FHLBank Topeka Announces 2021 Third Quarter Operating Results
October 28, 2021
FHLBank Topeka is reporting net income of $37.4 million computed in accordance with U.S. generally accepted accounting principles (GAAP) for the quarter ended September 30, 2021 compared to $40.0 million for the quarter ended September 30, 2020. FHLBank is reporting net income of $114.3 million for the nine months ended September 30, 2021, compared to $72.1 million for the nine months ended September 30, 2020. The $2.6 million decrease for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 was a result of a $12.8 million increase in unrealized net losses on economic derivatives (i.e., derivatives not qualifying for hedge accounting) and trading securities that were not entirely offset by the increase in net interest income of $8.5 million and the reversal of the provision for credit losses of $1.8 million. The $42.2 million increase for the nine months ended September 30, 2021, was primarily attributed to an increase in net interest income of $37.3 million.
Net interest income increased $8.5 million for the quarter, from $64.8 million for the quarter ended September 30, 2020, to $73.3 million for the quarter ended September 30, 2021. Net interest income increased $37.3 million for the current year-to-date period, from $176.6 million for the nine months ended September 30, 2020, to $213.9 million for the nine months ended September 30, 2021. The increase for both periods was a result of a significant decrease in FHLBank's cost of debt between periods. Interest income for the quarter and year-to-date periods was reduced by the decline in the average balance and average rate across most asset categories, most notably advances and mortgage loans for the year-to-date period, and the change in net interest settlements on fair value hedges. However, the reduction in interest income 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 September 30, 2021, with the Securities and Exchange Commission (SEC) on or about November 10, 2021.
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The information contained in this announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements describing the objectives, projections, estimates or future predictions of FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “is likely,” “could,” “estimate,” “expect,” “will,” “intend,” “probable,” “project,” “should” or their negatives or other variations on these terms. FHLBank cautions that by their nature forward-looking statements involve risks or uncertainties and that actual results may differ materially from those expressed in any forward-looking statements as a result of such risks and uncertainties, including but not limited to: changes in economic and market conditions, including conditions in our district and the U.S. and global economy, as well as the mortgage, housing, and capital markets; the impact of the ongoing and evolving impact of the coronavirus (COVID-19) pandemic and its variants or other pandemics on our members, our business, the economy and financial markets; governmental actions, including legislative, regulatory, judicial or other developments that affect FHLBank, our members, counterparties or investors, housing government-sponsored enterprises, or the FHLBank System in general; effects of derivative accounting treatment and other accounting rule requirements, or changes in such requirements; competitive forces, including competition for loan demand, purchases of mortgage loans and access to funding; the ability of FHLBank to introduce new products and services to meet market demand and to manage successfully the risks associated with all products and services; changes in demand for FHLBank products and services or consolidated obligations of the FHLBank System; membership changes, including changes resulting from member failures or mergers, changes due to member eligibility, or changes in the principal place of business of members; changes in the U.S. government's long-term debt rating and the long-term credit rating of the senior unsecured debt issues of the FHLBank System; soundness of other financial institutions, including FHLBank members, non-member borrowers, counterparties and the other FHLBanks; the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which FHLBank has joint and several liability; the volume and quality of eligible mortgage loans originated and sold by participating members to FHLBank through its various mortgage finance products; changes in the fair value and economic value of, impairment of, and risks associated with FHLBank’s investments in mortgage loans and mortgage-backed securities or other assets and the related credit enhancement protections; changes in the value or liquidity of collateral underlying advances to FHLBank members or nonmember borrowers or collateral pledged by reverse repurchase and derivative counterparties; volatility of market prices, changes in interest rates and indices and the timing and volume of market activity, including the effects of these factors on amortization/accretion; gains/losses on derivatives or on trading investments and the ability to enter into effective derivative instruments on acceptable terms; upcoming discontinuance of LIBOR and the related effect on FHLBank's LIBOR-based financial products, investments, and contracts and the collateral underlying advances to our members; changes in FHLBank's capital structure; FHLBank's ability to declare dividends or to pay dividends at rates consistent with past practices; and the ability of FHLBank to keep pace with technological changes and the ability to develop and support technology and information systems, including the ability to securely access the internet and internet-based systems and services, sufficient to effectively manage the risks of FHLBank's business. Additional risks that might cause FHLBank’s results to differ from these forward-looking statements are provided in detail in FHLBank’s filings with the SEC, which are available at www.sec.gov.
All forward-looking statements contained in this announcement are expressly qualified in their entirety by reference to this cautionary notice. The reader should not place undue reliance on such forward-looking statements, since the statements speak only as of the date that they are made, and FHLBank has no obligation and does not undertake publicly to update, revise or correct any forward-looking statement for any reason to reflect events or circumstances after the date of this announcement.