Regulators Lift Supervisory Agreement With FHLB-Seattle

WASHINGTON - The Federal Housing Finance Board said last week it has terminated the rare supervisory agreement it had with the Federal Home Loan Bank of Seattle, which barred the Seattle Bank from paying dividends for three years without regulatory approval, or from approving any stock redemptions before the mandatory five-year period.

The Bank's compliance with the terms of the supervisory agreement, which included its exit from the secondary loan market, and improved financials, which allowed it to pay a slight dividend for the third quarter, prompted the regulator to lift the supervisory agreement, said the FHFB, which oversees the 12 Federal Home Loan Banks.

It was the secondary mortgage market program that caused most of the Seattle Bank's problems, as instruments it acquired to hedge its mortgage portfolio fell into the red when interest rates began to gyrate three years ago. Since then, the Seattle Bank and several others of the FHLBs have exited the secondary loan market.

Since signing the supervisory agreement, the Seattle Bank has brought in new management, including former Office of Thrift Supervision Director James Gilleran, who was hired as its president.

The Seattle bank reported net income of $19.6 million for the first three quarters. The bank has 375 members, including 75 CUs.