8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 19, 2015

Federal Home Loan Bank of Pittsburgh
__________________________________________
(Exact name of registrant as specified in its charter)

Federally Chartered Corporation	000-51395	25-6001324
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
601 Grant Street, Pittsburgh, Pennsylvania		15219
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 412-288-3400

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 19, 2015, the Federal Home Loan Bank of Pittsburgh (the "Bank"): 1) issued a press release, to report the Bank’s financial results for the quarter and year ended December 31, 2014 and announce the Board’s declaration of a quarterly dividend and special dividend; 2) a member letter regarding the financial results and dividends; and 3) a member brochure outlining the Bank’s recent Capital Plan changes and plans regarding differentiated dividends beginning in 2015. Attached as Exhibits 99.1, 99.2 and 99.3 to this Current Report on Form 8-K are copies of the related press release, member letter and member brochure.

Item 7.01 Regulation FD Disclosure.

The information set forth under Item 2.02 is also furnished pursuant to this Item 7.01. The information being furnished pursuant to Item 2.02 and Item 7.01 of this Current Report on Form 8-K and the information contained in Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1 Press release dated February 19, 2015 issued by the Bank
99.2 Letter to Members dated February 19, 2015 issued by the Bank
99.3 Member brochure dated February 19, 2015 issued by the Bank

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Federal Home Loan Bank of Pittsburgh
February 19, 2015	By:	/s/ Edward V. Weller
		Name: Edward V. Weller
		Title: Chief Accounting Officer

Exhibit Index

Exhibit No.	Description
99.1	Press release dated February 19, 2015 issued by the Bank
99.2	Letter to Members dated February 19, 2015 issued by the Bank
99.3	Member brochure dated February 19, 2015 issued by the Bank

EX-99.1

Press Release

FOR IMMEDIATE RELEASE:

Contact: Terri McKay, FHLBank Pittsburgh, 412-288-2830, cell: 412-523-8511, terri.mckay@fhlb-pgh.com

FHLBank Pittsburgh Announces Full Year and Fourth Quarter Financial Results

PITTSBURGH, February 19, 2015 – The Federal Home Loan Bank of Pittsburgh (FHLBank or the Bank) today announced unaudited financial results for full year and fourth quarter 2014. The Bank recorded net income of $255.8 million for the year 2014 and $64.3 million for the fourth quarter. The Board of Directors declared a quarterly dividend of 4.00 percent annualized. In addition, the Board declared a special dividend of 2.50 percent, payable to each stockholder based on their average stock for the full year.

“Our cooperative is strong,” said Winthrop Watson, president and chief executive officer. “We have achieved record earnings, which support an attractive return to our stockholders and a significant contribution to affordable housing.”

Operating Results

The Bank’s net income for 2014 totaled $255.8 million, compared to $147.8 million for 2013. This $108.0 million increase was primarily driven by higher net interest income, gains on litigation settlements (net of legal fees and expenses) and net gains on trading securities, partially offset by net losses on derivatives and hedging activities. Net interest income was $283.1 million for 2014, an increase of $88.0 million from $195.1 in 2013, primarily due to lower interest expense on consolidated obligation bonds and higher interest income on advances and prepayment fees on advances. In 2014, the Bank recorded $70.9 million in gains on the resolution of litigation (net of legal fees and expenses) related to matters arising from investments the Bank made in private-label mortgage-backed securities (MBS), compared to $1.5 million in 2013. Net gains on trading securities were $22.4 million for 2014, an increase of $27.0 million compared to a net loss of $4.6 million in 2013. Net losses on derivatives and hedging activities were $37.5 million in 2014, a decrease of $67.7 compared to a net gain of $30.2 million in 2013. Performance in 2014 allowed the Bank to set aside $28.4 million for affordable housing programs.

