FHLBB Net Income Plunges 30% Amid Rising Expenses, Asset Growth

TL;DR

FHLBB's net income is getting hammered by higher funding costs and increased expenses, making its balance sheet growth look less appealing.

AI Summary

The Federal Home Loan Bank of Boston (FHLBB) reported a significant decrease in net income for the six months ended June 30, 2025, falling to $103,949 thousand from $148,026 thousand in the prior year, a 29.8% decline. Total assets increased by 9.3% to $78,693,574 thousand at June 30, 2025, from $71,992,966 thousand at December 31, 2024, primarily driven by a $2,004,464 thousand increase in advances to members and a $2,400,000 thousand increase in securities purchased under agreements to resell. Net interest income decreased by 12.5% to $190,824 thousand for the six months ended June 30, 2025, compared to $218,097 thousand for the same period in 2024, largely due to higher interest expense on consolidated obligations, which rose to $1,531,525 thousand from $1,587,174 thousand. The Bank's total capital increased to $3,977,590 thousand from $3,852,845 thousand, reflecting an increase in capital stock and retained earnings. A notable risk is the substantial unrealized loss position in available-for-sale securities, totaling $314,345 thousand at June 30, 2025, with $303,233 thousand of these losses being continuous for 12 months or more. The Bank also saw a significant increase in other expenses, rising to $81,224 thousand from $59,218 thousand, primarily due to higher discretionary housing and community investment programs and AHP voluntary contributions.

Why It Matters

This filing reveals a challenging period for the Federal Home Loan Bank of Boston, with a substantial drop in net income that could impact its ability to support member institutions and affordable housing initiatives. The increase in advances to members suggests continued demand for liquidity within the banking system, but the rising interest expenses on consolidated obligations highlight the cost of funding in the current rate environment. For investors, the significant unrealized losses in available-for-sale securities, particularly those held for over 12 months, signal potential future capital erosion if these losses are realized. This performance could also affect the broader market by influencing the FHLBB's capacity to provide stable funding to its member banks, potentially tightening credit conditions for consumers and businesses in the region.

Risk Assessment

Risk Level: medium — The risk level is medium due to the 29.8% decrease in net income for the six months ended June 30, 2025, and the substantial $314,345 thousand in unrealized losses on available-for-sale securities, with $303,233 thousand of these losses being continuous for 12 months or more. While total capital increased, these unrealized losses represent a significant potential drag on future financial performance if market conditions do not improve.

Analyst Insight

Investors should closely monitor FHLBB's net interest margin and the duration of its investment portfolio given the significant unrealized losses. Evaluate the impact of rising interest rates on its funding costs and the potential for further declines in net income, which could affect its ability to pay dividends or support member institutions.

Financial Highlights

debt To Equity

18.78

revenue

$1,752,357

operating Margin

N/A

total Assets

$78,693,574

total Debt

$73,321,155

net Income

$103,949

eps

N/A

gross Margin

N/A

cash Position

$1,927,163

revenue Growth

-10.3%

Revenue Breakdown

Key Numbers

• $103.9M — Net Income (Decreased by 29.8% for the six months ended June 30, 2025, from $148.0M in 2024.)
• $78.7B — Total Assets (Increased by 9.3% from $71.9B at December 31, 2024, driven by advances and securities purchased under agreements to resell.)
• $190.8M — Net Interest Income (Decreased by 12.5% for the six months ended June 30, 2025, from $218.1M in 2024.)
• $314.3M — Unrealized Losses on AFS Securities (Total unrealized losses at June 30, 2025, with $303.2M continuous for 12 months or more.)
• $47.2B — Advances to Members (Increased from $45.2B at December 31, 2024, reflecting higher demand for liquidity.)
• $73.3B — Consolidated Obligations (Increased from $66.7B at December 31, 2024, indicating higher funding costs.)
• $3.98B — Total Capital (Increased from $3.85B at December 31, 2024, despite net income decline.)
• 29.8% — Net Income Decrease (Percentage decrease in net income for the six months ended June 30, 2025, compared to the same period in 2024.)
• $81.2M — Total Other Expense (Increased from $59.2M for the six months ended June 30, 2024, driven by housing programs.)
• $1.54B — Total Interest Expense (Increased from $1.61B for the six months ended June 30, 2024, primarily due to consolidated obligations.)

Key Players & Entities

• Federal Home Loan Bank of Boston (company) — registrant
• Bloomberg (company) — publisher
• SEC (regulator) — filing oversight
• Federal Housing Finance Agency (regulator) — regulatory body
• $103,949 thousand (dollar_amount) — net income for six months ended June 30, 2025
• $148,026 thousand (dollar_amount) — net income for six months ended June 30, 2024
• $78,693,574 thousand (dollar_amount) — total assets at June 30, 2025
• $314,345 thousand (dollar_amount) — total unrealized losses on available-for-sale securities at June 30, 2025
• $303,233 thousand (dollar_amount) — unrealized losses on available-for-sale securities continuous for 12 months or more
• $190,824 thousand (dollar_amount) — net interest income for six months ended June 30, 2025

