Capital

6 Months Ended

Jun. 30, 2024

Stockholders' Equity Note [Abstract]

Capital

CAPITAL

Capital Requirements: FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the FHFA's capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

•Risk-based capital. FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operational risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the FHFA. Only permanent capital, defined as the amounts paid-in for Class B Common Stock and retained earnings, can be used by FHLBank to satisfy its risk-based capital requirement. The FHFA may require FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the FHFA has not placed any such requirement on FHLBank to date.

•Total regulatory capital. The GLB Act requires FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A Common Stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

•Leverage capital. FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times, divided by total assets.

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of June 30, 2024 and December 31, 2023 (dollar amounts in thousands):

Table 10.1

	06/30/2024						12/31/2023
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	805,359		$	3,932,532		$	746,439		$	3,730,738
Total regulatory capital-to-asset ratio	4.0		%	5.3		%	4.0		%	5.4		%
Total regulatory capital	$	3,190,201		$	4,251,892		$	2,997,879		$	4,009,870
Leverage capital ratio	5.0		%	7.8		%	5.0		%	7.8		%
Leverage capital	$	3,987,752		$	6,218,158		$	3,747,349		$	5,875,238

Mandatorily Redeemable Capital Stock: FHLBank is a cooperative whose members own most of FHLBank’s capital stock. Former members (including certain non-members that own FHLBank capital stock as a result of merger or acquisition, relocation, charter termination, or involuntary termination of an FHLBank member) own the remaining capital stock to support business transactions still carried on FHLBank's Statements of Condition. Shares cannot be purchased or sold except between FHLBank and its members at a price equal to the $100 per share par value.

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and six months ended June 30, 2024 and 2023 (in thousands):

Table 10.2

	Three Months Ended				Six Months Ended
	06/30/2024		06/30/2023		06/30/2024		06/30/2023
Balance, beginning of period	$	205	$	269	$	247	$	280
Capital stock subject to mandatory redemption reclassified from equity during the period	77,949		282,260		232,442		493,497
Redemption or repurchase of mandatorily redeemable capital stock during the period	(74,762)		(282,271)		(229,299)		(493,521)
Stock dividend classified as mandatorily redeemable capital stock during the period	50		5		52		7
Balance, end of period	$	3,442	$	263	$	3,442	$	263

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. FHFA rules limit the ability of FHLBank to create excess member stock under certain circumstances. For example, FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed one percent of its total assets. As of June 30, 2024, FHLBank’s excess stock was less than one percent of total assets.

Capital Classification Determination: The FHFA determines each FHLBank’s capital classification on at least a quarterly basis. If an FHLBank is determined to be other than adequately capitalized, that FHLBank becomes subject to additional supervisory authority by the FHFA. Before implementing a reclassification, the Director of the FHFA is required to provide an FHLBank with written notice of the proposed action and an opportunity to submit a response. As of the most recent review by the FHFA, FHLBank Topeka was classified as adequately capitalized.