Federal Home Loan Bank of San Francisco Announces Second Quarter 2022 Operating Results

Federal Home Loan Bank of San Francisco

SAN FRANCISCO, July 28 12, 2022 (GLOBE NEWSWIRE) — The Federal Home Loan Bank of San Francisco (Bank) today announced its operating results for the second quarter of 2022. Net income for the second quarter of 2022 was $48 million, a down $7 million from net income of $55 million for the second quarter of 2021.

The decrease in net income of $7 million compared to the prior year period was mainly due to a change in other income/(loss) of $5 million and an increase in the provision of $5 million. for credit losses and was partially offset by an increase in net interest income of $1 million.

The $5 million change in other income/(loss) was primarily due to an increase of $19 million in net fair value losses associated with qualifying non-hedging derivatives, resulting primarily from the growth of short-term advances term funded by economically hedged consolidated bonds which was offset by a decrease in net fair value losses of $19 million on maturing trading securities since the second quarter of 2021. In addition, the fair value of the assets of the grantor trust related to the funding of the Bank’s employee pension plans, which are primarily invested in corporate funds, decreased by $3 million.

In addition, a $5 million increase in the provision for credit losses contributed to lower net income for the quarter, primarily due to lower fair values ​​and discounted cash flow expected from certain private label residential mortgage-backed securities. (MBS) in the second quarter of 2022.

The $1 million increase in net interest income for the second quarter of 2022 reflects an increase in interest income of $119 million, primarily due to higher yields on interest-earning assets (resulting largely from recent increases in interest rates on higher levels of new or renewed assets (advances); a $10 million improvement in the retrospective adjustment of actual mortgage yields and related delivery commitments; a $6 million increase in net gains on designated fair value hedges; and a $5 million increase in net prepayment fee income on Advances and MBS. These improvements in net interest income were largely offset by a $118 million increase in interest expense due to higher funding levels and costs.

As of June 30, 2022, total assets were $87.6 billion, an increase of $33.5 billion from $54.1 billion as of December 31, 2021. Advances increased to $43.2 billion at June 30, 2022, compared to $17.0 billion at December 31, 2021, a $26.2 billion, as member demand for short-term advances increased. The increase in total assets also included an increase in total investments of $7.4 billion, to $43.2 billion as of June 30, 2022, from $35.8 billion as of December 31, 2021. Investment increase primarily reflects an increase in federal funds sold of $4.5 billion, US Treasury securities of $2.7 billion and securities purchased under resale agreements of $1.5 billion. This increase in investments was partly offset by a decrease in MBS of $2.0 billion.

Accumulated other comprehensive income decreased by $231 million in the first half of 2022 to $100 million as of June 30, 2022 from $331 million as of December 31, 2021, primarily reflecting the decline in fair values ​​of MBS classified as available-for-sale, which mainly reflects the increase in market interest rates during the first half of 2022.

As of June 30, 2022, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was lower than at December 31, 2021, at 7.6%, exceeding the requirement of 4.0%. The Bank had $6.6 billion in permanent capital at the end of the second quarter of 2022, exceeding its risk-based capital requirement by $764 million. Total retained earnings increased to $3.9 billion as of June 30, 2022 from $3.8 billion at the end of fiscal 2021.

Today, the Bank’s Board of Directors declared a quarterly cash dividend on the average share capital outstanding during the second quarter of 2022 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 $40 million and the Bank expects to pay the dividend on August 10, 2022.

Financial Highlights
(Unaudited)
(in millions of dollars)

Selected balance sheet items at the end of the period

June 30, 2022

December 31, 2021

Total assets

$

87,602

$

54 121

Advances

43,221

17,027

Mortgages held for the portfolio, net

863

980

Investments, net1

43 153

35,768

Consolidated bonds:

Obligations

26,076

22,716

Discount Notes

53 132

23,987

Capital stock – Class B – Putable

2,754

2,061

Unrestricted unrestricted earnings

3,198

3,124

Restricted retained earnings

692

708

Accumulated other comprehensive income

100

331

total capital

6,744

6,224

Other data selected at the end of the period

June 30, 2022

December 31, 2021

Regulatory capital ratio2

7.59

%

10.89

%

Three months completed

Semester completed

Selected operating results for the period

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net interest income

$

126

$

125

$

229

$

283

Provision for/(Reversal of) credit losses

3

(2

)

(8

)

Other income/(loss)

(31

)

(26

)

(13

)

(47

)

Other expenses

38

39

76

78

Affordable Housing Program Evaluation

6

seven

14

17

Net income/(loss)

$

48

$

55

$

126

$

149

Three months completed

Semester completed

Other data selected for the period

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net interest margin3

0.67

%

0.88

%

0.72

%

0.96

%

Average return on assets

0.25

0.38

0.39

0.50

return on average equity

2.85

3.45

3.85

4.72

Annualized dividend rate4

6.00

6.00

6.00

5.47

Average equity/average assets ratio

8.81

11.07

10.08

10.52

  1. Investments consist of 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 June 30, 2022 and December 31, 2021 was $6.6 billion and $5.9 billion, respectively.

  3. Net interest margin is calculated as 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, equitable 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; and allowance for credit losses. We undertake no obligation to publicly revise or update any forward-looking statements for any reason.

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

Bernadine J. Perkins