Financial Results

The Bank’s board of directors has declared a dividend equal to an annual yield of 8.31%, the daily average of the Secured Overnight Financing Rate for the third quarter of 2023 plus 300 basis points. The dividend, based on average stock outstanding for the third quarter of 2023, will be paid on November 2, 2023. As always, dividends remain at the discretion of the board.

“FHLBank Boston’s earnings were strong in the third quarter due to an increase in net interest income driven by elevated market interest rates,” said President and CEO Timothy J. Barrett. “FHLBank Boston’s balance sheet remains strong and keeps us well positioned to meet members’ evolving need for liquidity. We are pleased to set aside $13.9 million in total this quarter to support housing and economic development throughout New England through the Affordable Housing Program, Housing Our Workforce, Jobs for New England, and our new Lift Up Homeownership pilot program.”

Third 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 third quarter of 2023, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to between 525 and 550 basis points. During the quarter, the yield curve remained inverted but flattened as long term interest rates rose at a faster rate than short-term interest rates due to stronger economic and labor market outlook. Simultaneously, deposit levels in the banking industry stabilized further. As a result of this improved liquidity outlook, there was a decrease in members’ demand for advances during the quarter ended September 30, 2023.

Net income for the quarter ending September 30, 2023, was $70.1 million, compared with net income of $60.0 million for the third quarter of 2022, primarily the result of an increase of $21.0 million in net interest income after provision for credit losses, partially offset by a $7.6 million increase in other expenses. These results led to a $7.8 million statutory contribution to the Bank’s AHP for the quarter, an increase of $1.1 million compared to the third quarter of 2022.

Net interest income after provision for credit losses for the three months ended September 30, 2023, was $104.1 million, compared with $83.1 million for 2022. The $21.0 million increase in net interest income after provision for credit losses was driven by growth in our average advances and average investment portfolios, growth in average capital, and an increase in yields in the three months ended September 30, 2023, resulting from higher market interest rates compared to the same period in 2022. These improvements to net interest income were partially offset by a $28.1 million decrease of net gains on fair value hedges, attributed to the smaller increase in intermediate-term interest rates during the quarter compared to the same quarter one year ago.

Net interest spread was 0.27% for the three months ended September 30, 2023, a decrease of 17 basis points from the same period in 2022 and net interest margin was 0.65%, an increase of 7 basis points from 2022. The decrease of net interest spread was primarily attributable to the decline in net gains and losses on fair value hedges and net accretion of MBS premium, in addition to the impact of higher concentrations of advances on our balance sheet, which tend to have lower spreads to funding costs.

​September 30, 2023 Balance-Sheet Highlights

Total assets decreased $150.1 million, or 0.2 percent, to $62.7 billion at September 30, 2023, down slightly from $62.9 billion at year-end 2022. The net decrease in total assets consisted of an increase in investments and mortgage loans, largely offset by a decrease in advances. Total investments were $18.7 billion at September 30, 2023, an increase of $817.8 million from $17.9 billion at the prior year end, while advances ended the third quarter of 2023 at $40.1 billion, a decrease of $1.5 billion, or 3.5%, from $41.6 billion at December 31, 2022. Mortgage loans totaled $2.9 billion at September 30, 2023, an increase of $181.8 million from year-end 2022 as mortgage sales to the Bank increased.

GAAP capital at September 30, 2023, was $3.5 billion, an increase of $44.5 million from $3.4 billion at year-end 2022. During the first nine months of 2023, capital stock decreased by $24.1 million, primarily attributable to the decrease in advances. Total retained earnings grew to $1.8 billion at September 30, 2023, an increase of $88.6 million, or 5.2%, from December 31, 2022. Of this amount, restricted retained earnings totaled $440.9 million at September 30, 2023. Accumulated other comprehensive loss totaled $326.5 million at September 30, 2023, an increase of $20.0 million from accumulated other comprehensive loss as of December 31, 2022, due to higher intermediate interest rates.

The Bank was in compliance with all regulatory capital ratios at September 30, 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 June 30, 2023.

To read the entire release, go here.