The 12 Federal Home Loan Banks reported combined earnings of $345 million in the first quarter, down 50% from a year ago, as six banks took a net loss for the quarter primarily due to impairment charges on private-label mortgage-backed securities.

"Other than temporary impairment" charges on the $61.2 billion in private-label MBS held by the FHLBanks reduced earnings by $516 million.

The banks also recognized $4.7 billion in private-label MBS valuation losses in "accumulated other comprehensive income."

Federal Housing Finance Agency director James Lockhart recently told Congress that the credit quality of the FHLBanks' investments in private-label securities has proven to be "much worse" than expected.

"With ongoing uncertainty surrounding the true economic value of PLS, those investments will continue to raise safety and soundness concerns," the GSE regulator said.

As of March 31, combined retained earnings totaled $5 billion while losses recognized in accumulated other comprehensive income totaled $7.4 billion.

Half of the FHLBanks have suspended dividend payments to rebuild retained earnings. The 12 banks have $1.2 trillion in assets and $60 billion in regulatory capital, according to the combined first quarter report issued by the FHLBank Office of Finance.

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