FEDERAL HOME LOAN BANK OF BOSTON ANNOUNCES 2022 SECOND QUARTER RESULTS, DECLARES DIVIDEND

BY PR Newswire | AGENCY | 07/22/22 01:30 PM EDT

BOSTON, July 22, 2022 /PRNewswire/ -- The Federal Home Loan Bank of Boston announced its preliminary, unaudited second quarter financial results for 2022, reporting net income of $41.0 million for the quarter. The Bank expects to file its quarterly report on Form 10-Q for the quarter ending June 30, 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 3.72%, the daily average of the Secured Overnight Financing Rate for the second quarter of 2022 plus 300 basis points. The dividend, based on average stock outstanding for the second quarter of 2022, will be paid on August?2, 2022. As always, dividends remain at the discretion of the board.

"Advances activity increased in the second quarter as demand for wholesale funding by our members picked up significantly. The Bank experienced year-over-year gains in net income, net interest income, and net interest spread," said FHLBank Boston President and CEO Timothy J. Barrett. "The Bank's balance sheet remains strong, and we continue to maintain our focus of providing liquidity and funding to our members and supporting affordable housing and economic development."

Second 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 second quarter of 2022, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to between 150 and 175 basis points. Additionally, the Bank experienced a sharp increase in demand for advances from our members during the quarter ended June?30, 2022.

Net income for the quarter ending June?30, 2022, was $41.0 million, compared with net income of $6.2 million for the same period in 2021, the result of a $26.3 million increase in net interest income after provision for credit losses and a decrease of $14.3 million in net unrealized losses on trading securities. These results led to a $4.6 million statutory contribution to the Bank's Affordable Housing Program for the quarter. In addition, the Bank made a voluntary contribution of $5.5 million to the Affordable Housing Program for the quarter ending June?30, 2022.

Net interest income after provision for credit losses for the three months ended June?30, 2022, was $69.4 million, compared with $43.1 million for the same period in 2021. The?$26.3 million increase in net interest income after provision for credit losses was driven by growth in our advances and investments portfolios, as well as an increase in yields in the quarter ended June?30, 2022. As a result, net interest spread was 0.52% for the quarter ended June?30, 2022, an increase of 8 basis points from the same period in 2021, and net interest margin was 0.60%, an increase of 12 basis points from the same period in 2021.

June?30, 2022 Balance-Sheet Highlights

Total assets increased $29.5 billion, or 90.7%, to $62.1 billion at June?30, 2022, up from $32.5 billion at year-end 2021. During the six months ended June?30, 2022, advances increased $18.0 billion, or 145.7%, to $30.3 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 $28.3 billion at June?30, 2022, up from $16.4 billion at December?31, 2021, with most of the increase concentrated in short term investments that support liquidity needs resulting from higher demand for advances. Investments in mortgage loans totaled $2.9 billion at June?30, 2022, a decrease of $222.8 million from year-end 2021 as paydowns continued to outpace new purchases in a challenging mortgage refinance market.

GAAP capital at June?30, 2022, was $2.9 billion, an increase of $417.0 million from $2.5 billion at year-end 2021. During the first half of 2022, capital stock increased by $603.6 million, primarily attributable to the increase in advances. Total retained earnings grew to $1.6 billion at June?30, 2022, an increase of $58.8 million, or 3.8%, from December?31, 2021. Of this amount, restricted retained earnings(1) totaled $376.6 million at June?30, 2022. Due to the increase in the average balance of consolidated obligations during the quarter ended June?30, 2022, we contributed $8.2 million of second quarter 2022 net income to restricted retained earnings. Accumulated other comprehensive loss totaled $216.4 million at June?30, 2022, a decrease of $245.4 million, from accumulated other comprehensive income of $29.0 million at December?31, 2021, mainly attributable to valuation losses from investment securities as interest rates rose sharply during the first half of 2022.

The Bank was in compliance with all regulatory capital ratios at June?30, 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 March 31, 2022.(2)

About the Bank

The Federal Home Loan Bank of Boston is a cooperatively owned wholesale bank for housing finance in the six New England states. Its mission is to provide highly reliable wholesale funding and liquidity to its member financial institutions in New England. The Bank also develops and delivers competitively priced financial products, services, and expertise that support housing finance, community development, and economic growth, including programs targeted to lower-income households.

Contact:
Adam Coldwell
617-292-9774
adam.coldwell@fhlbboston.com

Federal Home Loan Bank of Boston

Balance Sheet Highlights

(Dollars in thousands)

(Unaudited)




6/30/2022


3/31/2022


12/31/2021

ASSETS







Cash and due from banks


$????????????? 65,965


$??????????? 202,883


$??????????? 204,993

Advances


30,318,486


11,816,428


12,340,020

Investments (3)


28,254,534


16,849,318


16,372,499

Mortgage loans held for portfolio, net


2,897,373


2,998,682


3,120,159

Other assets


527,636


528,351


507,621

Total assets


$?????? 62,063,994


$?????? 32,395,662


$?????? 32,545,292








LIABILITIES







Consolidated obligations, net


$?????? 57,817,835


$?????? 28,949,436


$?????? 28,888,352

Deposits


1,066,459


803,383


884,032

Other liabilities


231,688


231,056


241,897








CAPITAL







Class B capital stock


1,557,243


929,482


953,638

Retained earnings - unrestricted


1,230,558


1,202,685


1,179,986

Retained earnings - restricted (1)


376,620


368,420


368,420

Total retained earnings


1,607,178


1,571,105


1,548,406

Accumulated other comprehensive (loss) income


(216,409)


(88,800)


28,967

Total capital


2,948,012


2,411,787


2,531,011

Total liabilities and capital


$?????? 62,063,994


$?????? 32,395,662


$?????? 32,545,292








Total regulatory capital-to-assets ratio


5.1?%


7.8?%


7.7?%

Ratio of market value of equity (MVE) to par value of capital stock (4)


189?%


251?%


253?%

?