FAQ

Risk Factors

• Unrealized Losses on Securities [high — financial]: The Bank holds $16,967,327 thousand in available-for-sale securities, with a significant portion ($314,345 thousand) experiencing unrealized losses as of June 30, 2025. A substantial amount of these losses ($303,233 thousand) have persisted for 12 months or more, indicating potential long-term valuation issues and impacting comprehensive income.
• Interest Rate Sensitivity [high — market]: Fluctuations in interest rates can significantly impact the Bank's net interest income and the fair value of its investment portfolio. The decrease in net interest income by 12.5% to $190,824 thousand for the six months ended June 30, 2025, compared to $218,097 thousand in 2024, highlights this sensitivity, driven by increased interest expense on consolidated obligations.
• Increased Funding Costs [medium — financial]: The Bank's total consolidated obligations increased by $6,582,480 thousand to $73,321,155 thousand at June 30, 2025, from $66,738,675 thousand at December 31, 2024. This rise, coupled with higher interest expense, suggests increasing funding costs which can pressure profitability.
• Rising Other Expenses [medium — operational]: Total other expenses increased to $81,224 thousand for the six months ended June 30, 2025, from $59,218 thousand in the prior year. This 37.16% increase is primarily attributed to higher discretionary housing and community investment programs and AHP voluntary contributions, which may impact the Bank's operating efficiency.
• Affordable Housing Program (AHP) Mandates [medium — regulatory]: The Bank has a commitment to the Affordable Housing Program, with AHP payable increasing to $114,678 thousand from $104,300 thousand. While fulfilling social mandates, these programs represent a significant financial commitment and potential operational complexity.
• Decline in Net Income [high — financial]: Net income for the six months ended June 30, 2025, decreased by 29.8% to $103,949 thousand from $148,026 thousand in the prior year. This significant decline warrants close monitoring of revenue generation and expense management.

Industry Context

The Federal Home Loan Bank system operates as a government-sponsored enterprise (GSE) providing liquidity to member financial institutions for housing finance and community development. The competitive landscape involves other GSEs, banks, and capital markets. Current industry trends are influenced by rising interest rates, which increase funding costs and impact the valuation of fixed-income securities held by FHLBs.

Regulatory Implications

As a GSE, the FHLBB is subject to oversight by the Federal Housing Finance Agency (FHFA). Regulatory requirements focus on capital adequacy, risk management, and fulfilling its mission of supporting housing finance. The Bank's substantial unrealized losses on securities and increased reliance on consolidated obligations could attract regulatory scrutiny regarding its risk profile.

What Investors Should Do

1. Monitor unrealized losses on available-for-sale securities.
2. Analyze the drivers of the net interest income decline.
3. Evaluate the sustainability of increased other expenses.
4. Assess the impact of rising consolidated obligations on funding costs.

Key Dates

• 2025-06-30: Quarter End — Reporting period for the 10-Q, showing $78.7B in assets and $103.9M in net income.
• 2025-03-14: 2024 Annual Report Filed — Provided audited financial statements and context for the current interim report.
• 2024-12-31: Year End — Previous reporting period, showing $72.0B in assets and $148.0M in net income for the prior year's six-month period.

Glossary

Advances

Loans made by the FHLB to its member institutions, typically to provide liquidity for housing finance. (The primary lending product of the FHLBB, representing a significant portion of its assets ($47.2B).)

Consolidated Obligations (COs)

Debt securities issued by the FHLB system to fund its operations and lending activities. (The main source of funding for the FHLBB, with total COs at $73.3B, and their interest expense significantly impacting net income.)

Available-for-sale securities

Investments that are not classified as held-to-maturity or trading securities. Their unrealized gains and losses are reported in other comprehensive income. (A significant investment category ($17.0B) with substantial unrealized losses ($314.3M) impacting the Bank's capital.)

Securities purchased under agreements to resell

Short-term borrowing transactions where the Bank sells securities and agrees to repurchase them at a later date at a higher price. (A significant asset class ($3.9B), showing substantial growth and contributing to interest income.)

Accumulated Other Comprehensive Income (Loss)

A component of equity that includes unrealized gains and losses on available-for-sale securities and other items not included in net income. (Reflects the impact of unrealized losses on AFS securities, showing a loss of $249.1M at June 30, 2025.)

Affordable Housing Program (AHP)

A program mandated by Congress requiring FHLBs to support the development and preservation of affordable housing. (Represents a significant commitment and expense for the Bank, with AHP payable at $114.7M.)

Year-Over-Year Comparison

Compared to the prior year's six-month period, the Federal Home Loan Bank of Boston experienced a significant 29.8% decrease in net income, falling to $103.9 million from $148.0 million. This decline was primarily driven by a 12.5% reduction in net interest income, stemming from higher interest expenses on its consolidated obligations. While total assets grew by 9.3% to $78.7 billion, largely due to increased advances and repurchase agreements, the Bank also faced a substantial increase in other expenses (37.16%) and a notable unrealized loss position in its available-for-sale securities portfolio.

