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COFI: Frequently Asked Questions
What does "COFI" mean? COFI is the acronym for the 11th District Monthly Weighted Average Cost of Funds Index. The COFI is not an interest rate. It reflects the interest expenses reported for a given month by the COFI Reporting Members, as described below. The interest expenses are incurred from the COFI Reporting Members' various sources of funds. Deposits -- including checking and savings accounts, certificates of deposit, money market deposit accounts, transaction accounts, and passbook accounts (collectively known as "Deposit Accounts") -- are the primary source of funds for most savings institutions. Other sources of funds include loans obtained through the credit program of the Bank (known as "advances") and from other sources. Top
What institutions are included in the COFI Reporting Members? Only Arizona, California, and Nevada savings institutions that are members of the Federal Home Loan Bank of San Francisco are eligible to be considered for inclusion in the COFI. The Bank reserves the right to determine what type of institution satisfies its criteria for inclusion in the COFI and its criteria may change in the future to reflect changes in relevant law. Various federal and state laws and regulations relevant to authorizing charters of financial institutions and defining the types of institutions that may join a Federal Home Loan Bank have changed, and may continue to change, over time. An individual financial institution is usually a member of the FHLBank District in which the institution's principal office is located and, at this time, may be a member of only one Federal Home Loan Bank. Such limitations could change in the future, however. This means that the savings institutions that that are currently included in the COFI may change at any time and without notice. In determining which savings institution members are eligible to be included in the COFI, the Bank relies on information that it receives from its members. The Bank does not warrant, confirm, or guarantee the accuracy of the information that it receives from its members, and does not examine the books and records of its members for the purpose of confirming the accuracy of the information they deliver to the Bank that is used to determine the eligibility of savings institution members for inclusion in the COFI. Top
Why does the COFI move differently than market interest rates? The movement of COFI is affected by a number of factors, such as changes in market interest rates, the sources of funds used by the COFI Reporting Members, merger and acquisition activities, and changes in accounting rules or regulatory reporting instructions. In general, the COFI has not moved up or down as rapidly as market interest rates (such as the prime rate, the discount rate, or Treasury bill rates) because some COFI Reporting Members rely on fixed rate deposits with medium- and long-term maturities as a primary source of funds. Because rates on these deposits are not affected by changing market interest rates until the deposit matures, the total interest expense paid by savings institutions in a particular month may reflect interest rates that were prevalent in previous months or years. Merger and acquisition activity can affect interest expense if the activity results in an unrealized mark-to-market gain or loss on funds acquired by a COFI Reporting Member. The composition of the funds included in the COFI can also be affected by merger and acquisition activity between a COFI Reporting Member and a financial institution that is not included in the COFI. Because of the interplay of these and possibly other factors, the movement of COFI cannot be predicted and historical COFI rates should not be relied on as indicative of future COFI rates. In addition, the movement of COFI may not correspond to the movement of market interest rates. Top
How is the COFI calculated? The COFI is a ratio of monthly interest expenses to total funds, adjusted for variation in the number of days in that month, annualized and expressed as a percentage. Interest expenses, the numerator of the calculation, include the total amount of interest reported for the month on all Deposit Accounts, Federal Home Loan Bank advances, and other borrowings. Total funds, the denominator of the calculation, consists of the simple average of the two most recent monthend balances of Deposit Accounts, Federal Home Loan Bank advances, and other borrowings. Because the number of days in each month differs, the resulting quotient is multiplied by an adjustment factor that is calculated by dividing an average month (based on a 12-month, 365-day or 366-day year) by the actual number of days in that month. The adjustment factors are:
The product is annualized by multiplying by 12. This product is then rounded to the third decimal place to find the COFI for that month.
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What effect, if any, do changes in the COFI Reporting Members or member merger and acquisition activity have on the calculation of the COFI? The COFI is based on data received from the Bank's COFI Reporting Members. If a COFI Reporting Member engages in corporate activity, such as changing its charter or merging into an entity with a different charter, the Bank may determine that the resulting entity no longer qualifies as a COFI Reporting Member and will no longer be included in the COFI. Similarly, if a COFI Reporting Member’s Bank membership is terminated, it will no longer be included in the COFI Reporting Members. The impact of removals of COFI Reporting Members on the COFI will depend entirely on the amount of interest expense and total funds of the entity being removed. If an institution with a large amount of interest expense and total funds is removed from the COFI Reporting Members, the impact on the COFI could be significant. As a result of mergers, acquisitions, charter changes, and terminations of Bank membership, the total number of institutions included in the COFI Reporting Members has declined significantly since January 1991. The total number of COFI Reporting Members was 153 in January 1991, 81 in January 1996, 49 in January 2001, and 26 in January 2007. In addition, transactions that transfer liabilities between a COFI Reporting Member and an institution that is not a COFI Reporting Member during a given month may also affect the COFI because the interest expense and average total funds for that month are adjusted by the Bank so that the average dollar amount of total funds (the COFI denominator) will include only those funds for which the corresponding amount of interest expense has been included in the COFI numerator for that month. Top
Are new savings institutions ever added to the COFI Reporting Members? Yes. A new savings institution that is chartered with its principal offices in Arizona, California, or Nevada and that meets the Bank's criteria for inclusion in the COFI will become a COFI Reporting Member if and when it becomes a member of the Bank. Top
