The Federal Home Loan Bank of Boston is reporting a huge impairment charge on its investments in private-label MBS and a net loss of $115.8 million for 2008, but the bank expects recent changes to accounting rules will mitigate the impact on its retained earnings.

"The net loss eliminated retained earnings, resulting in an accumulated deficit of $19.7 million," the Boston FHLBank president Michael Jessee said.

Nevertheless, the bank continues to meet its minimum capital requirements. The Boston FHLBank delayed its annual 2008 securities filing while it reviewed its "other-than-temporary impairment" analysis on $652.9 million in private-label MBS.

This review resulted in a $381.7 million OTTI charge — $42.7 million larger than originally estimated. However, the Financial Accounting Standards Board recently loosened its mark-to-market accounting and OTTI guidance.

These changes "will restore a significant portion of the retained earnings that were lost in 2008 when implemented in the first or second quarter of 2009," Jessee said.

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