Filing Documents

• fhlbbost-20250630.htm (10-Q) — 3192KB
• ex311_q22025.htm (EX-31.1) — 14KB
• ex312_q22025.htm (EX-31.2) — 14KB
• ex321_q22025.htm (EX-32.1) — 7KB
• ex322_q22025.htm (EX-32.2) — 7KB
• 0001331463-25-000151.txt ( ) — 14586KB
• fhlbbost-20250630.xsd (EX-101.SCH) — 69KB
• fhlbbost-20250630_cal.xml (EX-101.CAL) — 138KB
• fhlbbost-20250630_def.xml (EX-101.DEF) — 468KB
• fhlbbost-20250630_lab.xml (EX-101.LAB) — 834KB
• fhlbbost-20250630_pre.xml (EX-101.PRE) — 647KB
• fhlbbost-20250630_htm.xml (XML) — 3306KB

Financial Statements (unaudited)

Financial Statements (unaudited) 3 3 4 5 6 7

Notes to Financial Statements

Notes to Financial Statements 9 Note 1 — Basis of Presentation 9 Note 2 — Investments 9 Note 3 — Advances 13 Note 4 — Mortgage Loans Held for Portfolio 15 Note 5 — Derivatives and Hedging Activities 17 Note 6 — Deposits 23 Note 7 — Consolidated Obligations 24 Note 8 — Affordable Housing Program 25 Note 9 — Capital 26 Note 10 — Accumulated Other Comprehensive Income ( Los s) 27 Note 11 — Fair Value 28 Note 12 — Commitments and Contingencies 33 Note 13 — Transactions with Shareholders 35 Note 14 — Subsequent Events 35 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 35 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 59 Item 4.

Controls and Procedures

Controls and Procedures 63 PART II. OTHER INFORMATION 64 Item 1.

Legal Proceedings

Legal Proceedings 64 Item 1A.

Risk Factors

Risk Factors 64 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64 Item 3. Defaults Upon Senior Securities 64 Item 4. Mine Safety Disclosures 64 Item 5. Other Information 64 Item 6. Exhibits 65 2 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS FEDERAL HOME LOAN BANK OF BOSTON (dollars and shares in thousands, except par value) (unaudited) June 30, 2025 December 31, 2024 ASSETS Cash and due from banks $ 16,964 $ 5,149 Interest-bearing deposits 1,925,239 1,958,353 Securities purchased under agreements to resell 3,900,000 1,500,000 Federal funds sold 4,115,000 2,505,000 Investment securities: Trading securities 1,454 1,489 Available-for-sale securities (amortized cost of $ 17,269,317 and $ 16,792,153 at June 30, 2025, and December 31, 2024, respectively) 16,967,327 16,470,908 Held-to-maturity securities (a) 56,831 63,318 Total investment securities 17,025,612 16,535,715 Advances 47,167,639 45,163,175 Mortgage loans held for portfolio, net of allowance for credit losses of $ 2,400 and $ 2,200 at June 30, 2025, and December 31, 2024, respectively 3,941,304 3,679,150 Accrued interest receivable 259,805 262,203 Derivative assets, net 255,271 301,873 Other assets 86,740 82,348 Total Assets $ 78,693,574 $ 71,992,966 LIABILITIES Deposits Interest-bearing $ 772,682 $ 842,062 Non-interest-bearing 33,588 35,019 Total deposits 806,270 877,081 Consolidated obligations (COs): Bonds 53,899,536 48,192,171 Discount notes 19,421,619 18,546,504 Total consolidated obligations 73,321,155 66,738,675 Mandatorily redeemable capital stock 4,234 5,086 Accrued interest payable 386,839 328,596 Affordable Housing Program (AHP) payable 114,678 104,300 Derivative liabilities, net 2,085 4,746 Other liabilities 80,723 81,637 Total liabilities 74,715,984 68,140,121 Commitments and contingencies ( Note 12 ) CAPITAL Capital stock – Class B – putable ($ 100 par value), 22,919 shares and 21,952 shares issued and outstanding at June 30, 2025, and December 31, 2024, respectively 2,291,941 2,195,167 Retained earnings: Unrestricted 1,404,666 1,403,455 Restricted 530,034 509,245 Total retained earnings 1,934,700 1,912,700 Accumulated other comprehens

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS Note 1 — Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. In the opinion of management, all adjustments considered necessary have been included. All such adjustments consist of normal recurring accruals. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2025. These interim financial statements do not include all the information and footnotes required by GAAP for complete annual financial statements and accordingly should be read in conjunction with the Federal Home Loan Bank of Boston's audited financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the SEC) on March 14, 2025 (the 2024 Annual Report). Unless otherwise indicated or the context requires otherwise, all references in this discussion to "the Bank," "we," "us," "our," or similar references mean the Federal Home Loan Bank of Boston. Note 2 — Investments Interest-Bearing Deposits, Securities Purchased Under Agreements to Resell, and Federal Funds Sold We invest in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide liquidity. These investments are generally transacted with counterparties that have received, or whose guarantors have received, a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO), or the equivalent. At June 30, 2025, and De

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