Operating expenses as a percentage of average assets||0.12||0.12|
|Return on average assets||(0.03||)||0.37|
|Average return on equity||(0.46||)||6.34|
|Annualized dividend rate4||7.00||7.00|
|Average ratio of equity to average assets||6.09||5.87|
- Investments consist of federal funds sold, interest-bearing deposits, commercial securities, available-for-sale securities, held-to-maturity securities and securities purchased under resale agreements.
- This ratio is calculated as regulatory capital divided by total assets. Regulatory capital includes retained earnings, Class B share capital, and mandatory redeemable share capital (which is classified as a liability), but excludes accumulated other comprehensive income / (loss). Total regulatory capital as of March 31, 2020 was $ 6.7 billion.
- The net interest margin is the net interest income (annualized) divided by the average interest earning assets.
- Cash dividend declared, recorded and paid during the period, on the share capital outstanding during the previous quarter.
Federal Mortgage Bank of San Francisco
The Federal Home Loan Bank of San Francisco is a member-driven cooperative that helps local lenders in Arizona, California, and Nevada build strong communities, create opportunity, and change lives for the better. The tools and resources we provide to our member financial institutions – commercial banks, credit unions, industrial loan companies, savings institutions, insurance companies and community development financial institutions – promote home ownership, expand access to quality housing, create or support small businesses, and revitalize entire neighborhoods. Together with our members and other partners, we make the communities we serve more vibrant and resilient.
Safe Harbor Declaration under the Private Titles Litigation Reform Act 1995
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to the philosophy and dividend rates of the Bank. These statements are based on our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as “endeavor”, “will” and “expects”, or their negatives or other variations of these terms. The Bank cautions that, by their nature, forward-looking statements involve risks or uncertainties and that actual results could differ materially from those expressed or implied in such forward-looking statements or could affect the extent to which an objective, projection , an estimate or forecast is made, including future dividends. These forward-looking statements involve risks and uncertainties, including, but not limited to, the application of accounting standards relating, among other things, to the amortization of discounts and bonuses on financial assets, financial liabilities and certain gains. and fair value losses; hedge accounting for derivatives and underlying financial instruments; the fair values of financial instruments, including marketable securities and derivatives; future operating results; and allowance for credit losses. We assume no obligation to publicly revise or update any forward-looking statements for any reason.