February 16, 2006
Federal Home Loan Bank of San Francisco Reports Annual and Quarterly Operating Results
San Francisco, CA -- The Federal Home Loan Bank of San Francisco today announced that its net income in the fourth quarter of 2005 was $110 million, compared to $82 million in the fourth quarter of 2004. For the year ended December 31, 2005, the Bank's net income was $369 million, compared to $293 million for the year ended December 31, 2004.
Net interest income increased $40 million, or 27%, to $187 million in the fourth quarter of 2005 from $147 million in the fourth quarter of 2004. Net interest income increased $141 million, or 26%, to $683 million for the year ended December 31, 2005, from $542 million for the year ended December 31, 2004. The increases in net interest income were driven primarily by higher average interest-earning assets outstanding, combined with the effect of higher interest rates on higher average capital balances.
The net effect of fair value adjustments on trading securities, derivatives, and hedged items resulted in a net fair value loss of $5 million in the fourth quarter of 2005 compared to a net fair value gain of $1 million in the fourth quarter of 2004. The net effect of fair value adjustments on trading securities, derivatives, and hedged items resulted in a net fair value loss of $44 million for the year ended December 31, 2005, compared to a net fair value loss of $4 million for the year ended December 31, 2004. The net fair value losses for 2005 primarily reflected unrealized fair value adjustments.
Nearly all of the Bank's derivatives and hedged instruments are held to the maturity, call, or put date. For these derivatives and hedged items, net unrealized fair value gains or losses are primarily a matter of timing and will generally reverse over the remaining contractual terms to maturity or by the exercised call or put dates. As of December 31, 2005, the cumulative effect of SFAS 133 was a net unrealized gain of $44 million.
Bank members continued to increase their borrowings from the Bank during 2005. Advances grew $22.6 billion, reaching a new record of $162.9 billion in advances outstanding at December 31, 2005. While 64% of this growth was attributable to a net increase in advances outstanding to the Bank's three largest members, the remaining growth reflected increased borrowings by other members. In total, 152 institutions increased their advance borrowings during 2005, while 82 institutions decreased their advance borrowings.
Total assets grew $38.6 billion, or 21%, during 2005, from $185.0 billion at December 31, 2004, to $223.6 billion at December 31, 2005. In addition to the growth in advances, Federal funds sold grew $8.5 billion, or 101%, from $8.5 billion to $17.0 billion, and held-to-maturity securities, primarily mortgage-backed securities, grew $5.9 billion, or 25%, from $23.8 billion to $29.7 billion.
Based on its operating results for the fourth quarter of 2005, the Bank expects to pay a dividend for the quarter at an annualized rate of 4.67%, up from 3.97% for the fourth quarter of 2004. The Bank's dividend rate for the year ended December 31, 2005, is expected to be 4.44%, compared to 4.07% for the year ended December 31, 2004. These increases in the dividend rate reflect a higher yield on invested capital, partially offset by a lower net interest spread on the Bank's mortgage loan and mortgage-backed securities portfolio during the fourth quarter of 2005 and the year ended December 31, 2005, compared to the same periods in 2004.
Financial Highlights
(Unaudited)
(Dollars in millions) | ||||||
Dec. 31, | Dec. 31, | PercentChange | ||||
Selected Balance Sheet | ||||||
Total Assets | $223,602 | $184,982 | 21 | % | ||
Advances | 162,873 | 140,254 | 16 | |||
Mortgage Loans | 5,214 | 6,035 | (14 | ) | ||
Held-to-Maturity Securities | 29,691 | 23,839 | 25 | |||
Federal Funds Sold | 16,997 | 8,461 | 101 | |||
Consolidated Obligations: | ||||||
Bonds | 182,625 | 148,109 | 23 | |||
Discount Notes | 27,618 | 26,257 | 5 | |||
Capital Stock -- Class B -- | ||||||
Putable | 9,520 | 7,765 | 23 | |||
Total Capital | 9,648 | 7,900 | 22 |
Three Months Ended | Twelve Months Ended | ||||||||||||
Dec. 31, | Dec. 31, | PercentChange | Dec. 31, | Dec. 31, | PercentChange | ||||||||
Operating Results | |||||||||||||
Net Interest Income | $187 | $147 | 27 | % | $683 | $542 | 26 | % | |||||
Other (Loss)/Income | (15 | ) | (17 | ) | (12 | ) | (100 | ) | (76 | ) | 32 | ||
Other Expense | 23 | 19 | 21 | 81 | 68 | 19 | |||||||
Assessments | 39 | 29 | 34 | 133 | 105 | 27 | |||||||
Net Income | $110 | $ 82 | 34 | $369 | $293 | 26 | |||||||
Other Data | |||||||||||||
Net Interest Margin | 0.35 | % | 0.33 | % | 6 | % | 0.34 | % | 0.34 | % | -- | ||
Operating Expenses as a | |||||||||||||
Percent of Average Assets | 0.04 | 0.04 | -- | 0.04 | 0.04 | -- | |||||||
Return on Equity | 4.70 | 4.29 | 10 | 4.22 | 4.23 | -- | |||||||
Annualized Dividend Rate1 | 4.67 | 3.97 | 18 | 4.44 | 4.07 | 9 | % | ||||||
Capital to Assets Ratio2 | 4.34 | 4.30 | 1 | 4.34 | 4.30 | 1 | |||||||
Duration Gap (in months)3 | 1 | 1 | -- | 1 | 1 | -- | |||||||
1 The rate shown for the three months ended December 31, 2005, represents the estimated dividend rate for the fourth quarter of 2005. The rate shown for the twelve months ended December 31, 2005, also reflects the estimated dividend rate for the fourth quarter of 2005. The final dividend rate for the fourth quarter of 2005 will be determined when the Bank issues its 2005 financial statements.
