FHLBank Boston's Q3 Net Income Rises, Assets Swell to $75.7B

TL;DR

**FHLBank Boston's Q3 net income beat expectations, but the nine-month trend is down, signaling a mixed bag for bondholders and member banks.**

AI Summary

The Federal Home Loan Bank of Boston reported a net income of $66.048 million for the three months ended September 30, 2025, an increase from $60.369 million in the same period of 2024. For the nine months ended September 30, 2025, net income decreased to $169.997 million from $208.395 million in the prior year. Total assets grew to $75.733 billion as of September 30, 2025, up from $71.992 billion at December 31, 2024, primarily driven by a $4.0 billion increase in securities purchased under agreements to resell and a $1.8 billion increase in federal funds sold. Advances to members decreased by $2.389 billion to $42.774 billion, while mortgage loans held for portfolio increased by $478.212 million to $4.157 billion. Total interest income for the nine months decreased by $122.329 million to $2.614 billion, largely due to a $110.848 million decrease in available-for-sale securities interest income. Total interest expense also decreased by $106.371 million to $2.322 billion, mainly from a $219.921 million reduction in discount notes interest expense, partially offset by a $122.759 million increase in bonds interest expense. The Bank's capital increased slightly to $3.859 billion from $3.852 billion at December 31, 2024, with accumulated other comprehensive loss improving by $47.099 million. The Bank faces risks related to interest rate fluctuations and credit quality of its investments, though its investments are primarily investment grade.

Why It Matters

For investors, the FHLBank Boston's increased net income in Q3 2025, despite a nine-month decline, signals resilience in a fluctuating interest rate environment. The significant growth in assets, particularly in repurchase agreements and federal funds sold, indicates active liquidity management and potentially higher short-term earnings, which could impact dividend payouts to member institutions. The competitive landscape for FHLBanks involves attracting and retaining member deposits and advances, and the Bank's ability to manage its consolidated obligations and investment portfolio effectively is crucial for its stability and role in supporting community lending. Employees benefit from a stable institution, while customers (member banks) rely on the FHLBank for liquidity and funding, making its financial health vital for the broader housing and community development market.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant unrealized losses in available-for-sale securities, totaling $(273.956) million as of September 30, 2025, with a substantial portion, $(266.730) million, in a continuous unrealized loss position for 12 months or more. While the Bank's investments are primarily investment grade, this persistent unrealized loss position, particularly in mortgage-backed securities, indicates exposure to interest rate risk and potential for future impairments if market conditions deteriorate further.

Analyst Insight

Investors should closely monitor the FHLBank Boston's interest rate risk management strategies and the performance of its available-for-sale securities portfolio. Given the significant unrealized losses, a deeper dive into the duration and credit quality of these assets is warranted to assess potential future impacts on capital and earnings. Consider the implications for member institutions relying on the FHLBank for liquidity and dividends.

Financial Highlights

debt To Equity

18.6

revenue

$2.614B

operating Margin

N/A

total Assets

$75.733B

total Debt

$70.263B

net Income

$169.997M

eps

N/A

gross Margin

N/A

cash Position

$9.930B

revenue Growth

-4.5%

Revenue Breakdown

Key Numbers

• $75.7B — Total Assets (Increased from $71.992 billion at December 31, 2024, reflecting growth in liquidity investments.)
• $66.0M — Net Income (Q3 2025) (Increased from $60.369 million in Q3 2024, showing quarterly improvement.)
• $169.9M — Net Income (YTD 2025) (Decreased from $208.395 million in YTD 2024, indicating a year-over-year decline.)
• $42.7B — Advances (Decreased by $2.389 billion from December 31, 2024, impacting interest income.)
• $4.1B — Mortgage loans held for portfolio (Increased by $478.212 million from December 31, 2024, contributing to interest income growth.)
• $2.614B — Total Interest Income (YTD 2025) (Decreased by $122.329 million from YTD 2024, primarily due to lower investment securities income.)
• $2.322B — Total Interest Expense (YTD 2025) (Decreased by $106.371 million from YTD 2024, mainly from lower discount notes expense.)
• $273.9M — Unrealized Losses on AFS Securities (Represents a significant portion of accumulated other comprehensive loss, indicating interest rate risk.)
• $3.859B — Total Capital (Slightly increased from $3.852 billion at December 31, 2024, maintaining stability.)
• $4.0B — Securities purchased under agreements to resell (Increased from $1.5 billion at December 31, 2024, indicating increased liquidity management.)

