The New York Federal Home Loan Bank is warning member institutions to expect very low quarterly dividends going forward while the bank rebuilds its retained earnings.The FHLBank suspended its third quarter dividend after it sold nearly $2 billion in impaired manufactured housing securities at a $190 million loss. This loss reduced the bank's retained earnings from $240 million to $100 million. In a letter to shareholders, New York FHLBank president Alfred DelliBovi noted that the bank's federal regulator wants dividends paid out of earnings after a set-aside is made to build retained earnings to an appropriate level. "Given our need to rebuild retained earnings and the loss of investment income from the nearly $2 billion in MBS investments we sold in September, we expect that future dividends paid by the Home Loan Bank will be at a lower level relative to prevailing market interest rates than the dividends of the recent past," Mr. DelliBovi says in the letter. In the second quarter, the NY bank paid a 5.05% dividend. Mr. DelliBovi also noted that FHLBank officers and employees will not receive a year-end bonus this year.

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