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October 24, 2022 Changes to FHLBank Topeka's Member Products Policy

At its meeting last week, FHLBank Topeka’s board of directors approved changes to its Member Products Policy. Details are available in the online  Member Products and Services Guide (MPSG)  and are effective Nov. 1, 2022.

UPDATED DELIVERY OF COLLATERAL REQUIREMENT: FHLBank has expanded the use of the Collateral Loan Listing requirement for blanket pledge members experiencing issues with high levels of non-performing assets.

Given the current interest rate environment and its associated impact on the value of securities, which are negatively impacting the calculation of total equity, FHLBank believes it is prudent to augment the current non-performing asset ratio by also considering other capitalization ratios such as the Tier 1 (Core) Leverage Ratio or Community Bank Leverage Ratio for banks and thrifts and the Net Worth ratio for credit unions for the Mandatory Delivery of Collateral and Collateral Loan Listing requirements.

First Lien language: FHLBank added a reference to acknowledge that first lien position can also be evidenced by an independent third-party title search as permitted by state law (within applicable sections of I. Loans and IV. Other Real Estate-Related Collateral of the Schedule of Eligible Collateral).

SBA PPP LOAN PLEDGING: Removed item 3 under section I. Loans (Guaranteed portion of other loans backed by the full faith and credit of the U.S. – Temporary Eligibility for Small Business Administration (SBA) – Paycheck Protection Program (PPP) Loans) from the Schedule of Eligible Collateral.

As your cooperative, we have been proud to be able to help you continue to serve your community by working with our regulator to be able to accept Small Business Administration (SBA) Paycheck Protection Program (PPP) loans as eligible collateral since May 2020. However, we have seen a noticeable and rapid decline in the amount of pledging activity and with such few loans being pledged, FHLBank believes it’s an appropriate time to sunset the collateral offering effective Nov. 1, 2022.

If you have any questions about any of these changes, please contact Lance Liby, chief credit officer,  Tom Bliss, director of credit administration, or  Dedra Duran-Gray, director of financial services, at 785.233.0507.

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