When is the COFI announced? The Bank usually announces the COFI for a given month at or after 3 p.m. California time on the last business day of the following month. For example, the COFI for August, which reflects the interest expenses reported by COFI Reporting Members during August, is usually announced on the last business day of September at or after 3 p.m. Sample Timeline for Calculating the COFI August Savings institutions incur interest expenses throughout the month. Mid-September (Approximately Sept. 10-20) The Bank collects cost of funds data for August from its COFI Reporting Members. Between mid-September and 12 noon on the last business day in September The Bank calculates the August COFI. At or after 3 p.m. on the last business day in September The Bank announces the August COFI. Top
Does the Bank guarantee that it will publish the COFI by 3 p.m. on the last business day of the month? No. The Bank intends to publish the COFI at or after 3 p.m. California time on the last business day of the following month, but does not guarantee that it will always publish the COFI by that date and time. The Bank expressly disclaims all liability for any delay in publishing the COFI. Top
Will the Bank publish the COFI if it does not receive cost of funds data from all of its COFI Reporting Members? The Bank's COFI Reporting Members are required to submit cost of funds data on a monthly basis. The Bank usually receives all data for a given month in the middle of the following month, generally between the 10th and the 20th calendar day of the month, and calculates the COFI for the given month based on that data. To be included in the calculation of the COFI for a given month, any new or corrected data must be received by the Bank no later than 12 noon California time on the last business day of the following month. If the Bank believes that it may not receive timely cost of funds data from any COFI Reporting Member for any reason, the Bank may request the assistance of the Office of Thrift Supervision ("OTS") in obtaining that data. (The OTS is the federal banking agency with the jurisdiction to enforce 12 C.F.R. Sec. 563.180(e), the regulation that requires COFI Reporting Members to report the data necessary to calculate the COFI.) If any of the Bank's COFI Reporting Members do not transmit the necessary data according to this timetable, the Bank will make a good faith effort to publish the COFI as scheduled, based on whatever data it has received from those COFI Reporting Members that have reported data. If the Bank publishes the COFI based on data received from fewer than all of its COFI Reporting Members, the Bank will disclose the number of members that reported data and the total number of COFI Reporting Members. Top
Will the Bank revise the COFI for a given month after it has been published if the Bank finds out that a COFI Reporting Member gave the Bank inaccurate data? No. The Bank accepts data for the COFI for a given month from its COFI Reporting Members until only 12 noon California time on the last business day of the following month and publishes the COFI based on data received by that time. The Bank will not revise or republish any COFI for a given month based on new or corrected data received after that time and expressly disclaims all liability that may arise as a result. Top
Does the Bank use any new or corrected COFI data that it receives after the deadline for submitting COFI data for a given month? Yes. New or corrected monthend balance data received by the Bank after the deadline for submitting COFI data for a given month will be reflected in the COFI for the following month, as long as it is received in accordance with the Bank's procedures for accepting data for that following month's COFI. New or corrected interest expense data will not be reflected in the following month's COFI. For a discussion of how the Bank will use corrected data from COFI Reporting Members for other indices, please see How are the semiannual cost of funds indices calculated and reported? Top
When will a change in the COFI affect my mortgage payment? The effect of a change in the COFI on your mortgage payment depends on your lender's mortgage documents. Changes in the COFI may not coincide with changes in your mortgage payments because the use of adjustable rate mortgage indices varies greatly among lending institutions. Typically, your mortgage note identifies the index to be used, your lender's methodology for adjusting the interest rate and mortgage payment, and your lender's timetable for notifying you of any changes in the rate and payment. Because of the great variation in the way indices are used in adjustable rate mortgage contracts, any questions about changes in your mortgage payment should be directed to your lender. Top
Is the COFI the only index published by the Bank? No. The Bank also publishes semiannual weighted average cost of funds indices for California and the 11th District, which are based on the interest expenses of applicable COFI Reporting Members from January through June and July through December each year. Top
How are the semiannual cost of funds indices calculated and reported? No. The Bank also publishes semiannual weighted average cost of funds indices for California and the 11th District, which are based on the interest expenses of applicable COFI Reporting Members from January through June and July through December each year. Top
Could my loan be tied to another index? Yes! There are many other adjustable rate mortgage indices available, and some of them may be readily confused with the Bank's cost of funds indices. Your mortgage contract identifies the precise index to which your loan is tied. Here are some other popular ARM indices:
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How can I obtain the cost of funds indices published by the Federal Home Loan Bank of San Francisco? Current and historical information on the cost of funds indices published by the Bank can be found on the following pages: COFI Semiannual Cost of Funds Indices History of COFI History of Semiannual Cost of Funds Indices If you have questions about the cost of funds indices, you may contact the Marketing Department. To listen to a telephone recording of the current index values for the monthly COFI and the semiannual indices for California and the 11th District, you may call (415) 616-2600. (If you are calling to find out the new monthly index value on the last business day of the month, please be sure to wait until after 3 p.m. California time.) Top
Does the Bank guarantee the accuracy of the cost of funds indices it publishes? No. Although the Bank makes a good faith effort to be accurate in the calculation and publication of the COFI and other cost of funds indices it publishes, the Bank does not warrant, confirm, or guarantee the accuracy of the data it receives from its COFI Reporting Members, the accuracy of the cost of funds calculations, or the accuracy of the cost of funds indices as published. The Bank does not examine the books and records of its COFI Reporting Members for this purpose, and the Bank expressly disclaims all liability that may arise from any use of the COFI or other index or the use of inaccurate data received from its COFI Reporting Members in calculating the COFI and semiannual cost of funds indices. In addition, the Bank expressly disclaims any liability to any person for any inaccuracy in any cost of funds index, regardless of the cause, or for any resulting damages. Top
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