Seattle FHLBank OKs Investment Cap

The Seattle Federal Home Loan Bank has agreed to limit the growth of it mortgage investments to 10% annually due to poor hedging and financial results.Under the supervisory agreement with the Federal Housing Finance Board, the Seattle bank has to submit a three-year business and capital management plan by Feb. 28. The Seattle bank had been limiting its mortgage purchases over the past year while building its infrastructure, so the 10% limit "will not significantly impact our mortgage business," a spokesman said. The Finance Board also set a 4.15% minimum capital requirement on the Seattle Bank, which currently has a capital ratio of 4.52%. "While the Seattle bank remains a profitable company, exceeds its minimum capital requirements, and has an excellent credit track record, we agree with the Finance Board that now is the time to reassess our business plans and goals," bank president Norman Rice said. On Nov. 17, the Seattle bank reported that third-quarter earnings fell to $16.8 million -- 53% below the level of the same quarter in 2003. The bank said it did "not efficiently manage the funding and hedging" of its Mortgage Purchase Program and its mortgage-backed securities investments.