|FOR IMMEDIATE RELEASE||Contact: Carrie O'Connor|
|July 29, 2020||Senior Director of Communications|
|email@example.com | 317.465.0469|
Federal Home Loan Bank of Indianapolis Declares Dividends, Reports Earnings
Indianapolis, IN…Today the Board of Directors of the Federal Home Loan Bank of Indianapolis ("FHLBank Indianapolis" or "Bank") declared its second quarter 2020 dividends on Class B-1 and Class B-2 capital stock at annualized rates of 3.50% and 2.80%, respectively. The dividends will be paid in cash on July 30, 2020.
"We're pleased to be able to pay our members an attractive return and meet their liquidity needs during these uncertain times," said Cindy Konich, FHLBank Indianapolis President and CEO. "We have considerable remote capabilities, and continue to conduct business as usual and operate at full strength."
Net income for the second quarter of 2020 was $13 million, a decrease of $22 million compared to the corresponding quarter in the prior year, primarily due to accelerated amortization of purchase premium resulting from higher prepayments on mortgage loans, net losses on trading securities1, and higher net losses on qualifying fair-value hedging relationships.2 These decreases were partially offset by additional net interest income resulting from the Bank's growth in average asset balances.
Net income for the six months ended June 30, 2020 was $43 million, a decrease of $25 million compared to the corresponding period in the prior year, substantially due to accelerated amortization of purchase premium resulting from higher prepayments on mortgage loans.
Hedging gains (losses) on qualifying fair-value hedging relationships are reported in net interest income. As a result, net interest income3 for the three and six months ended June 30, 2020 included net hedging losses of $19 million and $22 million, respectively, compared to net hedging losses for the three and six months ended June 30, 2019 of $9 million and $22 million, respectively. In general, the Bank holds the derivatives and associated hedged items to the maturity, call, or put date. As a result, we expect that nearly all of the gains and losses on these financial instruments will reverse over the remaining contractual terms of the hedged items.
1 The Bank uses U.S. Treasury securities as part of its liquidity portfolio. Such securities are classified as trading securities, on which changes in fair value are recorded in other income. Changes in the estimated fair value of the associated economic hedging instruments are also recorded in other income.
2 The Bank uses interest-rate swaps to hedge the risk of changes in the fair value of certain of its advances, available-for-sale securities and consolidated obligations. These derivatives are designated as fair-value hedges. Changes in the estimated fair value of the derivative and, to the extent these relationships qualify for hedge accounting, changes in the fair value of the hedged item that are attributable to the hedged risk are recorded in earnings.
3 FHLBank Indianapolis earns interest income on advances to and mortgage loans purchased from its Michigan and Indiana member financial institutions, as well as on long- and short-term investments. Net interest income is primarily determined by the spread between the interest earned on those assets and the interest cost of funding with consolidated obligations.
The following information was filed by Federal Home Loan Bank Of Indianapolis on Wednesday, July 29, 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.