Key Players & Entities

• Federal Home Loan Bank of Boston (company) — registrant
• Securities and Exchange Commission (regulator) — filing recipient
• Financial Accounting Standards Board (regulator) — accounting standard setter
• Federal Housing Finance Agency (regulator) — oversight body
• Office of Finance (company) — related entity
• $75,733,967 (dollar_amount) — Total Assets at September 30, 2025
• $66,048 (dollar_amount) — Net Income for Q3 2025
• $169,997 (dollar_amount) — Net Income for nine months ended September 30, 2025
• $2,107,549 (dollar_amount) — Capital stock – Class B at September 30, 2025
• $273,956 (dollar_amount) — Total unrealized losses on available-for-sale securities at September 30, 2025

FAQ

Risk Factors

• Interest Rate Fluctuations [high — market]: The Bank is exposed to interest rate risk due to the nature of its business, which involves borrowing funds at short-term rates and lending at longer-term rates. Changes in interest rates can affect the fair value of its investment portfolio and its net interest income. For instance, the decrease in interest income from available-for-sale securities by $110.848 million for the nine months ended September 30, 2025, highlights this sensitivity.
• Credit Quality of Investments [medium — financial]: While the Bank's investments are primarily investment grade, there is an inherent risk associated with the credit quality of its counterparties and the underlying assets in its investment portfolio. Deterioration in credit quality could lead to realized losses. The allowance for credit losses on mortgage loans held for portfolio was $2.6 million as of September 30, 2025.
• Regulatory Compliance [medium — regulatory]: As a regulated entity, the Bank must comply with various federal regulations. Changes in regulatory requirements or failure to comply could result in penalties or operational disruptions. The Bank's operations are overseen by the Federal Housing Finance Agency (FHFA).
• Liquidity Management [medium — market]: The Bank must maintain sufficient liquidity to meet member demands for advances and other services. A sudden increase in demand or disruption in funding sources could strain liquidity. The significant increase in 'Securities purchased under agreements to resell' to $5.5 billion from $1.5 billion indicates active liquidity management, but also highlights the scale of short-term funding.

Industry Context

The Federal Home Loan Bank of Boston operates within the regulated financial services sector, specifically as a government-sponsored enterprise (GSE) providing liquidity to member financial institutions. Its primary role is to support housing finance and community development. The competitive landscape involves other FHLBs and various sources of wholesale funding for banks. Industry trends include evolving interest rate environments, increasing regulatory scrutiny, and the ongoing need for stable, low-cost funding to support member lending.

Regulatory Implications

The Bank is subject to oversight by the Federal Housing Finance Agency (FHFA), which sets capital requirements and other prudential standards. Compliance with these regulations is critical to maintaining operational stability and market confidence. Changes in capital requirements or new regulatory directives could impact the Bank's profitability and strategic flexibility.

What Investors Should Do

1. Monitor interest rate sensitivity
2. Analyze shifts in asset composition
3. Evaluate capital adequacy and stability

Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported net income of $66.048 million for Q3 2025, an increase from $60.369 million in Q3 2024. Total assets grew to $75.733 billion.
• 2025-03-14: 2024 Annual Report (10-K) Filing — Provided audited financial statements and detailed disclosures for the fiscal year ended December 31, 2024, serving as a basis for comparison with current interim reports.
• 2027-12-15: Effective Date for New Accounting Guidance — The FASB guidance on internal-use software will become effective, though it is not expected to materially impact the Bank's financial condition.

Glossary

Advances

Loans made by the FHLB to its member institutions. (A primary asset and source of interest income for the Bank. A decrease of $2.389 billion to $42.774 billion indicates a shift in member borrowing patterns or liquidity.)

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 slightly higher price. (Represents a significant increase in short-term investments, growing by $4.0 billion to $5.5 billion, indicating increased liquidity management or investment activity.)

Available-for-sale securities

Debt or equity securities that are not classified as trading or held-to-maturity, with unrealized gains and losses reported in other comprehensive income. (A major component of the Bank's investment portfolio. A decrease in interest income from these securities by $110.848 million is a key factor in the overall decline in interest income.)

Held-to-maturity securities

Debt securities that the Bank has the intent and ability to hold until maturity. (These securities are reported at amortized cost, and their fair value is disclosed. The portfolio size decreased slightly to $53.317 million.)

Consolidated Obligations (COs)

Debt instruments issued by the FHLB to fund its operations and lending activities. (The Bank's primary source of funding. Total COs increased to $70.263 billion, driven by increases in both bonds and discount notes.)

Accumulated Other Comprehensive Income (Loss)

A component of equity that includes unrealized gains and losses on certain investments and other items not recognized in net income. (Improved by $47.099 million to a loss of $207.923 million, indicating a reduction in unrealized losses, likely due to changes in market interest rates affecting available-for-sale securities.)

Discount notes

Short-term debt instruments issued by the FHLB, typically with maturities of less than one year. (Interest expense on discount notes decreased by $219.921 million, a significant factor in the overall reduction of interest expense.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, the Federal Home Loan Bank of Boston experienced a decrease in net income from $208.395 million to $169.997 million, primarily driven by a $122.329 million reduction in total interest income. This income decline was largely due to a $110.848 million decrease in interest from available-for-sale securities. While total interest expense also decreased by $106.371 million, mainly from lower discount note expenses, the overall profitability was impacted. Total assets grew by $3.741 billion to $75.733 billion, fueled by increases in short-term investments like repurchase agreements and federal funds sold, while advances to members saw a notable decrease of $2.389 billion.

