WASHINGTON — The Federal Home Loan Bank of Seattle is treading back into safer waters, after a near shutdown a few years earlier, the Federal Housing Finance Agency said Monday.

The agency reclassified the struggling Seattle Home Loan Bank as "adequately capitalized," allowing it to proceed with plans to repurchase excess capital stock since December 2008.

FHFA is letting the bank repurchase up to $25 million of excess capital stock per quarter at par ($100 per share) as long as its financial condition doesn't deteriorate.

"Even though this initial repurchase amount is relatively small, it is a significant milestone in our return to normal operations," Michael Wilson, president and CEO of the bank, wrote in a letter to members.

The Seattle Bank said it plans to make its initial excess stock repurchase before Sept. 30 and will provide details as soon as possible.

The bank was first deemed "undercapitalized" by FHFA in November 2009. It is still unable to redeem stock or pay a dividend without approval from the Finance Agency under a October 2010 consent order.

"We have a ways to go before we will be able to perform these activities at will," said Wilson. "We are still burdened by a large portfolio of private-label mortgage-backed securities, and our core business of advances is challenged by a weak economy and the highly liquid balance sheets of our members. We are taking prudent steps to normal operations, but it will take time."

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