Dick Swanson had a chance to unpack his suitcase last week, but it won’t be empty for long.

Swanson, president and CEO of the Federal Home Loan Bank of Des Moines, this spring has visited hundreds of the bank’s members during weeklong trips throughout its five-state district.

This week, he plans to travel to New York City to meet with officials of the major credit rating agencies and update them on the bank’s progress during the past 12 months. In April 2006, Standard & Poor’s and Moody’s Investors Service placed the bank on a credit watch, which put its AAA credit rating at risk. Though that status was lifted in September, both agencies still list the bank’s financial outlook as “negative.”

The Federal Home Loan Bank’s financial health is of key concern to the more than 1,250 banks, credit unions and insurance companies that are stockholders in the cooperatively owned institution.

Swanson, who was named to his position a year ago, is the first to admit that the members’ confidence has been shaken by a series of financial setbacks that have also plagued most of the bank’s regional counterparts. However, a great deal of progress has been made in the past year to strengthen the Des Moines bank’s financial position and to restore the trust of its members, he said.

“The last year for us has been a time of settling back down, of absorbing these changes, of putting together a new management team, and I think rediscovering with our new management team the important, essential role of the Federal Home Loan Bank in supporting the success of our community members,” he said.

One of 12 banks within the Federal Home Loan Bank system, the $43 billion FHLB Des Moines is the smallest in asset size of the wholesale banks, yet serves the largest number of member institutions covering Iowa, North Dakota, South Dakota, Minnesota and Missouri. By maintaining investments in the global capital markets, the bank plays a key role in providing low-cost mortgage funds to its member institutions, as well as access to affordable housing grant and loan programs.

Part of the uncertainty surrounding the Federal Home Loan Bank came from last year’s management shakeup. In December 2005 Patrick Conway resigned as president and CEO. By early 2006, nearly all of the Des Moines bank’s top officers resigned in the wake of a major restatement of earnings due to errors made in accounting for complex financial hedging transactions. Meanwhile, the bank had reduced dividend payments to its members and forecast lower earnings.

The Des Moines bank’s board chose Swanson, a former CEO of a major regional bank in the Pacific Northwest, to rebuild the bank’s management structure and to stabilize its financial performance. Swanson had also served as a director on the board of the Federal Home Loan Bank of Seattle.

“One of the criteria they were really looking for was someone who understood this Federal Home Loan Bank system from the viewpoint of their members,” said Swanson, 57, who retired as chairman of Seattle-based HomeStreet Bank in 2003. “My bank was a very active shareholder of the Federal Home Loan Bank of Seattle,” said Swanson, who in 1998 was elected to that bank’s board. “So my perspective first really developed as a customer of the Federal Home Loan Bank and then as a director. During the five or six years that I served in that capacity, I developed a pretty thorough understanding of how the Federal Home Loan Banks work from within the Federal Home Loan Bank system.”

That same member-oriented philosophy applied in filling other key positions, Swanson said. With the recent hiring of its new chief risk officer and general counsel, Nicholas Spaeth, the bank has filled all of its key management positions, among them the chief business officer, director of internal audit and chief financial officer.

With a new management team in place, Swanson is leading an effort to reassess the bank’s primary missions and turning its attention to providing new products and services for its members.

The bank’s completion of its registration with the U.S. Securities and Exchange Commission a year ago, required of all 12 Federal Home Loan Banks, was a significant accomplishment, he said.

“Registering with the SEC is really the beginning of the discipline of reporting as a public company with quarterly and annual filings,” he said. “That’s been an important area of expertise to get under our belts, and we’ve been doing that successfully.”

Swanson noted about six people left the bank’s accountng department following the exhaustive earnings restatement process, but that the department is once again fully staffed. “That was probably the only area where we had significant personnel changes,”he said.

The bank has since reconfigured its balance sheet to allow it to generate more consistent earnings, he said. “Beginning in mid-2006, we have been operating with very consistent earnings in excess of $20 million per quarter,” Swanson said. “That’s been a very significant accomplishment for us.”

Beginning last month, the bank also adjusted its dividend payment schedule to match its quarterly earnings periods, so that it can announce expected dividend payouts at the same time as earnings, as most public companies do. For the past year, the bank has paid a dividend with an annualized rate of 4.25 percent each quarter, essentially paying out all of its operating profits in each period.

“It lets our members know it’s in a very strong position financially, and they have the knowledge that our earnings and dividend levels are very stable, which was not the case previously for this bank, and isn’t the case currently for other Federal Home Loan Banks,” Swanson said.

A byproduct of the bank’s accounting restatement was a significantly higher level of retained earnings – now $344.5 million – which allows the more consistent dividend payout, but will also lower earnings for the next five to 10 years. The bank’s regulator, the Federal Housing Finance Board, is still in the process of determining the level of retained earnings each Federal Home Loan Bank must have, he said.

Changing conditions in the mortgage market will also mean the bank will be less exposed to risk associated with purchasing mortgages directly from banks through its Mortgage Partnership Finance program, Swanson said.

“When this bank, like many other Federal Home Loan Banks, was getting the program up and running, we were buying large numbers of mortgages from large banks during the refinancing boom,” he said. “Our bank has now been focusing our efforts on our smaller members, not on our largest members. The program is still an important one for us and our members, but it is of declining financial significance to us. As a result, it’s of less concern to rating agencies who are looking at the financial stability of the bank.”

Swanson said the bank is considering several possible alternative programs in which it wouldn’t hold the mortgages directly on its balance sheet.

On the credit front, Swanson said he doesn’t plan to request an immediate reconsideration from Standard & Poor’s and Moody’s, but said he hopes to see a reassessment by the agencies by the end of the year.

The bank’s member institutions are beginning to see evidence of renewed attention to their needs. On June 1, the bank announced several initiatives aimed at providing them greater convenience, from extending the hours of its wire transfer department by another hour to changing its deposit pricing strategy to be more competitive with the market.

The changes “aren’t dramatic individually, but collectively indicate a number of ways we’re adjusting our service levels, our specific products and pricing to better reflect what our members want from us,” Swanson said.

Supporting local banks and affordable housing is a mission that’s as vital today as it ever was, Swanson said. “And I think we’ve got a group of people here that are pretty excited about demonstrating that we can fulfill that mission,” he said.