Federal Home Loan Bank of San Francisco announces its first

SAN FRANCISCO, April 29, 2021 (GLOBE NEWSWIRE) — Federal Home Loan Bank of San Francisco (Bank) today announced its operating results for the first quarter of 2021. Net income for the first quarter of 2021 was amounted to $94 million, compared to a net loss of $8 million for the first quarter of 2020.

The $102 million increase in net income over the prior year period primarily reflects an increase in net interest income of $109 million and an improvement in the provision for/(reversal of) losses on receivables of $45 million. This was partially offset by a decrease in other income of $39 million, primarily due to an increase in net fair value losses associated with financial instruments carried at fair value which was partially offset by an increase in net fair value gains value associated with derivatives.

The $109 million increase in net interest income primarily reflects a $64 million increase in net fair value gains on designated fair value hedges, improved retrospective adjustment of effective mortgage yields and related delivery commitments of $38 million, and an increase in prepayment charges received on advances of $7 million. In addition, the Bank recorded a reversal of credit losses of $6 million for the first quarter of 2021, primarily associated with certain private label residential mortgage-backed securities (PLRMBS) classified as available for sale (AFS ) and largely resulting from improved credit performance and an improved economic outlook. This reversal compares to a $39 million provision for credit losses recorded in the first quarter of 2020 associated with certain PLRMBS classified as available for sale, which was primarily the result of a significant decline in fair values ​​in the first quarter of 2020.

As of March 31, 2021, total assets were $57.9 billion, a decrease of $10.7 billion from $68.6 billion as of December 31, 2020. Total investments decreased by $7.7 billion to $27.5 billion as of March 31, 2021, from $35.2 billion as of December 31, 2020. The decrease in investments primarily reflects a decrease in securities purchased under resale agreements, US Treasury securities and mortgage-backed securities (MBS), which was partially offset by an increase in fed funds sold as the Bank continued to manage its liquidity. Additionally, advances decreased by $2.9 billion to $28.1 billion as of March 31, 2021, from $31.0 billion as of December 31, 2020, as many members maintained large deposit balances and excess liquidity resulting from the economic impact of the COVID-19 pandemic.

Accumulated other comprehensive income (AOCI) increased $137 million in the first quarter of 2021 to $367 million at March 31, 2021 from $230 million at December 31, 2020. The increase of AOCI during the first quarter of 2021 primarily reflects the increase in fair values ​​of MBS classified as AFS.

As at March 31, 2021, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 10.3%, exceeding the requirement of 4.0%. The Bank had $6.0 billion in permanent capital, exceeding its risk-based capital requirement by $1.2 billion. Total retained earnings as of March 31, 2021 was $3.7 billion.

Today, the Bank’s Board of Directors declared a quarterly cash dividend on outstanding capital stock during the first 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 $34 million. The Bank expects to pay the dividend on May 11, 2021.

Financial Highlights
(Unaudited)
(in millions of dollars)

Selected balance sheet items
at the end of the period
March 31, 2021 December 31, 2020
Total assets $ 57,908 $ 68,634
Advances 28,140 30,796
Mortgages held for the portfolio, net 1,581 1,935
Investments, net1 27,526 35,228
Consolidated bonds:
Obligations 33,011 44,408
Discount Notes 17 109 16,213
Capital stock – Class B – Putable 2,238 2,284
Unrestricted unrestricted earnings 2,983 2,919
Restricted retained earnings 761 761
Accumulated other comprehensive income 367 230
total capital 6,349 6,194
Other data selected at the end of the period March 31, 2021 December 31, 2020
Regulatory capital ratio2 10:33 am % 8.69 %
Three months completed
Selected operating results for the period March 31, 2021 March 31, 2020
Net interest income $ 158 $ 49
Provision for/(Reversal of) credit losses (6 ) 39
Other income/(loss) (21 ) 18
Other expenses 39 36
Affordable Housing Program Evaluation ten
Net income/(loss) $ 94 $ (8 )
Three months completed
Other data selected for the period March 31, 2021 March 31, 2020
Net interest margin3 1.04 % 0.18 %
Operating expenses as a percentage of average assets 0.23 0.12
Average return on assets 0.61 (0.03 )
return on average equity 6.04 (0.46 )
Annualized dividend rate4 5.00 7.00
Average equity/average assets ratio 10.01 6.09

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. This 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 March 31, 2021 was $6.0 billion.
3. Net interest margin is net interest income (annualized) divided by average interest-earning assets.
4. Cash dividend declared, accrued and paid during the period on outstanding share capital 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; the 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.

Contact:
Marie Long, (415) 616-2556
[email protected]

Bernadine J. Perkins