UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 000-52004
FEDERAL HOME LOAN BANK OF TOPEKA
(Exact name of registrant as specified in its charter)
Federally chartered corporation | 48-0561319 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
One Security Benefit Pl. Suite 100 Topeka, KS | 66606 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 785.233.0507
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. ¨ Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares outstanding as of June 10, 2009 | |
Class A Stock, par value $100 | 4,386,828 |
Class B Stock, par value $100 | 14,803,108 |
FEDERAL HOME LOAN BANK OF TOPEKA
Important Notice about Information in this Quarterly Report
In this quarterly report, unless the context suggests otherwise, references to the “FHLBank,” “FHLBank Topeka,” “we,” “us” and “our” mean the Federal Home Loan Bank of Topeka, and “FHLBanks” means the 12 Federal Home Loan Banks, including the FHLBank Topeka.
The information contained in this quarterly report is accurate only as of the date of this quarterly report and as of the dates specified herein.
The product and service names used in this quarterly report are the property of the FHLBank, and in some cases, the other FHLBanks. Where the context suggests otherwise, the products, services and company names mentioned in this quarterly report are the property of their respective owners.
The FHLBank filed an annual report on Form 10-K (referred in this report as “annual report on Form 10-K”) under the Securities Exchange Act of 1934 (“Exchange Act”) on March 26, 2009. Portions of the annual report on Form 10-K are incorporated by reference in this report.
Special Cautionary Notice Regarding Forward-looking Statements
The information included or incorporated by reference in this quarterly report on Form 10-Q contains certain forward-looking statements with respect to our financial condition, results of operations, plans, objectives, projections, estimates, predictions, future financial performance and ongoing business, including without limitation: statements that are not historical in nature, or statements preceded by, followed by or that include words such as “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions. The FHLBank cautions that, by their nature, forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions and actual results may differ materially from those expressed, contemplated or implied by the forward-looking statements or could affect the extent to which a certain plan, objective, projection, estimate or prediction is realized.
These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
§ | Economic and market conditions; |
§ | Demand for FHLBank advances resulting from changes in FHLBank members’ deposit flows and/or credit demands; |
§ | The volume of eligible mortgage loans originated and sold by participating members to the FHLBank through its various mortgage finance products (Mortgage Partnership Finance® (MPF®) Program1); |
§ | Pricing of various mortgage finance products under the MPF Program by the MPF Provider since the FHLBank has only limited input on pricing through our participation on the MPF Governance Committee; |
§ | Volatility of market prices, rates and indices that could affect the value of investments or collateral held by the FHLBank as security for the obligations of FHLBank members and counterparties to derivatives and similar instruments or the FHLBank’s ability to liquidate collateral expediently in the event of a default by an obligor; |
§ | Political events, including legislative, regulatory, judicial, or other developments that affect the FHLBank, its members, counterparties and/or investors in the consolidated obligations of the 12 FHLBanks; |
§ | Competitive forces including, without limitation, other sources of funding available to FHLBank members including existing and newly created debt programs explicitly guaranteed by the U.S. government, other entities borrowing funds in the capital markets and the ability of the FHLBank to attract and retain skilled individuals; |
§ | The pace of technological change and the ability to develop and support technology and information systems, including the Internet, sufficient to manage the risks and operations of the FHLBank’s business effectively; |
§ | Changes in domestic and foreign investor demand for consolidated obligations of the 12 FHLBanks and/or the terms of derivatives and similar instruments including, without limitation, changes in the relative attractiveness of consolidated obligations as compared to other investment opportunities including existing and newly created debt programs explicitly guaranteed by the U.S. government; |
§ | Timing and volume of market activity; |
§ | Ability to introduce new FHLBank products and services, and successfully manage the risks associated with those products and services, including new types of collateral used to secure advances; |
§ | Risks related to the operations of the other 11 FHLBanks that could trigger our joint and several liability for debt issued by the other 11 FHLBanks; |
§ | Risk of loss arising from litigation filed against the FHLBank; and |
§ | Inflation/deflation. |
For additional information regarding these and other risks, see Item 1A – “Risk Factors” in the annual report on Form 10-K, incorporated by reference herein.