Income Statement Highlights

(Dollars in thousands)

(Unaudited)



For the Three Months Ended


For the Six Months Ended


6/30/2022


3/31/2022


6/30/2021


6/30/2022


6/30/2021











Total interest income

$??????? 174,401


$??????? 103,443


$????????? 97,743


$??????? 277,844


$??????? 222,057

Total interest expense

105,084


44,601


54,422


149,685


118,478

Net interest income

69,317


58,842


43,321


128,159


103,579

Net interest income after provision for credit losses

69,416


58,942


43,122


128,358


104,606

Net losses on trading securities

(252)


(635)


(14,599)


(887)


(29,442)

Other income

4,070


1,701


1,495


5,771


575

Operating expense

17,022


17,658


16,473


34,680


32,563

Other expense

10,645


11,415


6,704


22,060


13,127

AHP assessment

4,567


3,100


687


7,667


3,010

Net income

$????????? 41,000


$????????? 27,835


$??????????? 6,154


$????????? 68,835


$????????? 27,039











Performance Ratios: (5)










Return on average assets

0.35?%


0.35?%


0.07?%


0.35?%


0.15?%

Return on average equity (6)

6.13?%


4.50?%


0.92?%


5.35?%


2.01?%

Net interest spread

0.52?%


0.70?%


0.44?%


0.59?%


0.53?%

Net interest margin

0.60?%


0.74?%


0.48?%


0.66?%


0.58?%



(1)

The Bank's capital plan and a joint capital enhancement agreement among all Federal Home Loan Banks require the Bank to allocate a certain amount, generally not less than 20% of each of quarterly net income and adjustments to prior net income, to a restricted retained earnings account until a total required allocation is met. Amounts in the restricted retained earnings account are unavailable to be paid as dividends, which may be paid from current net income and unrestricted retained earnings. For additional information, see Item 5 ? Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in the 2021 Annual Report.



(2)

For additional information on the Bank's capital requirements, see Item 7 ? Management's Discussion and Analysis of Financial Condition and Results of Operations ? Liquidity and Capital Resources ? Capital in the Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 18, 2022 (the 2021 Annual Report).



(3)

Investments include available-for-sale securities, held-to-maturity securities, trading securities, interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold.



(4)

MVE equals the difference between the theoretical market value of assets and the theoretical market value of liabilities, and the ratio of MVE to par value of Bank capital stock can be an indicator of future net income to the extent that it demonstrates the impact of prior interest-rate movements on the capacity of the current balance sheet to generate net interest income. However, this ratio does not always provide an accurate indication of future net income. Accordingly, investors should not place undue reliance on this ratio and are encouraged to read the Bank's discussion of MVE, including discussion of the limitations of MVE as a metric, in Item 7A ? Quantitative and Qualitative Disclosures About Market Risk ? Measurement of Market and Interest Rate Risk in the 2021 Annual Report.



(5)

Yields for quarterly periods are annualized.



(6)

Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income, and total retained earnings.

****************************

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release, including the unaudited balance sheet highlights and income statement highlights, uses forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, which include statements with respect to the Bank's plans, objectives, projections, estimates, or predictions. These statements are based on the Bank's expectations as of the date hereof. The words "preliminary," "will," "continue," and similar statements and their plural and negative forms are used in this notification to identify some, but not all, of such forward-looking statements. For example, statements about future declarations of dividends and expectations for advances balances, mortgage-loan investments, and net income are forward-looking statements, among other forward-looking statements herein.

The Bank cautions that, by their nature, forward-looking statements involve risks and uncertainties, including, but not limited to, the application of accounting standards relating to, among other things, the amortization and accretion of premiums and discounts on financial assets, financial liabilities, and certain fair value gains and losses; hedge accounting of derivatives and underlying financial instruments; the fair values of financial instruments, including investment securities and derivatives; the allowance for credit losses on investment securities and mortgage loans; instability in the credit and debt markets; economic conditions (including effects on, among other things, mortgage-backed securities); changes in demand for advances or consolidated obligations of the Bank or the Federal Home Loan Bank system; changes in interest rates; volatility of market prices, rates, and indices that could affect the value of financial instruments; the expected discontinuance of LIBOR and the adverse consequences it could have for market participants, including the Bank; the effects of COVID-19 and the emerging variants of the virus that causes COVID-19 on regulatory developments, economic conditions and markets; the Bank's ability to execute its business model and pay future dividends; and prepayment speeds on mortgage assets. In addition, the Bank reserves the right to change its plans for any programs for any reason, including but not limited to, legislative or regulatory changes, changes in membership, or changes at the discretion of the board of directors. Accordingly, the Bank cautions that actual results could differ materially from those expressed or implied in these forward-looking statements or could impact the extent to which a particular plan, objective, projection, estimate or prediction is realized, and you are cautioned not to place undue reliance on such statements. The Bank does not undertake to update any forward-looking statement herein or that may be made from time to time on behalf of the Bank.

Cision View original content:https://www.prnewswire.com/news-releases/federal-home-loan-bank-of-boston-announces-2022-second-quarter-results-declares-dividend-301591859.html

SOURCE Federal Home Loan Bank of Boston

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article