SAN FRANCISCO – The Federal Home Loan Bank of San Francisco last night reported a $103 million loss for its fourth quarter, due to a $590 charge for other-than-temporary impaired mortgage backed securities.
As a result, the San Francisco Bank reported a 29% decline in net income for 2008, to $461 million.
The problems with the San Francisco Bank and several other FHLBs are similar to those being experienced by corporate credit unions which are recording ever-increasing unrealized losses on their MBSs.
Based on analyses and reviews of the San Francisco Bank's private label MBS, the Bank determined that 15 of its private label MBS with a carrying value of $1.5 billion were other-than-temporarily impaired at December 31, 2008, because the Bank determined that it was probable that it would not collect all of the contractual amounts due on each of the securities. The estimated economic loss on these securities as of December 31, 2008, is $27 million.
Because the fair values of non-agency MBS have declined dramatically in today's illiquid MBS market, the difference between the carrying value of $1.5 billion on the affected securities and the fair value of those securities determined as of December 31, 2008, is $590 million.
On January 8, the Bank notified members that it was likely to incur an OTTI charge in connection with some of its MBS holdings and as a result would not pay a dividend for the fourth quarter of 2008 and would not repurchase excess capital stock on January 31.
