Des Moines, Seattle home loan banks merging

DES MOINES - The boards of directors of the Federal Home Loan Banks of Des Moines and Seattle, Wash., have unanimously approved a merger of the institutions.

The merger also will require approval from the Federal Housing Finance Agency, as well as member-owners of the two home loan banks, which provide funds to member commercial and savings banks. The process is expected to stretch into the first half of 2015.

FHLB Des Moines is the larger of the two banks, with $82.2 billion in assets and 1,170 members at the end of June. FHLB Seattle had $36.5 billion, with 320 members.

FHLB Seattle had struggled with bad loans and investments stemming from the recent mortgage crisis. It is the only regional home loan bank whose Standard & Poor's credit rating is AA, a notch below its peers.

Richard Swanson, FHLB Des Moines president and CEO, will be the combined banks' CEO, while his FHLB Seattle counterpart, Mike Wilson, will serve as the combined bank's president.

The Des Moines and Seattle banks are part of the Federal Home Loan Bank System created in 1932, which is made up of 12 banks. The Des Moines and Seattle banks first announced potential merger talks in July.

The surviving home loan bank, which would create an entity with nearly $120 billion in assets, will have its headquarters in Des Moines. The bank would provide funding to 1,500 members in 13 states, as well as the U.S. territories of American Samoa and Guam and the Commonwealth of the Northern Mariana Islands.

Federal home loan banks are a group of cooperatives that lenders use to finance housing and economic development in local communities. About 80 percent of U.S. lending institutions rely on the home loan banks for low-cost funds.

Federal Home Loan Banks require their members to put up collateral against the advances they receive to make loans.