Federal Reserve System reports annual net income exceeding $63B

THE FEDERAL RESERVE SYSTEM will contribute $65.5 billion to the U.S. Treasury Department based on its preliminary 2018 financial results. The Fed system includes 12 Federal Reserve banks, including one in Boston, shown above. / BLOOMBERG FILE PHOTO/BRENT LEWIN

PROVIDENCE – The Federal Reserve System’s estimated net income for 2018 is $63.1 billion, the Fed announced. The figure represents the combined profit of the Fed’s board of governors and the 12 Federal Reserve banks nationwide.

As a result, the Fed’s total payments to the U.S. Treasury Department for 2018 are estimated at $65.5 billion, including nearly $3.2 billion from the Fed’s capital surplus fund, according to the Fed’s preliminary results for last year, announced Jan. 10. The payments total to the Treasury is down from $80.2 billion in 2017.

The Fed’s net income in 2018 represents a decrease of $17.6 billion from 2017, primarily attributable to an increase of $12.6 billion in interest expense associated with reserve balances held by depository institutions.

The Fed said last year’s net income was primarily derived from $112.3 billion in interest income on securities acquired through open-market operations, such as Treasury securities, federal agency and government-sponsored enterprise mortgage-backed securities, and government-sponsored enterprise debt securities.

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The Fed banks had interest expense of $38.5 billion, primarily associated with reserve balances held by depository institutions, and incurred interest expense of $4.6 billion on securities sold under agreement to repurchase, the Fed said.

Operating expenses of the Fed banks and net amounts reimbursed by the Treasury and other entities for services the banks provided totaled $4.3 billion last year, the Fed reported. The banks were assessed $849 million for costs related to producing, issuing and retiring currency; $838 million for board expenditures; and $337 million to fund the federal Consumer Financial Protection Bureau.

Additional earnings were derived from income from services of $444 million. Statutory dividends totaled $1 billion last year, the Fed said.

Scott Blake is a PBN staff writer. Email at Blake@PBN.com.