​Financial Results

The Bank’s board of directors has declared a dividend equal to an annual yield of 7.55%, the daily average of the Secured Overnight Financing Rate for the first quarter of 2023 plus 300 basis points. The dividend, based on average stock outstanding for the first quarter of 2023, will be paid on May 2, 2023. As always, dividends remain at the discretion of the board.

“The increased advance activity we experienced in 2022 continued in the first quarter of 2023 primarily in response to the banking industry turmoil sparked by bank closures and concerns about liquidity in the financial system,” said FHLBank Boston President and CEO Timothy J. Barrett. “Similar to our role during the global pandemic and the Great Recession before it, FHLBank Boston served as a critical, reliable, and on-demand source of liquidity for our members and the communities they serve when they needed it most. As a result of our strong performance, FHLBank Boston is pleased to set aside more than $7 million in support of affordable housing and job creation and preservation through our Affordable Housing Program as well as our Housing Our Workforce and Jobs for New England programs.”

First Quarter 2023 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 2023, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to between 475 and 500 basis points. Short-term interest rates rose while intermediate-term rates declined, continuing the trend of an inverted yield curve during the quarter reflecting concerns over a potential economic downturn and worsening of the recent turmoil in the banking industry. Additionally, the Bank experienced a robust increase in demand for advances from our members during the quarter ended March 31, 2023.

Net income for the quarter ending March 31, 2023, was $57.2 million, compared with net income of $27.8 million for 2022, the result of an increase of $22.9 million in net interest income after provision for credit losses and a decrease of $8.5 million in Affordable Housing Program (AHP) voluntary expense. These results led to a $6.4 million statutory contribution to the Bank’s AHP for the quarter, an increase of $3.3 million compared to the first quarter of 2022.

Net interest income after provision for credit losses for the three months ended March 31, 2023, was $81.8 million, compared with $58.9 million for 2022. The $22.9 million increase in net interest income after provision for credit losses was driven by growth in our advances and investments portfolios, growth in capital, and an increase in yields in the three months ended March 31, 2023, resulting from higher market interest rates. These improvements to net interest income were moderated by a $35.0 million decrease of net unrealized gains and losses on fair value hedges, and a $12.0 million decrease in net accretion of MBS premium, both of which were primarily driven by a decrease of intermediate-term interest rates during the quarter versus an increase in the comparable quarter one year ago.

Net interest spread was 0.17% for the three months ended March 31, 2023, a decrease of 53 basis points from the same period in 2022 and net interest margin was 0.47%, a decrease of 27 basis points from 2022. The decrease of net interest spread and margin was primarily attributable to the decline in unrealized gains and losses on fair value hedges and net accretion of MBS premium, in addition to the impact of higher concentrations of advances and short-term investments on our balance sheet, which tend to have lower spreads to funding costs.

March 31, 2023 Balance-Sheet Highlights

Total assets increased $17.3 billion, or 27.5 percent, to $80.2 billion at March 31, 2023, up from $62.9 billion at year-end 2022. During the three months ended March 31, 2023, advances increased $8.0 billion, or 19.3%, to $49.6 billion, compared with $41.6 billion at December 31, 2022. The significant increase in advances was concentrated in variable-rate advances, long-term fixed rate advances, and short-term fixed-rate advances, reflecting rising demand for wholesale funding at member institutions, which accelerated in the wake of the recent banking industry turmoil.

Total investments were $27.2 billion at March 31, 2023, up from $17.9 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 $2.7 billion at March 31, 2023, a decrease of $33.8 million from year-end 2022 because mortgage refinance activity has declined significantly and home sales have slowed.

GAAP capital at March 31, 2023, was $3.8 billion, an increase of $399.4 million from $3.4 billion at year-end 2022. During 2023, capital stock increased by $373.2 million, primarily attributable to the increase in advances. Total retained earnings grew to $1.7 billion during 2023, an increase of $26.2 million, or 1.5%, from December 31, 2022. Of this amount, restricted retained earnings totaled $411.1 million at March 31, 2023. Accumulated other comprehensive loss totaled $306.4 million at March 31, 2023, substantially unchanged from accumulated other comprehensive loss as of December 31, 2022.

The Bank was in compliance with all regulatory capital ratios at March 31, 2023, 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, 2022.

To read the entire release, go here.