The Federal Home Loan Bank of New York announced Thursday it had sold its item processing business to Systematics Financial Services Inc., Little Rock, Ark., for an undisclosed sum.

Under terms of the agreement, Systematics will take over the New York Home Loan Bank's check processing facility in Piscataway, N.J., which processes 122 million checks a year for 125 financial institutions in New York, New Jersey, and Puerto Rico. Last year, Systematics also purchased the check-processing business of the San Francisco Home Loan Bank.

According to Home Loan Bank officials, Systematics intends to expand the market area, client base, and services offered.

Check processing is a volume-driven business that several of the 12 Home Loan Banks have begun to sell as part of an effort to cut operational costs.

According to Home Loan Bank executives, the new technology investments required by today's check processing business are generally not compatible with institution's stream-lining efforts.

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