The Federal Home Loan Bank of Seattle reported third-quarter income of $9.7 million after losing $144.3 million a year earlier and another $93.8 million in the second quarter. FHLBs provide low-cost funding to financial institutions for mortgages and other loans. The Seattle FHLB said lower credit-related charges recorded on private-label mortgage-backed securities helped boost third-quarter earnings. Losses on those MBS holdings equaled $15.6 million for the quarter, down 88% from a year ago. The Federal Housing Finance Agency, its conservator, still deems the bank undercapitalized, although its capital did increase to $1.1 billion in the third quarter from $993 million at the end of 2009. The Seattle FHLB’s capital-to-assets ratio is 5.76%, and its regulatory leverage ratio came in higher at 8.48% fro 7.8% in the third quarter of 2009. FHFA requires the bank to maintain a 5% minimum, according to the bank’s spokesperson. Write to Jon Prior.