BOSTON – The Federal Home Loan Bank of Boston announced it will cease paying dividends after mounting unrealized losses on its mortgage backed holdings forced it to report a $73.2 million loss for 2008.
The losses were caused by $339.1 million other-than-temporary impairment charge on the FHLB’s private label mortgage backed securities.
The problems with the Boston Bank and several other FHLBs are similar to those being experienced by corporate credit unions which are recording ever-increasing unrealized losses on their MBSs.
In order to preserve capital, the Boston Bank said it has taken a number of steps, including the suspension of dividends for the first quarter. Dividend payments for the rest of 2009 are also unlikely. In addition, the moratorium on excess stock repurchases declared in December will continue.
Also, as a result of the loss, the Bank will not make a contribution to the Affordable Housing Program and Equity Builder Program for 2009, both of which are funded directly from prior year profits.
