Federal Home Loan Bank Of Topeka 10-K Annual Report Fri Mar 20 2020

February 20, 2020 - FHLBank Topeka (FHLBank) announces its 2019 fourth quarter and annual operating results. FHLBank is reporting net income computed in accordance with U.S. generally accepted accounting principles (GAAP) of $52.3 million for the three months ended December 31, 2019 compared to $43.4 million for the three months ended December 31, 2018. For the year ended December 31, 2019, FHLBank is reporting net income of $185.2 million compared to $170.3 million for the year ended December 31, 2018.

During the fourth quarter of 2019, FHLBank paid a dividend of 2.50 percent on the average outstanding shares of Class A Common Stock and 7.50 percent on the average outstanding shares of Class B Common Stock. Other operating highlights from the fourth quarter and the year ended December 31, 2019 are presented below. FHLBank expects to file its Form 10-K for the year ended December 31, 2019 with the Securities and Exchange Commission (SEC) on or about March 20, 2020.

Operating Highlights

Net income for the three months ended December 31, 2019 increased $8.9 million, or 20.4 percent, compared to the same period in 2018 and increased by $14.9 million, or 8.8 percent, for the year ended December 31, 2019 compared to the same period in the prior year. The increase in both periods was driven by net fair value fluctuations on derivatives and trading securities. Declines in longer-term market interest rates since December 31, 2018 resulted in unrealized net gains on economic derivatives and trading securities for both the quarterly and annual periods ended December 31, 2019. Net unrealized losses on economic derivatives and trading securities were recorded for both the quarterly and annual periods ended December 31, 2018, resulting in an increase in other income for both the quarterly and annual periods ended December 31, 2019 compared to the same periods in the prior year.

Net interest income for the three months ended December 31, 2019 was $69.4 million compared to $68.2 million for the same period in the prior year. Net interest income increased for the current quarter due to higher volumes of interest-earning assets despite tightening spreads caused by the impact of the decrease in short-term interest rates on the cost of liquidity, specifically overnight assets funded with term debt. Changes in regulatory liquidity requirements effective March 31, 2019 changed the level and composition of assets held for liquidity purposes and the structure of the related funding. The Federal Open Market Committee lowered the Federal funds rate during the current quarter, which caused overnight assets to reprice downward more quickly than the associated liabilities.

For the year ended December 31, 2019, net interest income was $256.1 million compared to $271.2 million for the same period in the prior year. The volume of interest-earning assets also increased for the year ended December 31, 2019 compared to the prior year, but tightening spreads and an increase in premium amortization caused a $15.1 million decline in net interest income. Premium amortization on mortgage-related assets increased due to the decline in long-term market interest rates during 2019. This decline resulted in an increase in prepayment speeds on mortgage-related assets which accelerates premium amortization, thereby reducing net interest income for both the quarterly and annual periods ended December 31, 2019. However, this decrease in long-term market interest rates also allowed FHLBank to replace some callable debt at a lower cost, which will provide a greater benefit in future periods; for the current period, the accelerated amortization of concessions (i.e., broker fees) on the called debt further reduced net interest income.

The change in net interest income for both the quarterly and annual periods ended December 31, 2019 was also impacted by the adoption of a new hedge accounting standard on January 1, 2019 that requires fair value fluctuations on designated fair value hedges to be presented in the income statement line item related to the hedged item, which is interest income/expense for FHLBank. The guidance was adopted prospectively, so the fair value fluctuations on fair value hedges in the prior year are presented in other income, which creates a lack of comparability between periods. Both the quarterly and annual periods were impacted by fair value fluctuations on designated fair value hedges; however, the impact was positive for the fourth quarter of 2019 and negative for the 2019 annual period.

An increase in average assets and average capital combined with the increase in net income resulted in a return on average equity (ROE) of 7.82 percent for the quarter ended December 31, 2019 compared to 7.07 percent for the quarter ended December 31, 2018 and ROE of 7.32 percent for the year ended December 31, 2019 compared to 6.82 percent for the prior year period. The weighted average dividend rate for the quarter ended December 31, 2019 was 6.14 percent, which represented a dividend payout ratio of 48.6 percent, compared to a weighted average dividend rate of 6.24 percent and a payout ratio of 53.9 percent for the same period in 2018. The weighted average dividend rate for the year ended December 31, 2019 was 6.46 percent, which represented a dividend payout ratio of 53.7 percent, compared to a weighted average dividend rate of 6.13 percent and a payout ratio of 56.8 percent for the same period in 2018.

The following information was filed by Federal Home Loan Bank Of Topeka on Thursday, February 20, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside this 10-K Annual Report

Material Contracts, Statements, Certifications & more

Federal Home Loan Bank Of Topeka provided additional information to their SEC Filing as exhibits

Exhibit 4.1: Instruments Defining The Rights Of Security Holders, Including Indentures

Exhibit 4.2: Instruments Defining The Rights Of Security Holders, Including Indentures

Exhibit 24.1: Power Of Attorney

Exhibit 31.1: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 31.2: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 32: Section 1350 Certification

Exhibit 99.2: Additional Exhibits

CIK: 1325878
Form Type: 10-K Annual Report
Accession Number: 0001325878-20-000006
Submitted to the SEC: Fri Mar 20 2020 3:18:13 PM EST
Accepted by the SEC: Fri Mar 20 2020
Period: Tuesday, December 31, 2019
Industry: Federal And Federally Sponsored Credit Agencies

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Federal Home Loan Bank Of Topeka (1325878) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2019

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