Federal Home Loan bank forgoes dividend

The Federal Home Loan Bank of Atlanta has announced it will not pay a dividend for the fourth quarter of 2008, a move designed to shore up the bank’s capital reserves amid losses tied to mortgage-backed securities.

The bank, a government-chartered cooperative owned by its member banks, typically returns up to 90 percent of its profits to its 1,200 members throughout the Southeast.

The bank recently reported that fourth-quarter earnings declined nearly 40 percent, to $74.6 million, compared to a year ago. The drop was primarily the result of $98.7 million in losses tied to the deteriorating value of the bank’s portfolio of mortgage-backed securities.

The market for mortgage-backed securities has dried up in recent years as the real estate bubble burst and recession deepened, driving down values. Accounting rules have forced financial institutions across the country to value the securities at current market rates, leading to large paper losses.

Bank officials said the Federal Home Loan Bank of Atlanta remains well capitalized but decided to suspend dividend payments given the “extended volatility in the financial markets.”

“The Bank continues to perform well in this most difficult of economic environments, while taking prudent steps to protect our members’ investment and ongoing access to liquidity,” said Richard A. Dorfman, the bank’s president and chief executive officer.

The Atlanta institution is one of 12 Federal Home Loan Banks across the country that Congress created during the Great Depression. The banks don’t lend to individuals, but to member banks.