April 22, 2022
FHLBank Boston Announces 2022 First Quarter Results and Dividend
The Federal Home Loan Bank of Boston announced its preliminary, unaudited first quarter financial results for 2022, reporting net income of $27.8 million for the quarter. The Bank expects to file its quarterly report on Form 10-Q for the quarter ending March 31, 2022, with the U.S. Securities and Exchange Commission next month.
The Bank's board of directors has declared a dividend equal to an annual yield of 2.09%, the daily average of the Secured Overnight Financing Rate for the first quarter of 2022 plus 200 basis points. The dividend, based on average stock outstanding for the first quarter of 2022, will be paid on May 3, 2022. As always, dividends remain at the discretion of the board.
“Despite the continued suppression of advances demand due to excess liquidity on members’ balance sheets, rising interest rates led to a 33% increase in net income in the first quarter of 2022 compared to the same period last year,” said President and Chief Executive Officer Timothy J. Barrett. “This performance and FHLBank Boston’s strong financial condition enabled us to offer our members a dividend of SOFR plus 200 basis points and to set aside $11.6 million towards our vital affordable housing program that our members rely on to support affordable housing development in the communities they serve."
First Quarter 2022 Operating Highlights
The Bank’s overall results of operations are influenced by the economy, financial markets and, in particular, by members' demand for advances. During the first quarter of 2022, interest rates remained significantly below pre-pandemic levels and the Bank experienced a continued reduction in demand for advances from our members. Depository member institutions continued to report significantly elevated deposit balances, which has reduced demand for advances and other forms of wholesale funding.
Net income for the quarter ending March 31, 2022, was $27.8 million, compared with net income of $20.9 million for the same period in 2021, the result of a decrease of $14.2 million in net unrealized losses on trading securities and a decline of $3.0 million in loss on early extinguishment of debt. These increases to net income were offset by a $5.0 million increase in other expenses, a decrease of $2.5 million in net interest income after provision for credit losses, and a $1.6 million increase in operating expenses, compared to the same period last year. These results led to a $3.1 million statutory contribution to the Bank's Affordable Housing Program for the quarter. In addition, the Bank made a voluntary contribution of $8.5 million to the Affordable Housing Program, which contributed to the aforementioned increase in other expenses for the quarter ending March 31, 2022.
Net interest income after provision for credit losses for the three months ended March 31, 2022, was $58.9 million, compared with $61.5 million for the same period in 2021. The $2.5 million decrease in net interest income after provision for credit losses was driven by a $6.8 million decrease in net prepayment fee income, a $5.2 billion decrease in the average balance of advances, and a $785.5 million decrease in the average balance of mortgageloans. These negative factors were partially offset by an increase of net accretion of discounts and premiums on mortgage-backed securities and mortgage loans of $16.5 million, resulting from significant increases in mortgage rates during the first quarter of 2022, an increase of fair value hedge ineffectiveness net gains of $7.2 million, a $1.9 billion increase in the average balance of mortgage-backed securities, a $1.6 billion increase in the average balance of U.S. Treasury securities, and an improvement in funding costs relative to the same period in 2021. As a result, net interest spread was 0.70% for the quarter ended March 31, 2022, an increase of 7 basis points from the same period in 2021, and net interest margin was 0.74%, an increase of 6 basis points from the same period in 2021.
March 31, 2022 Balance-Sheet Highlights
Total assets decreased $149.6 million, or 0.5%, to $32.4 billion at March 31, 2022, down from $32.5 billion at year-end 2021.During the quarter ended March 31, 2022, advances decreased $523.6 million, or 4.2%, to $11.8 billion, compared with $12.3 billion at year-end 2021.
Total investments were $16.8 billion at March 31, 2022, up from $16.4 billion at December 31, 2021. Investments in mortgage loans totaled $3.0 billion at March 31, 2022, a decrease of $121.5 million from year-end 2021 as paydowns continued to outpace new purchases in a very competitive environment.
GAAP capital at March 31, 2022, was $2.4 billion, a decrease of $119.2 million from $2.5 billion at year-end 2021. During the first quarter of 2022, capital stock decreased by $24.2 million, primarily attributable to the decrease in advances. Total retained earnings grew to $1.57 billion at March 31, 2022, an increase of $22.7 million, or 1.5%, from December 31, 2021. Of this amount, restricted retained earnings totaled $368.4 million at March 31, 2022. Accumulated other comprehensive loss totaled $88.8 million at March 31, 2022, a decrease of $117.8 million, from accumulated other comprehensive income of $29.0 million at December 31, 2021.
The Bank was in compliance with all regulatory capital ratios at March 31, 2022, and in the most recent information available was classified “adequately capitalized” by its regulator, the Federal Housing Finance Agency, based on the Bank's financial information at December 31, 2021.