FHLBank Topeka Announces First Quarter 2007 Results
TOPEKA, KAN. – FHLBank Topeka (FHLBank) today released financial results for the first quarter ended March 31, 2007.
“The FHLBank continues to post solid financial results that allow us not only to pay a highly competitive dividend to our members but also continue to build our retained earnings,” stated Andrew J. Jetter, president and CEO. “Financial strength and stability are important to ensure that we are always there to provide liquidity and funding to our members. 2007 is our 75th anniversary of serving our members and their communities. We look forward to continuing this relationship well into the future.”
Total assets declined during the first three months of 2007 to $49.8 billion at March 31, 2007, from $52.7 billion at December 31, 2006. This was largely because of a $1.7 billion decrease in advances attributable to one large member.
FHLBank’s net income for the three months ended March 31, 2007 was $32.6 million compared to $36.8 million for the three months ended March 31, 2006. As reflected in the table below, the decrease is mostly due to income items reflecting the application of Statement of Financial Accounting Standards No. 133 (SFAS 133),Accounting for Derivative Instruments and Hedging Activities,as amended.
As part of evaluating its quarterly performance, the FHLBank adjusts net income reported in accordance with generally accepted accounting principles (GAAP) for the impact of SFAS 133 and other irregular or non-recurring items such as prepayment fees and gain/loss on securities. The result is referred to as core net income, which is used to compute a return on equity (ROE) that is compared to three-month LIBOR. As reflected in the following calculations, core net income ROE as a spread to three-month LIBOR was 1.35 percent in the first quarter of 2007 compared to 2.07 percent for the first quarter of 2006.
Quarter Ending March 31,
2007
2006
Net Income, as reported under GAAP
$
32,589
$
36,848
SFAS 133-related & Other Adjustments:
Net (gain) loss on derivatives and hedging activities
3,211
(18,102
)
Net (gain) loss on trading securities
(2,074
)
11,905
Prepayment fees on terminated advances
(397
)
(1,003
)
Net realized (gain) loss on sale of held-to-maturity securities
962
—
Net realized (gain) loss on retirement of debt
—
1,813
Total SFAS 133-related & Other Adjustments
1,702
(5,387
)
AHP/REFCorp Adjustment (13/49ths)
(452
)
1,429
SFAS 133 & Other Adjustments, net of AHP/REFCorp
1,250
(3,958
)
Core Net Income
$
33,839
$
32,890
Average GAAP Capital
$
2,045,248
$
1,949,681
ROE, based upon Net Income as reported under GAAP
6.46
%
7.66
%
ROE, based upon Core Net Income
6.71
%
6.84
%
Average 3-Month LIBOR for quarter
5.36
%
4.77
%
Spread to LIBOR
1.35
%
2.07
%
Dividends paid for the first quarter of 2007 were 4.45 percent and 6.50 percent for Class A Common Stock and Class B Common Stock, respectively. Dividend rates were unchanged from those paid in the fourth quarter of 2006. Retained earnings rose $5.5 million, or 3 percent, to $177.3 million at the end of the first quarter of 2007 from $171.8 million at Dec. 31, 2006.
FHLBank Topeka’s Form 10-Q, with complete first quarter 2007 financial statements and management’s discussion and analysis of FHLBank’s financial condition and results of operation, is available on the SEC’s Web site (www.sec.gov) and through FHLBank’s Web site (www.fhlbtopeka.com).
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 the FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as anticipates, believes, could, estimate, may, should and will, or other variations on these terms. The FHLBank’s actual results may differ materially from those expressed in any forward-looking statements as a result of many factors and uncertainties including, but not limited to: the effects of SFAS 133 accounting treatment and other accounting rule requirements, changes in the regulatory requirements of the Federal Housing Finance Board, the FHLBank’s ability to pay dividends out of retained earnings, changes in interest rates, changes in projected business volumes, the FHLBank’s cost of funding, changes in the FHLBank’s membership profile, the withdrawal of one or more large members, shifts in demand for FHLBank products, and general economic conditions.
