The Federal Home Loan Bank of Boston has reported a surge in net income to $56 million for the second quarter, up from $21.8 million for the second quarter of 2011. However, that figure was boosted by an "atypical contribution of $28.3 million in net prepayment fees from advances and investments," the bank noted in a statement.
"We are pleased to report steady, improved financial performance as we continue to meet our members’ funding needs in this challenging economic environment," said President and Chief Executive Officer Edward A. Hjerpe III in a statement. "We have made it a priority to help members take advantage of current low interest rates and manage their interest-rate risk in the future. Our balance-sheet improvement is evidenced by a retained earnings balance of $491.8 million, the highest level in the bank’s history."
The bank contributed $6.3 million to its Affordable Housing Program on the basis of the strong results.
The bank also reported substantially improvements in losses related to private-label mortgage back securities; losses on the securities had blown a $35.8 million hole in the banks books in the second quarter of 2011, but those losses were trimmed to $1.5 million for the second quarter of 2012. However, other losses increased during the quarter, up to a net loss of $10.5 million from income of $5.0 million in the second quarter of 2011, due primarily to the $12 million expense for the early retirement of debt in the second quarter of 2012 and the absence of gains on sale of investment securities, which totaled $4.4 million in the second quarter of 2011. The $12 million expense on the early retirement of debt in 2012 resulted principally from the retirement of debt in connection with the prepayment of associated advances.
Net interest income was up $11.8 million, or 15.1 percent. The bank said it was unlikely to repeat such results in future quarters, since interest rates will likely stay low for the foreseeable future and the bank "has largely exhausted its opportunities to redeem and refinance debt," it reported. A decline in average earning assets, from $53.7 billion in Q2 2011 to $46.1 billion in Q2 2012 is also likely to negatively impact future earnings, it warned.
In a separate announcement, the bank noted it has hired Michael C. Clifton as senior vice president/chief information officer
Clifton will have responsibility for leading technology services, information security, project management, enterprise architecture, and operations, and will also serve on the management committee.
He previously served as chief information officer at The Hanover Insurance Group.
