Federal Home Loan Bank of San Francisco Announces Third Quarter 2019 Operating Results
SAN FRANCISCO, October 24, 2019 — 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.
The following information was filed by Federal Home Loan Bank Of San Francisco on Friday, October 25, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.