FHLBANK TOPEKA ANNOUNCES 2021 FIRST QUARTER RESULTS
April 29, 2021 - FHLBank Topeka (FHLBank) is reporting net income of $43.9 million computed in accordance with U.S. generally accepted accounting principles (GAAP) for the quarter ended March 31, 2021 compared to $11.8 million for the quarter ended March 31, 2020. The $32.1 million increase for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily attributed to a net increase of $18.7 million related to fair value fluctuations on economic derivatives (i.e., derivatives not qualifying for hedge accounting) and trading securities and an increase in net interest income of $18.3 million.
Net interest income increased $18.3 million for the quarter, from $55.1 million for the quarter ended March 31, 2020 to $73.4 million for the quarter ended March 31, 2021, as a result of a significant decrease in FHLBank's cost of debt between periods. Net interest income was reduced by the decline in the average balance and average rate across most asset categories, most notably advances and mortgage loans, the change in net interest settlements on fair value hedges, and increased premium amortization on mortgage-related assets due to elevated prepayments, but the reduction was more than offset by the significant decrease in FHLBank's cost of debt.
FHLBank expects to file its Form 10-Q for the quarter ended March 31, 2021 with the Securities and Exchange Commission (SEC) on or about May 10, 2021.
•Net interest income/margin: Net interest income of $73.4 million for the quarter ended March 31, 2021 increased $18.3 million compared to the same period in 2020. The decrease in market interest rates allowed FHLBank to replace approximately $14 billion of callable debt between periods at a lower cost, which has reduced overall funding costs for current and future periods. Notably, the repricing of the liabilities funding our short-term assets combined with the overall reduction in funding costs resulted in a 23 basis point increase in net interest margin and a 28 basis point increase in net interest spread for the quarter ended March 31, 2021 compared to the prior year period.
•Total assets: Total assets declined from $52.6 billion as of December 31, 2020 to $48.5 billion as of March 31, 2021, driven by the decrease in the short-term liquidity portfolio between those periods, which was elevated at December 31, 2020 in anticipation of potential year-end financial disruptions.
•Advances: Advances remained relatively flat from December 31, 2020 to March 31, 2021, decreasing slightly to $21.1 billion. The average balance of advances declined $5.5 billion, or 18.9 percent, for the quarter ended March 31, 2021 compared to March 31, 2020. Advance demand by members dropped significantly in the second quarter of 2020 and remained at that lower level through the first quarter of 2021, as many members have experienced significant deposit inflows and excess liquidity as a result of economic stimulus packages passed by Congress along with the Federal Reserve Bank’s easing of monetary policy, security purchase programs, and newly created lending facilities in response to the COVID-19 pandemic.
•Mortgage loans: Mortgage loans decreased by $0.5 billion from December 31, 2020 to March 31, 2021, representing 17.9 percent of total assets as of March 31, 2021, compared to 17.5 percent as of December 31, 2020. The average balance of mortgage loans decreased $1.9 billion, or 17.9 percent, for the quarter ended March 31, 2021 compared to the prior year period as prepayments outpaced acquisitions.
•Performance ratios: Return on average equity (ROE) increased to 6.55 percent for the quarter ended March 31, 2021 compared to 1.75 percent for the prior year period due to the increase in net income for the current quarter, especially relative to the pandemic-related market volatility in the prior year period.
•Dividends: The Class A Common Stock dividend rate of 0.25 percent per annum and the Class B Common Stock dividend rate of 5.25 percent per annum combined for a weighted average dividend rate for the quarter ended March 31, 2021 of 4.15 percent per annum, compared to a weighted average dividend rate of 5.94 percent for the same period in 2020. Our dividend rates have historically moved in tandem with short-term market rates, so the decrease in the weighted average dividend rate reflects the decline in short-term market interest rates resulting from Federal Open Market Committee rate cuts in March 2020 to stimulate the U.S. economy.
Attached are highlights of FHLBank’s financial position as of March 31, 2021 and December 31, 2020 and highlights of the results of operations for the quarterly periods ended March 31, 2021 and 2020.
The following information was filed by Federal Home Loan Bank Of Topeka on Thursday, April 29, 2021 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.