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FHLBank Reports Earnings of $26.9 Million in Q3 and $52.1 Million Year-to-Date
News Release: November 13, 2007
Contact: Connie Waks
206.340.2305
Seattle – The Federal Home Loan Bank of Seattle (Seattle Bank) today announced financial results for the third quarter of 2007 and the filing of its third quarter 2007 Form 10-Q with the Securities and Exchange Commission (SEC).
The Seattle Bank reported $26.9 million of net income for the third quarter and $52.1 million of net income year-to-date. Third quarter net income increased $17.7 million and year-to-date net income increased $32.4 million, compared to the same periods in 2006.
The Seattle Bank attributes its earnings growth to its increased advance activity and associated growth in its balance sheet, as well as to its reinvestment of proceeds from maturing low-yielding investments into higher yielding investments.
“Our cooperative is a primary source of liquidity for many of our financial institution members,” said Seattle Bank President and Chief Executive Officer Richard M. Riccobono, “and the recent volatility in the capital markets significantly increased demand for our advances. As a result, we have grown our balance sheet and our profitability, which also serves to accelerate our business turnaround.”
The Seattle Bank has experienced significant earnings growth following its business restructuring in 2005 to focus on advances, with net income increasing from $1.7 million in 2005 to $25.8 million in 2006 to $52.1 million for the nine-month period ending September 30, 2007.
Key Factors
Advances outstanding were $41.4 billion as of September 30, 2007, compared to $28.0 billion as of December 31, 2006. The increased advance volume reflects, in part, the increased volatility in the capital markets during the third quarter of 2007. The new advances, which were generally issued for terms of one to three years, are expected to favorably affect the bank’s financial results while they remain outstanding.
Net interest income for the three and nine months ended September 30, 2007 increased to $45.6 million and $110.1 million, respectively, compared to $22.2 million and $56.1 million for the same periods in 2006. The growth in net interest income resulted primarily from the increase in advances outstanding, favorable debt issuance spreads, and higher prevailing short-term interest rates, which favorably impacted the returns on the bank’s short-term advances and investments. In addition, $7.0 billion of the new advances made in third quarter 2007 required the purchase of additional Seattle Bank capital stock, allowing the bank to grow its balance sheet and its net interest income from invested capital.
Other Highlights
The Seattle Bank continued to meet all regulatory capital requirements, with total capital, at $2.6 billion as of September 30, 2007, increasing $324.2 million during the first nine months of the year. This increase was driven primarily by the growth of our Class A stock outstanding and in the amount of our retained earnings.
Retained earnings as of September 30, 2007 increased to $135.8 million, compared to $92.4 million as of December 31, 2006, and $88.4 million as of September 30, 2006. The Seattle Bank’s capital-to-assets ratio was 4.11 percent as of September 30, 2007.
On October 30, 2007, the Seattle Bank’s Board of Directors declared a $0.20 per share dividend, or $4.3 million, on average Class B stock outstanding during the third quarter and a $1.28 per share dividend, or $1.5 million, on average Class A stock outstanding during the third quarter.
SEC Form 10-Q for Quarter Ended September 30, 2007
About the Seattle Bank
The Federal Home Loan Bank of Seattle is a financial cooperative that provides liquidity, funding, and services to enhance the success of its members and support the availability of affordable homes and economic development in the communities they serve. Our funding and financial services enable over 375 member institutions to provide their customers with greater access to mortgages, commercial lending, and affordable housing. The Seattle Bank commits 10 percent of its annual profits to help fund affordable housing and homeownership.
The Seattle Bank serves eight states, American Samoa, Guam, and the Northern Mariana Islands. Our members include commercial banks, credit unions, thrifts, industrial loan corporations, and insurance companies.
The Seattle Bank is one of 12 Federal Home Loan Banks in the United States. Together, the Federal Home Loan Banks represent one of the country’s largest private sources of liquidity and funding for community financial institutions, as well as funding for affordable housing.
This press release includes financial results and highlights and contains forward-looking statements regarding events that may impact the bank's future financial performance. Forward-looking statements are subject to known and unknown risks and uncertainties. Actual performance may differ materially from projections because of many factors. Such factors may include, but are not limited to, demand for advances, business and capital plan adjustments and amendments, changes in the bank's management and Board of Directors, regulatory actions or approvals, competitive pressure from other Federal Home Loan Banks and alternative funding sources, accounting adjustments or requirements, interest-rate volatility, the bank's ability to maintain adequate capital levels, changes in projected business volumes, our ability to appropriately manage our cost of funds, changes in our membership profile or the withdrawal of or changes in business activities with one or more large members, the cost-effectiveness of our funding, hedging and asset-liability management activities, shifts in demand for our products and consolidated obligations, and general economic conditions. Additional factors and related information are discussed in the Seattle Bank's public filings, including the Form 10-K for the year ended December 31, 2006, which are available on the Seattle Bank’s Web site at www.fhlbsea.com. The Seattle Bank does not undertake to update any forward-looking statements made in this announcement.
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