Magazine article American Banker

FHLB of Chicago Nixes 3Q Dividend

Magazine article American Banker

FHLB of Chicago Nixes 3Q Dividend

Article excerpt

Troubles in the credit market this summer helped boost the bottom line at the Federal Home Loan Bank System, but a mixed earnings outlook at the Federal Home Loan Bank of Chicagokept its members from receiving a dividend for the third quarter.

The system's Office of Finance said in a report issued Wednesday that combined third-quarter earnings for the 12 Home Loan banks grew 7.7% from a year earlier, to $716 million. Advances soared 28.6% from yearend, to $24 billion, while assets jumped 20.8%, to $1.2 trillion, and outstanding consolidated obligations rose 21.4%, to $1.1 trillion.

The report was based on unaudited data.

The Chicago bank said in a letter to members dated Tuesday that it would not pay a dividend for the quarter. It made the announcement several weeks after receiving a regulatory cease-and-desist order preventing the government-sponsored enterprise from issuing a dividend without written permission from the Federal Housing Finance Board.

Mike Thomas, the Chicago bank's president, wrote in the letter that it had decided on its own not to pay the dividend. He expects the bank to post "positive earnings" for the third quarter, but its board decided against a dividend in anticipation of earnings pressure in the fourth quarter and into next year.

"The decision not to declare a dividend for the quarter was a difficult one, as we well understand that an adequate return on your investment in the bank is one element of the value of membership in the bank," he wrote. …

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