Filing Documents

• fhlbbost-20250930.htm (10-Q) — 3216KB
• ex311_q32025.htm (EX-31.1) — 14KB
• ex312_q32025.htm (EX-31.2) — 14KB
• ex321_q32025.htm (EX-32.1) — 7KB
• ex322_q32025.htm (EX-32.2) — 7KB
• 0001331463-25-000221.txt ( ) — 14829KB
• fhlbbost-20250930.xsd (EX-101.SCH) — 67KB
• fhlbbost-20250930_cal.xml (EX-101.CAL) — 147KB
• fhlbbost-20250930_def.xml (EX-101.DEF) — 467KB
• fhlbbost-20250930_lab.xml (EX-101.LAB) — 832KB
• fhlbbost-20250930_pre.xml (EX-101.PRE) — 647KB
• fhlbbost-20250930_htm.xml (XML) — 3310KB

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 — Recently Issued and Adopted Accounting Guidance 9 Note 3 — Investments 9 Note 4 — Advances 13 Note 5 — Mortgage Loans Held for Portfolio 15 Note 6 — Derivatives and Hedging Activities 18 Note 7 — Deposits 24 Note 8 — Consolidated Obligations 25 Note 9 — Affordable Housing Progra m and Discretiona ry Contributions 26 Note 10 — Capital 27 Note 1 1 — Accumulated Other Comprehensive Income (Loss) 28 Note 1 2 — Fair Value 29 Note 1 3 — Commitments and Contingencies 34 Note 1 4 — Transactions with Shareholders 35 Note 1 5 — Subsequent Events 36 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 36 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 60 Item 4.

Controls and Procedures

Controls and Procedures 64 PART II. OTHER INFORMATION 65 Item 1.

Legal Proceedings

Legal Proceedings 65 Item 1A.

Risk Factors

Risk Factors 65 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65 Item 3. Defaults Upon Senior Securities 65 Item 4. Mine Safety Disclosures 65 Item 5. Other Information 65 Item 6. Exhibits 66 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) September 30, 2025 December 31, 2024 ASSETS Cash and due from banks $ 9,930 $ 5,149 Interest-bearing deposits 1,851,983 1,958,353 Securities purchased under agreements to resell 5,500,000 1,500,000 Federal funds sold 4,305,000 2,505,000 Investment securities: Trading securities 1,338 1,489 Available-for-sale securities (amortized cost of $ 16,768,382 and $ 16,792,153 at September 30, 2025, and December 31, 2024, respectively) 16,509,357 16,470,908 Held-to-maturity securities (a) 53,317 63,318 Total investment securities 16,564,012 16,535,715 Advances 42,774,048 45,163,175 Mortgage loans held for portfolio, net of allowance for credit losses of $ 2,600 and $ 2,200 at September 30, 2025, and December 31, 2024, respectively 4,157,362 3,679,150 Accrued interest receivable 232,749 262,203 Derivative assets, net 253,481 301,873 Other assets 85,402 82,348 Total Assets $ 75,733,967 $ 71,992,966 LIABILITIES Deposits Interest-bearing $ 1,034,412 $ 842,062 Non-interest-bearing 43,051 35,019 Total deposits 1,077,463 877,081 Consolidated obligations (COs): Bonds 48,429,538 48,192,171 Discount notes 21,833,395 18,546,504 Total consolidated obligations 70,262,933 66,738,675 Mandatorily redeemable capital stock 4,234 5,086 Accrued interest payable 331,268 328,596 Affordable Housing Program (AHP) payable 117,304 104,300 Derivative liabilities, net 3,225 4,746 Other liabilities 77,905 81,637 Total liabilities 71,874,332 68,140,121 Commitments and contingencies ( Note 1 3 ) CAPITAL Capital stock – Class B – putable ($ 100 par value), 21,075 shares and 21,952 shares issued and outstanding at September 30, 2025, and December 31, 2024, respectively 2,107,549 2,195,167 Retained earnings: Unrestricted 1,416,765 1,403,455 Restricted 543,244 509,245 Total retained earnings 1,960,009 1,912,700 Accu

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 — Recently Issued and Adopted Accounting Guidance Targeted Improvements to the Accounting for Internal-Use Software. On September 18, 2025, the Financial Accounting Standards Board (FASB) issued guidance to modernize the accounting for internal-use software costs to better align the accounting with more current practices of how software is developed. Under previous GAAP, entities were required to capitalize development costs incurred for internal-use software depending on the nature of the costs and the project stage during which

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