Any forward-looking statements made or incorporated by reference in this quarterly report on Form 10-Q or that we may make from time to time are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION – Unaudited
(In thousands, except par value)
March 31, 2009 | December 31, 2008 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 76 | $ | 75 | ||||
Interest-bearing deposits | 6,610,964 | 3,348,212 | ||||||
Federal funds sold | 365,000 | 384,000 | ||||||
Trading securities (Note 3) | 5,369,622 | 4,652,700 | ||||||
Held-to-maturity securities1 (Note 4) | 9,246,761 | 11,050,897 | ||||||
Advances (Note 5) | 27,014,796 | 35,819,674 | ||||||
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $889 and $884 (Note 6) | 3,113,801 | 3,023,805 | ||||||
Accrued interest receivable | 105,360 | 138,770 | ||||||
Premises, software and equipment, net | 16,337 | 16,733 | ||||||
Derivative assets (Note 7) | 15,535 | 34,526 | ||||||
Other assets (Note 10) | 64,530 | 86,839 | ||||||
TOTAL ASSETS | $ | 51,922,782 | $ | 58,556,231 | ||||
LIABILITIES AND CAPITAL | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Interest-bearing: | ||||||||
Demand | $ | 150,674 | $ | 104,856 | ||||
Overnight | 1,289,100 | 1,013,800 | ||||||
Term | 185,185 | 570,340 | ||||||
Non-interest-bearing: | ||||||||
Demand | 51 | 36 | ||||||
Other | 19,983 | 14,499 | ||||||
Total deposits | 1,644,993 | 1,703,531 | ||||||
Consolidated obligations, net (Note 8): | ||||||||
Discount notes | 20,444,294 | 26,261,411 | ||||||
Bonds | 26,999,149 | 27,421,634 | ||||||
Total consolidated obligations, net | 47,443,443 | 53,683,045 | ||||||
Mandatorily redeemable capital stock (Note 11) | 29,703 | 34,806 | ||||||
Accrued interest payable | 212,598 | 253,743 | ||||||
Affordable Housing Program (Note 9) | 32,731 | 27,707 | ||||||
Derivative liabilities (Note 7) | 376,976 | 404,356 | ||||||
Other liabilities | 42,037 | 53,798 | ||||||
TOTAL LIABILITIES | 49,782,481 | 56,160,986 | ||||||
Commitments and contingencies (Note 14) | ||||||||
Capital (Note 11): | ||||||||
Capital stock outstanding – putable: | ||||||||
Class A ($100 par value; 5,822 and 6,339 shares issued and outstanding) | 582,228 | 633,941 | ||||||
Class B ($100 par value; 13,534 and 16,064 shares issued and outstanding) | 1,353,427 | 1,606,394 | ||||||
Total capital stock | 1,935,655 | 2,240,335 | ||||||
Retained earnings | 210,644 | 156,922 | ||||||
Accumulated other comprehensive income: | ||||||||
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities | (4,034 | ) | 0 | |||||
