More Details on Changes to Fees, Deadlines and a New Advance Product
June 27, 2022
FHLBank Topeka’s board of directors approved a few changes to our products to meet the needs of our members and better adjust to the market. These changes go into effect on Tuesday, July 5, 2022.
See more about each change below:
Adjusted Window for Incoming Wires and Term Advance Prepayment Notification >>>
New Late Wire Fee and Change to Overdraft Fee >>>
Lower Confirming Letter of Credit Fees>>>
New SOFR Adjustable-rate Callable Advance>>>
Adjusted Window for Incoming Wires and Term Advance Prepayment Notification
We are changing the following deadlines:
- Term Advance Prepayment Notification Deadline: Moved to 2 p.m. CT. Any notification received after this deadline will be processed the following business day.
- Incoming Wire Deadline: Moved to 4:30 p.m. CT to match with advance repayment deadline. See below for more information about a late wire fee associated with incoming wires received after the deadline.
Why we are adjusting the deadlines: Prepayment penalties often increase at the end of the day as the market approaches its close. Changing the prepayment notification and wire deadlines helps members avoid higher fees and improves FHLBank Topeka’s balance sheet and cashflow management practices, which ultimately improves the health of our cooperative for all members.
New Late Wire Fee and Change to Overdraft Fee
A market-based late wire fee will be instated. The late wire fee is the effective federal funds rate plus 0.25% per annum and will be assessed on all incoming wires received after 4:30 p.m. CT. This change accompanied the removal of a late advance repayment fee of 0.50% per annum.
The overdraft fee will now be based on our overnight line of credit rate plus 0.50% per annum, rather than a standard 4% per annum. The minimum overdraft fee is $25.
Why we are adjusting these fees: The late wire fee will help ensure we are able to facilitate the timely investment of funds wired in to FHLBank Topeka. The overdraft fee is being changed from 4% per annum to a market-based rate to make the fee more equitable in all rate cycles.
Lower Confirming Letter of Credit Fees
We are lowering the fee on confirming letters of credit to 1/4% per annum from 3/8% per annum (minimum of $500).
We are also lowering the fee on confirming letters of credit that qualify for FHLBank’s Community Investment Cash Advance (CICA) programs to 1/5% per annum from 1/4% per annum (minimum of $500). These are letters of credit where the purpose qualifies for facilitating community lending as defined in 12 C.F.R 1269.2(a)(2) (for example, enhancing a bond issue for moderate income housing or community development purposes).
Why we are lowering this fee: We conducted an in-depth analysis of our letter of credit fees and determined a lower fee on confirming and CICA confirming letters of credit was warranted given our current cost structure. As a cooperative, we are passing this savings along to our members.
New SOFR Adjustable-rate Callable Advance
We will offer an adjustable-rate callable advance tied to the Secured Overnight Financing Rate (SOFR). The new product is available in maturities of one to five years. Call options include one-time, monthly or quarterly.
We expect members will use the product to:
- Fund adjustable-rate loans and other interest-rate sensitive assets with similar maturities and repricing characteristics
- Efficiently fund the balance sheet with market-based funding that correlates well with many adjustable-rate assets
- Reduce the potential impact of widening credit spreads on your funding cost by using advances indexed to SOFR, which is a near risk-free reference rate
For more details on the new advance type, see our product summary sheet.
Why we added this product: We continually review our product suite to ensure it is meeting member needs. As the SOFR index has grown in use, we found a way SOFR could support a new adjustable-rate callable advance to serve our members’ business needs.
These changes are now reflected in our online Member Products and Services Guide. If you have any questions, please contact your regional account manager or our Lending Desk at 800.809.2733.