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SAN FRANCISCO, Oct. 24, 2019 (GLOBE NEWSWIRE) -- The Federal Home Loan Bank of San Francisco today announced that its net income for the third quarter of 2019 was $61 million, compared with net income of $102 million for the third quarter of 2018.
The $41 million decrease in net income relative to the prior-year period primarily reflected an increase in net fair value losses associated with derivatives, hedged items, and financial instruments carried at fair value, which reduced both net interest income and other income.
Net interest income for the third quarter of 2019 was $112 million, compared with $153 million for the third quarter of 2018. The $41 million decrease in net interest income primarily reflected lower spreads on interest-earning assets and the impact of new hedge accounting guidance adopted on January 1, 2019, which requires changes in the fair value of a derivative that was designated as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk, to be recorded in net interest income with the earnings effect of the hedged item. The guidance was applied prospectively, so the gains and losses on fair value hedges in the prior-year period are presented in other income. Net fair value losses on designated fair value hedges recorded in net interest income for the third quarter of 2019 were $11 million. The decline in net interest income was also due to a retrospective adjustment of the effective yields on mortgage loans driven by a lower interest rate environment.
Total assets decreased $5.1 billion during the first nine months of 2019, to $104.2 billion at September 30, 2019, from $109.3 billion at December 31, 2018. Total advances decreased $10.6 billion, to $62.8 billion at September 30, 2019, from $73.4 billion at December 31, 2018. Investments increased $5.1 billion, to $37.5 billion at September 30, 2019, from $32.4 billion at December 31, 2018, primarily reflecting an increase in available-for-sale securities.
Accumulated other comprehensive income increased by $32 million during the first nine months of 2019, to $267 million at September 30, 2019, from $235 million at December 31, 2018, primarily as a result of improvement in the fair value of mortgage-backed securities classified as available-for-sale.
As of September 30, 2019, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 6.2%, exceeding the 4.0% requirement. The Bank had $6.4 billion in permanent capital, exceeding its risk-based capital requirement of $1.5 billion. Total retained earnings as of September 30, 2019, were $3.4 billion.
Today, the Bank’s Board of Directors declared a quarterly cash dividend on the capital stock outstanding during the third quarter of 2019 at an annualized rate of 7.00%. The quarterly dividend rate is consistent with the Bank's dividend philosophy of endeavoring to pay a quarterly dividend at a rate between 5% and 7% annualized. The quarterly dividend will total $54 million, including $3 million in dividends on mandatorily redeemable capital stock that will be reflected as interest expense in the fourth quarter of 2019. The Bank expects to pay the dividend on November 12, 2019.
(Dollars in millions)
|Selected Balance Sheet Items at Period End||Sept. 30, 2019||Dec. 31, 2018|
|Mortgage Loans Held for Portfolio, Net||3,382||3,066|
|Mandatorily Redeemable Capital Stock||138||227|
|Capital Stock - Class B - Putable||2,898||2,949|
|Unrestricted Retained Earnings||2,715||2,699|
|Restricted Retained Earnings||690||647|
|Accumulated Other Comprehensive Income/(Loss)||267||235|
|Selected Other Data at Period End||Sept. 30, 2019||Dec. 31, 2018|
|Regulatory Capital Ratio2||6.18||%||5.97||%|
|Three Months Ended||Nine Months Ended|
|Selected Operating Results for the Period||Sept. 30, 2019||Sept. 30, 2018||Sept. 30, 2019||Sept. 30, 2018|
|Net Interest Income||$||112||$||153||$||366||$||455|
|Affordable Housing Program Assessment||7||12||25||34|
|Three Months Ended||Nine Months Ended|
|Selected Other Data for the Period||Sept. 30, 2019||Sept. 30, 2018||Sept. 30, 2019||Sept. 30, 2018|
|Net Interest Margin3||0.44||%||0.60||%||0.46||%||0.54||%|
|Operating Expenses as a Percent of Average Assets||0.15||0.14||0.14||0.12|
|Return on Average Assets||0.24||0.40||0.26||0.34|
|Return on Average Equity||3.65||6.26||4.29||5.76|
|Annualized Dividend Rate||7.00||7.00||7.00||7.00|
|Average Equity to Average Assets Ratio||6.47||6.36||6.16||5.91|
Federal Home Loan Bank of San Francisco
The Federal Home Loan Bank of San Francisco is a member-driven cooperative helping 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–foster homeownership, expand access to quality housing, seed or sustain small businesses, and revitalize whole neighborhoods. Together with our members and other partners, we are making 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 related 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 terms, such as “endeavoring,” “will,” and “expects,” or their negatives or other variations on these terms. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized, 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 investment securities and derivatives; future operating results; and other-than-temporary impairment of investment securities. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Amy Stewart, (415) 616-2605