Defined benefit pension plan – prior service cost | 13 | 15 | ||||||
Defined benefit pension plan – net loss | (1,977 | ) | (2,027 | ) | ||||
TOTAL CAPITAL | 2,140,301 | 2,395,245 | ||||||
TOTAL LIABILITIES AND CAPITAL | $ | 51,922,782 | $ | 58,556,231 |
__________
1 Fair value: $8,834,175 and $10,454,592 at March 31, 2009 and December 31, 2008, respectively.
FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME – Unaudited
(In thousands)
For the Three Months Ended March 31, | ||||||||||||
2009 | 2008 | |||||||||||
INTEREST INCOME: | ||||||||||||
Interest-bearing deposits | $ | 3,093 | $ | 363 | ||||||||
Federal funds sold | 1,283 | 37,167 | ||||||||||
Trading securities | 31,203 | 25,516 | ||||||||||
Held-to-maturity securities | 62,026 | 153,512 | ||||||||||
Advances | 123,164 | 322,563 | ||||||||||
Prepayment fees on terminated advances | 753 | 121 | ||||||||||
Mortgage loans held for portfolio | 39,708 | 31,108 | ||||||||||
Overnight loans to other Federal Home Loan Banks | 3 | 16 | ||||||||||
Other | 804 | 907 | ||||||||||
Total interest income | 262,037 | 571,273 | ||||||||||
INTEREST EXPENSE: | ||||||||||||
Deposits | 2,522 | 10,943 | ||||||||||
Consolidated obligations: | ||||||||||||
Discount notes | 47,927 | 193,847 | ||||||||||
Bonds | 149,209 | 304,416 | ||||||||||
Overnight loans from other Federal Home Loan Banks | 0 | 46 | ||||||||||
Mandatorily redeemable capital stock (Note 11) | 294 | 243 | ||||||||||
Other | 292 | 356 | ||||||||||
Total interest expense | 200,244 | 509,851 | ||||||||||
NET INTEREST INCOME | 61,793 | 61,422 | ||||||||||
Provision for credit losses on mortgage loans | 10 | 9 | ||||||||||
NET INTEREST INCOME AFTER MORTGAGE LOAN LOSS PROVISION | 61,783 | 61,413 | ||||||||||
OTHER INCOME (LOSS): | ||||||||||||
Service fees | 1,524 | 1,315 | ||||||||||
Net gain (loss) on trading securities (Note 3) | 9,873 | 13,282 | ||||||||||
Total other-than-temporary impairment losses on held-to-maturity securities (Note 4) | (1,059 | ) | ||||||||||
Portion of other-than-temporary impairment losses on held-to-maturity securities recognized in other comprehensive income | 1,018 | |||||||||||
Net other-than-temporary impairment losses on held-to-maturity securities | (41 | ) | 0 | |||||||||
Net gain (loss) on derivatives and hedging activities (Note 7) | 19,770 | (34,651 | ) | |||||||||
Other | 635 | 379 | ||||||||||
Total other income (loss) | 31,761 | (19,675 | ) | |||||||||
OTHER EXPENSES: | ||||||||||||
Compensation and benefits | 5,740 | 5,634 | ||||||||||
Other operating | 3,611 | 2,862 | ||||||||||
Finance Agency/Finance Board | 452 | 411 | ||||||||||
Office of Finance | 477 | 432 | ||||||||||
Other | 388 | 267 | ||||||||||
Total other expenses | 10,668 | 9,606 | ||||||||||
INCOME BEFORE ASSESSMENTS | 82,876 | 32,132 | ||||||||||
Affordable Housing Program (Note 9) | 6,796 | 2,648 | ||||||||||
REFCORP (Note 10) | 15,216 | 5,897 | ||||||||||
Total assessments | 22,012 | 8,545 | ||||||||||
NET INCOME | $ | 60,864 | $ | 23,587 |
FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL FOR PERIODS ENDED MARCH 31, 2009 AND 2008 – Unaudited
(In thousands)
Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Capital Stock Class A1 | Capital Stock Class B1 | Retained | Comprehensive | Total | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Earnings | Income | Capital | ||||||||||||||||||||||
BALANCE – DECEMBER 31, 2007 | 6,042 | $ | 604,190 | 14,870 | $ | 1,486,997 | $ | 208,763 | $ | (2,096 | ) | $ | 2,297,854 | |||||||||||||||
Proceeds from issuance of capital stock | 6 | 649 | 4,034 | 403,422 | 404,071 | |||||||||||||||||||||||
Repurchase/redemption of capital stock | (144 | ) | (14,445 | ) | (14,445 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | 23,587 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Reclassification adjustment for (gain) loss on hedging activities included in net income | 13 | |||||||||||||||||||||||||||
Amortization of prior service cost on defined benefit pension plan | (7 | ) | ||||||||||||||||||||||||||
Amortization of net loss on defined benefit pension plan | 55 | |||||||||||||||||||||||||||
Total comprehensive income | 23,648 | |||||||||||||||||||||||||||
Reclassification of shares to mandatorily redeemable capital stock | (102 | ) | (10,238 | ) | (4,933 | ) | (493,310 | ) | (503,548 | ) | ||||||||||||||||||
Net transfer of shares between Class A and Class B | 198 | 19,789 | (198 | ) | (19,789 | ) | 0 | |||||||||||||||||||||
Dividends on capital stock (Class A – 2.8%, Class B – 5.8%): | ||||||||||||||||||||||||||||
Cash payment | (83 | ) | (83 | ) | ||||||||||||||||||||||||
Stock issued | 250 | 25,065 | (25,065 | ) | 0 | |||||||||||||||||||||||
BALANCE – MARCH 31, 2008 | 6,144 | $ | 614,390 | 13,879 | $ | 1,387,940 | $ | 207,202 | $ | (2,035 | ) | $ | 2,207,497 |
__________
1 Putable
FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL FOR PERIODS ENDED MARCH 31, 2009 AND 2008 (continued) – Unaudited
(In thousands)