Federal Home Loan Bank of San Francisco announces third

SAN FRANCISCO, Oct. 29, 2020 (GLOBE NEWSWIRE) — Federal Home Loan Bank of San Francisco (Bank) today reported net income for the third quarter of 2020 was $161 million, compared to net income of $61 million for the third quarter of 2019.

The $100 million increase in net income over the prior year period primarily reflects the Bank’s receipt of restitution proceeds under a Securities and Exchange Commission enforcement action, of $85 million, in the third quarter of 2020. The increase also reflected a $35 million increase in net interest income, which increased from $112 million in the third quarter of 2019 to $147 million for the third quarter of 2020. The increase in net interest income was primarily due to a $25 million increase in net fair value gains on designated fair value hedges, a loss of $11 million for the third quarter of 2019 to a gain of $14 million for the third quarter of 2020, as well as higher spreads on interest-earning assets. These gains were partially offset by an increase in net fair value losses associated with derivatives and financial instruments carried at fair value for the third quarter of 2020 and an $11 million increase in the Affordable Housing Program valuation. , which reflected the increase in net worth before income.

Total assets decreased by $30.9 billion in the first nine months of 2020, from $106.8 billion as of December 31, 2019 to $75.9 billion as of September 30, 2020. Total advances decreased by $27.7 billion to $37.7 billion as of September 30, 2020, from $65.4 billion as of December 31, 2019. the impact of the COVID-19 pandemic on the economy and on our members. In addition, investments decreased by $2.4 billion, from $37.6 billion as of December 31, 2019 to $35.2 billion as of September 30, 2020.

Accumulated other comprehensive income (AOCI) decreased $138 million in the first nine months of 2020 to $136 million as of September 30, 2020 from $274 million as of December 31, 2019 The decrease in AOCI in the first nine months of 2020 primarily reflects lower fair values ​​of mortgage-backed securities classified as available-for-sale.

As at September 30, 2020, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 8.0%, exceeding the requirement of 4.0%. The Bank had $6.1 billion in permanent capital, exceeding its risk-based capital requirement by $1.4 billion. Total retained earnings as of September 30, 2020 was $3.6 billion.

Today, the Bank’s Board of Directors declared a quarterly cash dividend on outstanding capital stock during the third quarter of 2020 at an annualized rate of 5.00%. 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 $33 million, including a de minimis amount in mandatory redeemable capital stock dividends which will be reflected as interest expense in the fourth quarter of 2020. The Bank expects to pay the dividend on November 12, 2020. As a result of the COVID-19 pandemic and the measures taken to contain the spread of the virus, the U.S. and global economies face great challenges and ongoing 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 low end of the range set out in the Bank’s dividend philosophy.

Financial Highlights
(Unaudited)
(in millions of dollars)

Selected balance sheet items
at the end of the period
September 30, 2020 December 31, 2019
Total assets $ 75,870 $ 106,842
Advances 37,693 65,374
Mortgages held for the portfolio, net 2,404 3,314
Investments, net1 35,221 37,637
Consolidated bonds:
Obligations 54,921 71,372
Discount Notes 13,300 27,376
Mandatory redeemable share capital 2 138
Capital stock – Class B – Putable 2,465 3,000
Unrestricted unrestricted earnings 2,858 2,754
Restricted retained earnings 761 713
Accumulated other comprehensive income 136 274
total capital 6,220 6,741
Other data selected at the end of the period September 30, 2020 December 31, 2019
Regulatory capital ratio2 8.02 % 6.18 %
Three months completed Nine month period ended
Selected operating results for the period September 30
2020
September 30
2019
September 30
2020
September 30
2019
Net interest income $ 147 $ 112 $ 338 $ 366
Provision for/(Reversal of) credit losses (2 ) 30
Other income/(loss) 70 3 79 11
Other expenses 40 47 119 138
Affordable Housing Program Evaluation 18 7 27 25
Net income/(loss) $ 161 $ 61 $ 241 $ 214
Three months completed Nine month period ended
Other data selected for the period September 30
2020
September 30
2019
September 30
2020
September 30
2019
Net interest margin3 0.69 % 0.44 % 0.44 % 0.46 %
Operating expenses as a percentage of average assets 0.17 0.15 0.14 0.14
Average return on assets 0.76 0.24 0.32 0.26
return on average equity 10.59 3.65 5.08 4.29
Annualized dividend rate4 5.00 7.00 5.68 7.00
Average equity/average assets ratio 7.16 6.47 6.23 6.16

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 September 30, 2020 was $6.1 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; and allowance for credit losses. 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