SAN FRANCISCO, Feb. 16 12, 2022 (GLOBE NEWSWIRE) — The Federal Home Loan Bank of San Francisco (Bank) today announced its operating results for 2021. Net income for 2021 was $287 million, compared to net income of $335 million. for 2020. Net income for the fourth quarter of 2021 was $67 million, compared to net income of $94 million for the fourth quarter of 2020.
Net income of $287 million in 2021 decreased $48 million from 2020 net income, primarily reflecting a $109 million reduction in other income/(loss) which was partially offset by improved credit losses of $32 million and an increase in net interest income of $17 million.
The $109 million reduction in other income/(loss) for 2021 is primarily due to the Bank’s receipt of restitution proceeds under Securities and Exchange Commission enforcement action in the amount of of $85 million, in the third quarter of 2020, and an increase in net fair value losses of $22 million associated with derivatives and financial instruments carried at fair value.
The $17 million increase in net interest income for 2021 primarily reflects lower financing costs, a $46 million improvement in the retrospective adjustment of effective mortgage yields and related delivery commitments, and a $30 million increase in net gains on designated fair value hedges. . These increases in net interest income were partially offset by a decline in average interest-bearing assets. In addition, the Bank recorded a reversal of credit losses of $6 million for 2021, primarily associated with certain private label residential mortgage-backed securities (PLRMBS) classified as available-for-sale (AFS), resulting largely from improved credit performance and a more optimistic economic outlook. This reversal of credit losses for 2021 compares to a $26 million provision for credit losses for 2020 associated with certain PLRMBS classified as available-for-sale, which primarily stems from a significant decline in fair values in the first quarter of 2020.
For the fourth quarter of 2021, net income was $67 million, down $27 million from the prior year period. The decrease primarily reflects a decrease in net interest income of $48 million, primarily due to lower average interest-earning assets and a decrease of $10 million in net gains on designated fair value hedges. These reductions in net income were partially offset by a $20 million improvement in other income/(loss), which primarily reflects lower net fair value losses of $19 million associated with derivatives and financial instruments carried at the fair value.
As of December 31, 2021, total assets were $54.1 billion, a decrease of $14.5 billion from $68.6 billion as of December 31, 2020. as demand for advances remained subdued in response to substantial market liquidity resulting from the ongoing impacts of the COVID-19 pandemic on the economy and financial markets, including government intervention. In addition, mortgages held for the portfolio decreased by $0.9 billion, from $1.9 billion as at December 31, 2020 to $1.0 billion as at December 31, 2021, as the Bank stopped purchasing new mortgages for its own portfolio on March 31, 2021. These decreases in total assets were partially offset by an increase in total investments of $0.6 billion to $35.8 billion as of December 31, 2021 , from $35.2 billion as of December 31, 2020. The increase in investments primarily reflects an increase in securities purchased under resale agreements of $8.3 billion and an increase in fed funds sold of 3.5 billion, which was partially offset by a reduction in US Treasury securities of $8.5 billion as the Bank continued to manage its liquidity. A $2.8 billion decline in mortgage-backed securities (MBS) also partially offset other increases in investment balances.
Accumulated other comprehensive income increased by $101 million in 2021, from $230 million at December 31, 2020 to $331 million at December 31, 2020, primarily reflecting higher fair values of MBS classified as AFS .
As of December 31, 2021, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 10.9%, exceeding the requirement of 4.0%. The Bank had $5.9 billion in permanent capital, exceeding its risk-based capital requirement by $1.1 billion. Total retained earnings as of December 31, 2021 was $3.8 billion, compared to $3.7 billion as of December 31, 2020.
Today, the Bank’s Board of Directors declared a quarterly cash dividend on the average outstanding share capital during the fourth quarter of 2021 at an annualized rate of 6.00%. The quarterly dividend rate is consistent with the Bank’s dividend philosophy which strives to pay a quarterly dividend at a rate of between 5% and 7% annualized. The quarterly dividend will total $35 million and the Bank expects to pay the dividend on March 10, 2022.
(in millions of dollars)
|Selected balance sheet items
at the end of the period
|December 31, 2021||December 31, 2020|
|Total assets||$||54 121||$||68,634|
|Mortgages held for the portfolio, net||980||1,935|
|Capital stock – Class B – Putable||2,061||2,284|
|Unrestricted unrestricted earnings||3,124||2,919|
|Restricted retained earnings||708||761|
|Accumulated other comprehensive income||331||230|
|Other data selected at the end of the period||December 31, 2021||December 31, 2020|
|Regulatory capital ratio2||10.89||%||8.69||%|
|Three months completed||Twelve month period ended|
|Selected operating results for the period||December 31, 2021||December 31, 2020||December 31, 2021||December 31, 2020|
|Net interest income||$||119||$||167||$||522||$||505|
|Provision for/(Reversal of) credit losses||2||(4||)||(6||)||26|
|Affordable Housing Program Evaluation||7||11||32||38|
|Three months completed||Twelve month period ended|
|Other data selected for the period||December 31, 2021||December 31, 2020||December 31, 2021||December 31, 2020|
|Net interest margin3||0.87||%||0.94||%||0.91||%||0.54||%|
|Average return on assets||0.48||0.52||0.49||0.36|
|return on average equity||4.08||6.04||4.46||5.32|
|Annualized dividend rate4||6.00||5.00||5.74||5.53|
|Average equity/average assets ratio||11:70 am||8.65||11.00||6.69|
1. Investments include fed funds sold, interest-bearing deposits, trading securities, available-for-sale securities, held-to-maturity securities, and securities purchased under resale agreements.
2. The regulatory capital ratio is calculated as regulatory capital divided by total assets. Regulatory capital includes retained earnings, Class B share capital and mandatorily redeemable share capital (which is classified as a liability), but excludes accumulated other comprehensive income/(loss). Total regulatory capital as of December 31, 2021 and 2020 was $5.9 billion and $6.0 billion, respectively.
3. Net interest margin is net interest income (annualized) divided by average interest-earning assets.
4. Cash dividend declared, recorded and paid during the period, on the average share capital outstanding during the previous quarter.
Federal Home Loan 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, thrifts, insurance companies and community development financial institutions) promote home ownership, expand access to quality housing, start or sustain 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 Statement under the Private Securities Litigation Reform Act of 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 Bank’s dividend philosophy and dividend rates. These statements are based on our current expectations and speak only as of the date hereof. These statements may use forward-looking words, such as “endeavour”, “will” and “expect”, or their negatives or other variations of these terms. The Bank cautions that, by their nature, forward-looking statements involve risks or uncertainties that actual results could differ materially from those expressed or implied by such forward-looking statements or could affect the extent to which any objective, projection , an estimate or prediction is made, including future dividends. These forward-looking statements involve risks and uncertainties, including, but not limited to, the application of accounting standards relating to, among other things, the amortization of discounts and premiums on financial assets, financial liabilities and certain fair value gains and losses; hedge accounting of derivatives and underlying financial instruments; fair values of financial instruments, including marketable securities and derivatives; future operating results; provision for credit losses; and the impact of the COVID-19 pandemic. We undertake no obligation to publicly revise or update any forward-looking statements for any reason.