The 12 Federal Home Loan Banks reported a combined profit of $326 million the second quarter — unchanged from the previous period — despite a jump in losses from private-label mortgage-backed securities.

The FHLB system — whose banks are considered GSEs — stand in stark contrast to Fannie Mae and Freddie Mac which are in conservatorship and continue to lose money. (Both will report earnings in the next few weeks.)

The FHLB's Office of Finance said the 12 banks recognized $495 million of credit-related other-than-temporary-impairment charges on private-label MBS, more than double the OTTI charges in the first quarter.

Although the system was in the black, its assets continued to shrink, falling 5% to $966 billion since the beginning of the year. FHLB advances, the bread-and-butter of the system, have fallen 14% from year-end 2009 to $540 billion.

In 2Q the increase in OTTI charges pushed the Indianapolis FHLB into the red by $13 million. The Pittsburgh bank posted a $68 million loss for the quarter.

The San Francisco FHLB saw earnings fall to $29 million after earning $93 million in 1Q. The bank took $142 million in OTTI charges.

The San Francisco, Pittsburgh and Seattle banks are suing several Wall Street private-label MBS issuers for alleged misrepresentations about the quality of the underlying collateral backing the bonds.

Meanwhile, the Chicago FHLB earned $116 million in 2Q, a major improvement from 1Q when it had a profit of just $1 million. The Seattle bank, which is under supervisory pressure to increase its capital, earned $8 million, a 33% improvement from the first quarter.

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