Last week, FHLBank Topeka released our operating highlights for the fourth quarter and 2020 as a whole. If you had asked me mid-year how our annual results would shape up following the significant change in short-term interest rates and huge inflow of market liquidity, I wouldn’t have expected to finish the year so strongly.
Although financial strength is essential to the success of your cooperative, I’d like to share less about the numbers and more about the people and programs that made a difference in 2020. I will also highlight how you can expect FHLBank Topeka to continue to support your institutions and communities in 2021.
Community Commitment
Just as you are committed to making your community a better place, we strive to work with our members to improve the communities of all members across our district. This past year was challenging for everyone. Dealing with a public health crisis of this magnitude brought stress to the lives of your staff and customers. We can empathize with the toll that took and is still taking on all Americans.
Finding the bright spots among the difficulty has kept us all sane. At FHLBank Topeka, we’ve kept our remote workforce connected through bi-weekly videoconference Town Hall meetings. One of my favorite parts of the meeting is the sharing stories of what we call “Pandemic Patriots” – FHLBank staff members who’ve gone above and beyond. There hasn’t been a lack of FHLBank employees to recognize, even after nearly a year. Their actions have ranged from devising innovative solutions to meet member needs to being there when another employee needs support. It has been inspiring to hear their stories on our Town Halls.
Recently, we called on our members to share stories of how they are helping their employees, customers and communities. Shan Hanes, president and CEO of Heartland Tri-State Bank in Elkhart, Kansas, told us how his bank opened its doors to the children of its staff members. When local elementary and middle schools went remote, parents on Shan’s team struggled to balance work and home life. Shan’s bank transformed its boardroom into a workspace for the kids. Their caring, creative solution was a win for the bank and its employees.
If you have stories of helping your customers, community or employees, we’d love to hear them. Email them to fhlbank.topeka@fhlbtopeka.com.
Product Updates
As you would expect with so much liquidity in the market, the demand for advances isn’t strong right now. However, we are seeing a lot of interest in securing public unit deposits through our letters of credit. Some of this may be due to our popular new online option. If you haven’t yet checked out this quick and easy addition to our Members Only website, you can find more here or contact your regional account manager or the Lending Desk.
In addition to the letters of credit online option, we continue to focus on ways to make doing business even easier with us on our Members Only site. We previously introduced Overnight Line of Credit draws. Members have appreciated not only the ease of completing the transaction electronically but also more insight on their all-in advance rate. The new online confirmation shows their effective advance rate considering recent dividends and the current Federal funds rate.
Our commitment to the Mortgage Partnership Finance® (MPF®) Program hasn’t wavered. In 2020, the high volume of mortgages sold coupled with increased liquidity in the market meant our balance between advances and MPF loans wasn’t in line with regulatory expectations. We helped several members gain access to our MPF Xtra® product, which passes production through to Fannie Mae and isn’t held on our balance sheet.
Even with that adjustment, it was necessary for us to reduce our pricing for traditional on-balance sheet MPF products in order to manage volumes and the size of our mortgage loan portfolio. In late 2020 and early 2021, we have been able to improve pricing for the on-balance sheet MPF products. This year, consistent with our cooperative structure, we will strive to pay particular attention to our participating members with fewer outlets for their mortgage loans with the goal of continuing to provide competitive pricing for our on-balance sheet MPF products and access to additional outlets such as MPF Xtra.
With the addition of an MPF activity-based capital stock requirement last year, members that participate in on-balance sheet MPF products have begun receiving a dividend benefit for their required MPF stock ownership. In the fourth quarter alone, we paid more than $3.8 million* in dividends on our members’ stock supporting the MPF Program, which provides an additional income stream to our members that use the on-balance sheet MPF product.
On Jan. 22, we also added a stock requirement on letters of credit. If you are a letter of credit user and have conducted any transaction requiring activity stock with us since then, you’ve most likely purchased the required stock. If you don’t conduct a transaction before then, letters of credit users will be required to purchase stock on March 23. Read our full announcement here to learn more about the impact of this new stock requirement.
One final note in product news – we are proud to continue to partner with you on our Housing and Community Development Programs. In late December, we were pleased to announce Affordable Housing Program (AHP) grant awards totaling almost $13.4 million in partnership with member financial institutions like you. Together, we provided funding to help create, preserve or rehabilitate housing for 1,140 households across our district. With additional housing instability resulting from the current pandemic, these efforts are even more vital today. Applications for our next offering of AHP will open July 5, 2021. Visit our website to learn more about how you can take part in the future.
Also, we opened our Homeownership Set-aside Program (HSP) yesterday. This year, we have $4.59 million available in grants for qualifying first-time homebuyers in your community. With up to $5,000 for each grant, we expect to help more than 900 individuals and families realize the American dream of homeownership. We’re proud to partner with our members in this endeavor for the 24th year. If you want to learn more about HSP, visit our website.
Educational Opportunities
Your membership in FHLBank has another perk – access to industry experts. Last year, we introduced our Advance Your Thinking webinar series. Topics ranged from deposit strategies to managing your balance sheet. We plan to continue offering additional webinars in 2021. Our first one for the year focused on opening the door to early withdrawal and was held Feb. 9 and 10. You can find video archives of this webinar and past sessions on our website.
We are disappointed we can’t come together in person for our 2021 Annual Management Conference. Instead, we have put together a digital lineup of six outstanding speakers, including economist Marci Rossell and author Brad Meltzer. We already have 120 members registered for one or more of the three April sessions. If you are not on the list, I hope you’ll consider joining us.
We appreciate your business and the strong cooperative partnership we have. Please reach out to me or any member of the FHLBank team with your questions. We are here to serve you.
“Mortgage Partnership Finance,” “MPF” and “MPF Xtra” are registered trademarks of the Federal Home Loan Bank of Chicago.
* This figure is based on fourth quarter daily average MPF balances multiplied by our 3% MPF stock requirement and the Class B dividend rate of 5.25%.
