FHLBank-NY: MH Bonds Kill Dividend

The Federal Home Loan Bank of New York will not pay a dividend to its shareholders in the third quarter due to a $183 million loss on the sale of its troubled investments in manufactured housing securities.The FHLBank sold $1.033 billion of MH securities that were not insured and had been downgraded from their original triple-A ratings. "To ensure that there would be no further deterioration, the Bank has now sold this portfolio and has no uninsured exposure to the manufactured housing sector," FHLBank president Alfred DelliBovi says in a letter to shareholders. In August, Standard & Poor's warned that the bank's triple-A credit rating might be downgraded due to problems with its MH investments. Mr. DelliBovi also announced that the bank would postpone its conversion to a risk-based capital system that was scheduled to go into effect Oct. 1. The FHLBank's capital ratio of 4.68% is "well above" the minimum capital-to-assets ratio of 4.0%, the Sept. 24 letter says. "The Bank also expects its retained earnings will continue to be positive at September 30, 2003." (The FHLBank had $240 million in retained earnings at the end of the second quarter.)