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SAN FRANCISCO, Oct. 27, 2022 (GLOBE NEWSWIRE) — Federal Home Loan Bank of San Francisco (Bank) today reported operating results for the third quarter of 2022. Net income for the third quarter of 2022 was $80 million, an increase of $9 million from net income of $71 million for the third quarter of 2021.
The $9 million increase in net income over the prior year period was primarily due to an increase in net interest income of $37 million, partially offset by a decrease of $15 million in other income/(loss) and an increase in provision for credit losses of $9 million.
- The $37 million increase in net interest income for the quarter reflected a $479 million increase in interest income, which was driven by higher yields on interest-earning assets, primarily in due to rising interest rates on growing advance balances. The increase was partially offset by lower net gains on designated fair value hedges. The increase in interest income was offset by a $442 million increase in interest expense due to higher funding levels and interest expense.
- The $15 million change in other income/(loss) was primarily due to a $27 million increase in net fair value losses associated with qualifying non-hedging derivatives and financial instruments carried at fair value. This increase in fair value losses is mainly due to valuation changes created by market volatility and the growth of the Bank’s short-term advances funded by economically hedged consolidated bonds, which was offset by a decrease in net fair value losses of $13 million on trading securities that matured since the third quarter of 2021.
- The $9 million increase in the provision for credit losses for the quarter was largely due to lower fair values and discounted expected cash flows of certain private label residential mortgage-backed securities.
As of September 30, 2022, total assets were $108.5 billion, an increase of $54.4 billion from $54.1 billion as of December 31, 2021. Advances increased to $65.7 billion as of September 30, 2022, compared to $17.0 billion as of December 31, 2021, a $48.7 billion, as member demand for primarily short-term advances increased. The increase in total assets also includes an increase in total investments of $5.9 billion, to $41.7 billion as of September 30, 2022, up from $35.8 billion as of December 31. 2021. The increase in investments primarily reflects an increase in liquidity-related instruments, including increases in Federal funds sold for $7.3 billion, US Treasury securities for $3.0 billion and deposits bearing interest for $1.3 billion. This increase in investments was partially offset by a decrease of $3.5 billion in securities purchased under resale agreements and mortgage-backed securities of $2.2 billion.
Accumulated other comprehensive income decreased by $319 million in the first nine months of 2022 to $12 million at September 30, 2022 from $331 million at December 31, 2021, primarily reflecting the decline in fair values of investment securities classified as available for sale, which mainly reflects the increase in market interest rates during the first nine months of 2022.
As of September 30, 2022, the Bank was in compliance with all regulatory capital requirements. The Bank exceeded the risk-based capital requirement by $855 million with $7.3 billion in permanent capital and exceeded the regulatory requirement by 4.0% with a regulatory capital ratio of 6.7 % as of September 30, 2022. The decrease in the regulatory capital ratio to 6.7% from 10.9% as of December 31, 2021, is mainly attributable to an increase in total assets. Total retained earnings increased to $3.9 billion as of September 30, 2022, from $3.8 billion at the end of 2021.
Today, the Bank’s Board of Directors declared a quarterly cash dividend on the average share capital outstanding during the third quarter of 2022 at an annualized rate of 7.00%. 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 $54 million and the Bank expects to pay the dividend on November 10, 2022.
|(in millions of dollars)|
|Selected balance sheet items at the end of the period||Sep 30, 2022||December 31, 2021|
|Total assets||$||108,507||$||54 121|
|Mortgages held for the portfolio, net||834||980|
|Capital stock – Class B – Putable||3,322||2,061|
|Unrestricted unrestricted earnings||3,222||3,124|
|Restricted retained earnings||708||708|
|Accumulated other comprehensive income||12||331|
|Other data selected at the end of the period||Sep 30, 2022||December 31, 2021|
|Regulatory capital ratio2||6.69||%||10.89||%|
|Three months completed||Nine month period ended|
|Selected operating results for the period||Sep 30, 2022||Sep 30, 2021||Sep 30, 2022||Sep 30, 2021|
|Net interest income||$||157||$||120||$||386||$||403|
|Provision for/(Reversal of) credit losses||9||—||9||(8||)|
|Affordable Housing Program Evaluation||9||8||23||25|
|Three months completed||Nine month period ended|
|Other data selected for the period||Sep 30, 2022||Sep 30, 2021||Sep 30, 2022||Sep 30, 2021|
|Net interest margin3||0.63||%||0.85||%||0.68||%||0.92||%|
|Average return on assets||0.32||0.49||0.36||0.50|
|return on average equity||4.52||4.34||4.09||4.59|
|Annualized dividend rate4||6.00||6.00||6.00||5.65|
|Average equity/average assets ratio||7.16||11:32 am||8.81||10.78|
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. 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 September 30, 2022 and December 31, 2021 was $7.3 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, recognized 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, savings banks, insurance companies and community development financial institutions) promote home ownership, expand access to quality housing, start or support 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 risk factors set forth in our annual reports on Form 10-K and other periodic and current reports that we may file with the Securities and Exchange Commission, as well as regulatory and accounting adjustments or requirements; the application of accounting standards relating, among other things, to certain fair value gains and losses; hedge accounting of derivatives and underlying financial instruments; the fair values of financial instruments; allowance for credit losses; future operating results; the withdrawal of one or more large members; and high rates of inflation and increases in interest rates which may adversely affect our members and their customers. We undertake no obligation to publicly revise or update any forward-looking statements for any reason.
Contact: Chris Hammond, (415) 616-3763 [email protected]
Source: Federal Home Loan Bank of San Francisco