Five Quarter Financial Highlights (Unaudited)
03/31/2007
12/31/2006
09/30/2006
06/30/2006
03/31/2006
Statement of Condition
(at period end)
Total assets
$
49,765,055
$
52,738,967
$
49,863,846
$
47,740,596
$
48,070,888
Investments1
20,338,392
21,565,135
20,291,024
17,041,004
17,970,178
Advances
26,715,893
28,445,245
26,884,116
27,984,188
27,396,914
Mortgage loans held for portfolio, net
2,348,612
2,372,939
2,387,378
2,406,021
2,408,635
Deposits
1,307,684
1,118,406
731,156
��
864,233
1,157,759
Consolidated obligations, net2
45,826,766
48,775,006
46,390,017
43,886,604
44,076,735
Mandatorily redeemable capital stock
47,393
46,232
50,928
61,266
84,242
Capital
2,024,424
2,171,654
2,047,018
1,999,143
1,928,285
Statement of Income (for the quarterly period ended)
Net interest income before provision for credit losses on mortgage loans
54,249
54,995
53,672
53,597
52,383
Provision for (reversal of) credit losses on mortgage loans
(43
)
167
104
28
59
Other income (loss)
(779
)
2,711
(3,190
)
(707
)
5,556
Other expenses
9,084
8,790
8,774
7,990
7,657
Income before assessments
44,429
48,749
41,604
44,872
50,223
Assessments
11,840
12,985
11,097
11,963
13,375
Net income
32,589
35,764
30,507
32,909
36,848
Ratios and Other Financial Data
Dividends paid in cash3
114
89
91
82
92
Dividends paid in stock3
26,953
27,942
26,113
24,557
22,577
Class A Stock dividend rate
4.45
%
4.45
%
4.45
%
4.25
%
3.85
%
Class B Stock dividend rate
6.50
%
6.50
%
6.25
%
6.05
%
5.60
%
Weighted average dividend rate4
6.03
%
6.04
%
5.87
%
5.66
%
5.22
%
Dividend payout ratio
83.06
%
78.38
%
85.90
%
74.87
%
61.52
%
Return on average equity
6.46
%
6.87
%
6.13
%
6.80
%
7.66
%
Return on average assets
0.27
%
0.28
%
0.25
%
0.28
%
0.31
%
Average equity to average assets
4.11
%
4.14
%
4.11
%
4.06
%
4.08
%
Net interest margin5
0.44
%
0.44
%
0.45
%
0.45
%
0.45
%
Total capital ratio at period end6
4.07
%
4.12
%
4.11
%
4.19
%
4.01
%
Ratio of earnings to fixed charges7
1.07
1.08
1.07
1.08
1.10
1 Investments also include interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold.
2 Consolidated obligations are bonds and discount notes that the FHLBank is primarily liable to repay. See Note 9 to the quarterly financial statements for a description of the total consolidated obligations of all FHLBanks for which the FHLBank is jointly and severally
liable under the requirements of the Finance Board, which govern the issuance of debt for all FHLBanks in the FHLBank System.
3 Dividends classified as interest expense on mandatorily redeemable capital stock in accordance with SFAS 150 and not included as dividends under GAAP were $650,000, $633,000, $624,000, $716,000 and $621,000 for the quarters ended March 31, 2007, December 31, 2006,
September 30, 2006, June 30, 2006 and March 31, 2006, respectively.
4 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average capital stock eligible for dividends.
5 Net interest margin is net interest income before mortgage loan loss provision as a percentage of average earning assets.
6 Total capital ratio is GAAP capital stock, which excludes mandatorily redeemable capital stock in accordance with SFAS 150, plus retained earnings and accumulated other comprehensive income as a percentage of total assets at period end.
7 The ratio of earnings to fixed charges (interest expense including amortization of premiums, discounts and capitalized expenses related to indebtedness) is computed by dividing total earnings by fixed charges.
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