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 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.