The Chicago Federal Home Loan Bank has declared a 6% second-quarter dividend on the same day it entered into a supervisory agreement with its regulator, the Federal Housing Finance Board.The dividend represents 70% of second-quarter earnings, and the remaining 30% will be added to retained earnings, the bank said. The annual average dividend paid in 2003 was 6.63%. Under the agreement, the Chicago FHLBank must fix its management systems and submit a capital plan to the regulator that includes "acceptable" capital, retained earnings, and dividend policies that are based on the bank's business activities and risks. Stephen Cross, the FHFB's director of supervision, said there are no dividend restrictions in the agreement. However, dividend decisions will henceforth be made in the context of a capital plan, he told MortgageWire. "The bank continues to generate strong profitability while remaining very well capitalized," said acting president Charles Huston. The acting president, who assumed his new duties June 30, noted that the recommendations spelled out in the supervisory agreement are "prudent and sensible," adding that "we are continually seeking to enhance our risk management capabilities."
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The RMBS notes benefit from geographic diversity and credit enhancement.
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