February 24, 2023

FHLBank Boston Announces 2022 Fourth Quarter and Annual Results, Declares Dividend

The Federal Home Loan Bank of Boston announced its preliminary, unaudited fourth quarter and annual financial results for 2022, reporting net income of $55.4 million for the quarter and $184.2 million for the year. The Bank expects to file its annual report on Form 10-K for the year ending December 31, 2022, with the U.S. Securities and Exchange Commission next month.

​Financial Results

The Bank's board of directors has declared a dividend equal to an annual yield of 6.67%, the daily average of the Secured Overnight Financing Rate for the fourth quarter of 2022 plus 300 basis points. The dividend, based on average stock outstanding for the fourth quarter of 2022, will be paid on March 2, 2023. As always, dividends remain at the discretion of the board.

"The Bank’s strong financial performance in 2022 was driven in part by growth in our advances activity and higher market interest rates," said FHLBank Boston President and CEO Timothy J. Barrett. "We continue to provide value to all our members so they can meet the unique needs of the communities they serve. We are pleased to set aside $26 million for our Affordable Housing Program and once again make critical contributions to support homeownership through our Housing Our Workforce program while also promoting job creation and preservation through our Jobs for New England program."

​Fourth 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 fourth quarter of 2022, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to between 425 and 450 basis points and anticipates that ongoing increases in the target range will be appropriate given elevated, but decelerating, rates of inflation. Long-term interest rates were relatively stable while short- and intermediate-term rates rose, resulting in an inverted yield curve during the quarter reflecting concerns over a potential economic downturn. Additionally, the Bank experienced a continuing increase in demand for advances from our members during the quarter ended December 31, 2022.

Net income for the quarter ending December 31, 2022, was $55.4 million, compared with net income of $25.9 million for the same period in 2021. The increase in net income for the quarter was primarily due to an increase of $14.4 million in net interest income after provision for credit losses, an improvement of $6.2 million in net gains and losses on trading securities, and a $5.3 million decrease in losses on early extinguishment of debt. 

Net interest income after provision for credit losses for the three months ended December 31, 2022, was $70.8 million, compared with $56.4 million for the same period in 2021. The $14.4 million increase in net interest income after provision for credit losses was driven by growth in our advances and investments portfolios, growth in capital, as well as an increase in yields in the quarter ended December 31, 2022 resulting from higher market interest rates. These favorable impacts were partially offset by a decrease of $16.7 million of prepayment fee income and an increase of $13.9 million of net unrealized losses on fair value hedges. Net interest spread was 0.19% for the quarter ended December 31, 2022, a decrease of 45 basis points from the same period in 2021, and net interest margin was 0.45%, a decrease of 21 basis points from the same period in 2021.

​December 31, 2022 Balance-Sheet Highlights

Total assets increased $30.4 billion, or 93.3 percent, to $62.9 billion at December 31, 2022, up from $32.5 billion at year-end 2021. During the year ended December 31, 2022, advances increased $29.3 billion, or 237.1%, to $41.6 billion, compared with $12.3 billion at year-end 2021. The significant increase in advances was concentrated in variable-rate advances and short-term fixed-rate advances, reflecting rising demand for wholesale funding at member institutions.

Total investments were $17.9 billion at December 31, 2022, up from $16.4 billion at the prior year end, with most of the increase concentrated in short term investments that support liquidity needs resulting from higher demand for advances. Mortgage loans totaled $2.8 billion at December 31, 2022,  a decrease of $361.7 million from year-end 2021 as paydowns continued to outpace new purchases because mortgage refinance activity has declined significantly and home sales have slowed.

GAAP capital at December 31, 2022, was $3.4 billion, an increase of $884.3 million from $2.5 billion at year-end 2021. During 2022, capital stock increased by $1.1 billion, primarily attributable to the increase in advances. Total retained earnings grew to $1.7 billion during 2022, an increase of $142.2 million, or 9.2%, from December 31, 2021. Of this amount, restricted retained earnings(4) totaled $399.7 million at December 31, 2022. Accumulated other comprehensive loss totaled $306.4 million at December 31, 2022, a decrease of $335.4 million from accumulated other comprehensive income as of December 31, 2021, mainly attributable to declines in value of available-for-sale investment securities as interest rates rose sharply during 2022.

The Bank was in compliance with all regulatory capital ratios at December 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 September 30, 2022.

​2022 Annual Operating Highlights

Net income for the year ending December 31, 2022, was $184.2 million, compared with net income of $69.5 million for 2021, the result of an increase of $70.1 million in net interest income after provision for credit losses, an improvement of $46.0 million in net losses on trading securities, and a $11.5 million decrease in losses on early extinguishment of debt. These results led to a $20.5 million statutory contribution to the Bank's Affordable Housing Program for the year. In addition, the Bank made a voluntary contribution of $5.5 million to the Affordable Housing Program.

Net interest income after provision for credit losses for the year ended December 31, 2022, was $282.3 million, compared with $212.2 million for 2021. The $70.1 million increase in net interest income after provision for credit losses was driven by growth in our advances and investments portfolios, growth in capital, an increase in yields in the year ended December 31, 2022, resulting from higher market interest rates and an increase of $22.2 million of net unrealized gains on fair value hedges, partially offset by a decrease of $30.7 million of prepayment fee income. Net interest spread was 0.42% for the year ended December 31, 2022, a decrease of 15 basis points from the same period in 2021, and net interest margin was 0.57%, a decrease of three basis points from 2021.

To read the entire release, go here.

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