2 This ratio is based on regulatory capital, which includes a small amount of mandatorily redeemable capital stock that is classified as a liability.
3 Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched.
Five Quarter Financial Highlights
(Unaudited)
(Dollars in millions) | Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, | |||||
Selected Balance Sheet | ||||||||||
Total Assets | $223,602 | $211,760 | $206,727 | $192,761 | $184,982 | |||||
Advances | 162,873 | 152,956 | 152,808 | 142,316 | 140,254 | |||||
Mortgage Loans | 5,214 | 5,408 | 5,648 | 5,855 | 6,035 | |||||
Held-to-Maturity Securities | 29,691 | 28,823 | 27,283 | 25,456 | 23,839 | |||||
Federal Funds Sold | 16,997 | 17,188 | 13,499 | 13,554 | 8,461 | |||||
Consolidated Obligations: | ||||||||||
Bonds | 182,625 | 173,790 | 173,061 | 160,111 | 148,109 | |||||
Discount Notes | 27,618 | 24,873 | 21,261 | 21,277 | 26,257 | |||||
Capital Stock -- | ||||||||||
Class B -- Putable | 9,520 | 9,025 | 8,725 | 8,117 | 7,765 | |||||
Total Capital | 9,648 | 9,149 | 8,858 | 8,234 | 7,900 | |||||
Quarterly Operating Results | ||||||||||
Net Interest Income | $187 | $178 | $159 | $159 | $147 | |||||
Other (Loss)/Income | (15 | ) | (35 | ) | 5 | (55 | ) | (17 | ) | |
Other Expense | 23 | 19 | 20 | 19 | 19 | |||||
Assessments | 39 | 33 | 38 | 23 | 29 | |||||
Net Income | $110 | $ 91 | $106 | $ 62 | $ 82 | |||||
Other Data | ||||||||||
Net Interest Margin | 0.35 | % | 0.34 | % | 0.32 | % | 0.34 | % | 0.33 | % |
Operating Expenses as a | ||||||||||
Percent of Average Assets | 0.04 | 0.03 | 0.03 | 0.03 | 0.04 | |||||
Return on Equity | 4.70 | 4.03 | 4.94 | 3.11 | 4.29 | |||||
Annualized Dividend Rate1 | 4.67 | 4.58 | 4.21 | 4.25 | 3.97 | |||||
Capital to Assets Ratio2 | 4.34 | 4.34 | 4.31 | 4.30 | 4.30 | |||||
Duration Gap (in months)3 | 1 | 1 | 0 | 1 | 1 |
1 The rate shown for the period ended December 31, 2005, represents the estimated dividend rate for the fourth quarter of 2005. The final dividend rate for the fourth quarter of 2005 will be determined when the Bank issues its 2005 financial statements.
2 This ratio is based on regulatory capital, which includes a small amount of mandatorily redeemable capital stock that is classified as a liability.
3 Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched.
Federal Home Loan Bank of San Francisco
The Federal Home Loan Bank of San Francisco delivers low-cost funding and other services that help member financial institutions make home mortgage loans to people of all income levels and provide credit that supports neighborhoods and communities. The Bank also funds community investment programs that help members create affordable housing and promote community economic development. The Bank's members--its shareholders and customers--are commercial banks, credit unions, savings institutions, thrift and loans, and insurance companies headquartered in Arizona, California, and Nevada.
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 expected dividend rates. These statements are based upon our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as "expects," "will," 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. These forward-looking statements involve risks and uncertainties including, but not limited to, the effects of SFAS 133 and the Bank's ability to pay dividends out of retained earnings. We undertake no obligation t o revise or update publicly any forward-looking statements for any reason.
Contact:
Amy Stewart (415) 616-2605
stewarta@fhlbsf.com