Federal Home Loan Bank of San Francisco Announces Annual Report
SAN FRANCISCO, Feb. 18 2021 (GLOBE NEWSWIRE) – The Federal Home Loan Bank of San Francisco (Bank) today announced its 2020 operating results. Net income for 2020 was $ 335 million, compared to net income of $ 327 million of dollars for 2019. Net income for the fourth quarter of 2020 was $ 94 million, compared to net income of $ 113 million for the fourth quarter of 2019.
The increase in net income of $ 8 million for the year ended December 31, 2020, primarily reflects an increase in other income of $ 38 million and a decrease in other expenses of $ 22 million, which was offset by a decrease in net interest income of $ 26 million. and an increase in the allowance for bad debts of $ 26 million.
The $ 38 million increase in other income primarily reflects the receipt by the Bank of $ 85 million restitution proceeds as part of a Securities and Exchange Commission enforcement action in the third quarter of 2020, which was partially offset by an increase in net fair value losses associated with derivatives and financial instruments carried at fair value. The decrease of $ 22 million in other expenses mainly reflects a decrease of $ 15 million in expenses related to voluntary charitable contributions to the Quality Jobs Fund and a reduction in operating expenses of $ 9 million which was mainly related to higher expenses associated with the relocation of the Bank’s premises. during the second quarter of 2019.
Net interest income in 2020 decreased by $ 26 million, mainly reflecting a lower interest rate environment and lower average balances of interest-bearing assets, partially offset by an increase in fees. prepayment on advances of $ 30 million and a decrease in dividends paid on share capital (classified as interest expense) of $ 9 million. The allowance for credit losses in 2020 increased by $ 26 million and was primarily associated with certain Private Label Residential Mortgage Backed Securities (PLRMBS) classified as available for sale (AFS).
For the fourth quarter of 2020, net income was $ 94 million, down $ 19 million from the same period last year. The decrease primarily reflects an increase in net fair value losses associated with derivatives and financial instruments carried at fair value recognized in other income and a decrease of $ 16 million in net fair value gains on designated fair value hedges. These reductions in net income were partially offset by an increase in prepayment charges on advances of $ 16 million and a reversal of credit losses of $ 4 million for the fourth quarter of 2020 which was primarily associated with certain PLRMBS. classified as AFS.
As of December 31, 2020, total assets were $ 68.6 billion, a decrease of $ 38.2 billion from $ 106.8 billion as of December 31, 2019. Total advances have decreased of $ 34.4 billion, to reach $ 31.0 billion as at December 31, 2020, compared to $ 65.4 billion as at December 31, 2019. The decrease in advances mainly reflects the reduction in members’ liquidity needs related to the impact of the COVID-19 pandemic on the economy and on our members. In addition, investments decreased by $ 2.4 billion to $ 35.2 billion as at December 31, 2020, compared to $ 37.6 billion as at December 31, 2019. The decrease in investments primarily reflects a decrease in mortgage-backed securities, federal funds sold and interest-bearing deposits, partially offset by an increase in US Treasury securities.
Accumulated other comprehensive income (AOCI) decreased by $ 44 million in 2020, to $ 230 million as at December 31, 2020, from $ 274 million as at December 31, 2019. The decrease in AOCI in 2020 mainly reflects the decline in fair values of PLRMBS classified as AFS.
As of December 31, 2020, the Bank complied with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 8.7%, exceeding the requirement of 4.0%. The Bank had $ 6.0 billion in permanent capital, exceeding its risk-based capital requirement of $ 1.4 billion. Total retained earnings as of December 31, 2020 was $ 3.7 billion.
Today, the Bank’s Board of Directors declared a quarterly cash dividend on outstanding share capital during the fourth 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 $ 30 million. The Bank expects to pay the dividend on March 18, 2021. Due to 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.
(in millions of dollars)
|Selected balance sheet items at the end of the period||December 31, 2020||December 31, 2019|
|Total assets||$||68 634||$||106,842|
|Mortgage loans held for the portfolio, net||1,935||3 314|
|Net investments1||35,228||37 637|
|Mandatory redeemable share capital||2||138|
|Share capital – Class B – Putable||2 284||3000|
|Unrestricted retained earnings||2 919||2 754|
|Restricted retained earnings||761||713|
|Accumulated other comprehensive income / (loss)||230||274|
|Selection of other data at the end of the period||December 31, 2020||December 31, 2019|
|Regulatory capital ratio2||8.69||%||6.18||%|
|Three months ended||Twelve months ended|
|Selected operating results for the period||December 31, 2020||December 31, 2019||December 31, 2020||December 31, 2019|
|Net interest income||$||167||$||165||$||505||$||531|
|Provision for / (reversal of) credit losses||(4||)||–||26||–|
|Other income / (loss)||(20||)||ten||59||21|
|Affordable Housing Program Evaluation||11||13||38||38|
|Net income / (loss)||$||94||$||113||$||335||$||327|
|Three months ended||Twelve months ended|
|Other data selected for the period||December 31, 2020||December 31, 2019||December 31, 2020||December 31, 2019|
|Net interest margin3||0.94||%||0.63||%||0.54||%||0.50||%|
|Operating expenses as a percentage of average assets||0.23||0.17||0.16||0.15|
|Return on average assets||0.52||0.43||0.36||0.31|
|Return on average equity||6.04||6.82||5.32||4.92|
|Annualized dividend rate4||5.00||7.00||5.53||7.00|
|Average ratio of equity to average assets||8.65||6.37||6.69||6.21|
1. Investments include federal funds sold, interest-bearing deposits, trading securities, available-for-sale securities, held-to-maturity securities and securities purchased under resale agreements.
2. 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 December 31, 2020 was $ 6.0 billion.
3. The net interest margin is the net interest income (annualized) divided by the average interest earning assets.
4. 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 fair value gains and losses; hedge accounting for derivatives and underlying financial instruments; the fair values of financial instruments, including marketable securities and derivatives; future operating results; allowance for credit losses; and the impact of the COVID-19 pandemic. We assume no obligation to publicly revise or update any forward-looking statements for any reason.
Marie Long, (415) 616-2556