FHLBank Boston Announces 2023 Fourth Quarter Results and Dividend

The Bank's board of directors has declared a dividend equal to an annual yield of 8.40%, the daily average of the Secured Overnight Financing Rate for the fourth quarter of 2023 plus 300 basis points. The dividend, based on average stock outstanding for the fourth quarter of 2023, will be paid on March 4, 2024. As always, dividends remain at the discretion of the board.

“Stronger demand for advances and an increase in net interest income helped fuel FHLBank Boston’s solid financial performance in 2023. These results enabled FHLBank Boston to set aside more than $28 million for the Affordable Housing Program and another $14.9 million in voluntary contributions for housing and economic development programs that promote homeownership for lower- and moderate-income borrowers and job creation throughout New England for the year,” said President and CEO Timothy J. Barrett.

The Bank’s overall results of operations are influenced by the economy, interest rates and by members' demand for advances. During the fourth quarter of 2023, the Federal Open Market Committee (FOMC) maintained the target range for the federal funds rate between 525 and 550 basis points. During the quarter, the yield curve became more inverted as long term interest rates fell significantly due to anticipation of an economic downturn and rate cuts by the Federal Reserve in 2024. 

Net income for the quarter ending December 31, 2023, was $51.5 million, compared with net income of $55.4 million for the same period in 2022. The decrease in net income for the quarter was primarily due to an increase of certain noninterest expenses, including our Affordable Housing Program contributions, discretionary housing and community investment expenses, and operating expenses, which combined increased $13.1 million, partially offset by an increase of $8.8 million in net interest income after provision for credit losses. 

Net interest income after provision for credit losses for the three months ended December 31, 2023, was $79.6 million, compared with $70.8 million for the same period in 2022. The $8.8 million increase in net interest income after provision for credit losses was driven by growth in our average advances and average investments portfolios, growth in capital, as well as an increase in yields in the quarter ended December 31, 2023, resulting from higher market interest rates. These favorable impacts were partially offset by a $9.0 million increase of net unrealized losses on fair value hedge ineffectiveness attributable to a larger decline in intermediate-term interest rates during the quarter compared to the same quarter one year ago. 

Net interest spread was 0.12% for the quarter ended December 31, 2023, a decrease of seven basis points from the same period in 2022, and net interest margin was 0.49%, an increase of four basis points from the same period in 2022. The decrease of net interest spread was primarily attributable to the increase in net unrealized losses on fair value hedges and net amortization 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.

Total assets increased $4.2 billion, or 6.7%, to $67.1 billion at December 31, 2023, up from $62.9 billion at year-end 2022. The net increase in total assets consisted of increases in investments, advances, and mortgage loans. Total investments were $21.2 billion at December 31, 2023, an increase of $3.2 billion from $17.9 billion at the prior year end, while advances ended 2023 at $42.0 billion an increase of $359.0 million, or 0.9%, from $41.6 billion at December 31, 2022. Mortgage loans totaled $3.1 billion at December 31, 2023, an increase of $300.9 million from year-end 2022 as mortgage sales to the Bank increased.

GAAP capital at December 31, 2023, was $3.5 billion, an increase of $123.3 million from $3.4 billion at year-end 2022. During 2023, capital stock increased by $11.3 million, primarily attributable to the increase in advances. Total retained earnings grew to $1.8 billion during 2023, an increase of $100.1 million, or 5.9%, from December 31, 2022. Of this amount, restricted retained earnings(3) totaled $451.2 million at December 31, 2023. Accumulated other comprehensive loss totaled $294.5 million at December 31, 2023, an improvement of $11.9 million from accumulated other comprehensive loss as of December 31, 2022.

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

Net income for the year ending December 31, 2023, was $257.3 million, compared with net income of $184.2 million for 2022, primarily the result of an increase of $92.9 million in net interest income after provision for credit losses. These results led to a $28.6 million statutory contribution to the Bank's Affordable Housing Program for the year. In addition, the Bank voluntarily contributed $14.9 million to our discretionary housing and community investment programs in 2023, including discretionary contributions to our Affordable Housing Program, Jobs for New England (JNE), Housing Our Workforce (HOW) and Lift Up Homeownership programs.

Net interest income after provision for credit losses for the year ended December 31, 2023, was $375.2 million, compared with $282.3 million for 2022. The $92.9 million increase in net interest income after provision for credit losses was driven by growth in our advances and investments portfolios, growth in capital, an increase in yields in the year ended December 31, 2023, resulting from higher market interest rates compared to 2022. These improvements to net interest income were partially offset by a $59.3 million unfavorable variance in net unrealized gains and losses on fair value hedge ineffectiveness attributable to a decline in intermediate-term interest rates during the year ended December 31, 2023, compared to an increase in interest rates during 2022.

Net interest spread was 0.21% for the year ended December 31, 2023, a decrease of 21 basis points from the same period in 2022, and net interest margin was 0.55%, a decrease of two basis points from 2022. The decrease of net interest spread and margin was primarily attributable to the unfavorable variance in net unrealized gains and losses on fair value hedges and to net amortization of MBS premium. 

​To read the entire release, please go here.