For the fourth quarter of 2014, net income was $64.3 million, compared to $43.7 million in the fourth quarter of 2013. This $20.6 million increase was primarily driven by net interest income, gains on litigation settlements (net of legal fees and expenses), and net gains on trading securities, partially offset by net losses on derivatives and hedging activities. Net interest income for the fourth quarter of 2014 was $82.7 million, an increase of $22.6 million from $60.1 million in the fourth quarter of 2013, primarily due to higher interest income on advances, prepayment fees on advances and lower interest expense on consolidated obligation bonds, partially offset by lower interest income on mortgage loans held for portfolio. In the fourth quarter of 2014, the Bank recorded $20.2 million in a gain on the resolution of litigation (net of legal fees and expenses) related to matters arising from investment the Bank made in private-label MBS; there was no such gain in the fourth quarter of 2013. Net gains on trading securities were $5.9 million in the fourth quarter of 2014, compared to a net loss of $5.0 million in the fourth quarter of 2013. Net losses on derivatives and hedging activities were $19.0 million in the fourth quarter of 2014, compared to a net gain of $16.1 million in the fourth quarter of 2013.

Balance Sheet Highlights

At December 31, 2014, total assets were $85.7 billion, an increase of $15.0 billion from $70.7 billion at December 31, 2013, primarily due to increased advances. Advances totaled $63.4 billion at December 31, 2014, an increase of $13.2 billion compared to $50.2 billion at December 31, 2013.

Total capital at December 31, 2014, was $4.0 billion, up from $3.7 billion at December 31, 2013. This increase was primarily driven by higher retained earnings. Total retained earnings were $837.5 million at December 31, 2014, an increase of $151.8 million from $685.7 million at December 31, 2013. Total retained earnings at December 31, 2014, included $111.2 million of restricted retained earnings. At December 31, 2014, FHLBank Pittsburgh had total regulatory capital of $3.9 billion and remained in compliance with all regulatory capital requirements.

The Board of Directors declared a dividend equal to an annual yield of 4.00 percent. The dividend will be calculated on stockholders’ average balances during the period October 1, 2014, to December 31, 2014, and credited to stockholders’ accounts on Friday, February 20, 2015. The Board of Directors also declared a special dividend equal to an annual yield of 2.50 percent. This special dividend will be calculated on stockholders’ average capital stock during the period January 1, 2014, to December 31, 2014, and credited to stockholders’ accounts on Monday, February 23, 2015.

As set forth in Form 8-K filed on February 12, 2015, the Bank has agreed with certain defendants to settle its claims against them arising out of certain investments the Bank made in private-label MBS. This will be reflected in the Bank’s March 31, 2015 financial statements.

Detailed financial information regarding 2014 results will be available in FHLBank Pittsburgh’s 2014 Annual Report on Form 10-K, which the Bank anticipates filing around March 12, 2015. Detailed financial information regarding the first nine months of 2014 is available in the Bank’s 2014 Quarterly Reports on Form 10-Q and detailed information regarding 2013 is available in the 2013 Annual Report on Form 10-K, which can be accessed through FHLBank Pittsburgh’s website at www.fhlb-pgh.com or on the SEC’s website at www.sec.gov.

About FHLBank Pittsburgh

As an intermediary between global capital markets and local lenders, FHLBank Pittsburgh provides readily available liquidity, as well as affordable housing and community development opportunities, to member financial institutions of all sizes in Delaware, Pennsylvania and West Virginia. The Bank is one of the banks in the Federal Home Loan Bank System, which was established by Congress in 1932 and serves as a reliable source of funds for housing, jobs and economic growth in all economic cycles.

This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain.

Actual performance or events may differ materially from that expected or implied in forward-looking statements because of many factors. Such factors may include, but are not limited to, economic and market conditions, real estate, credit and mortgage markets; volatility of market prices, rates and indices related to financial instruments; political, legislative, regulatory, litigation, or judicial events or actions; changes in assumptions used in the quarterly other-than-temporary impairment (OTTI) process; risks related to MBS; changes in the assumptions used in the allowance for credit losses; changes in the Bank’s capital structure; changes in the Bank’s capital requirements; membership changes; changes in the demand by Bank members for Bank advances; an increase in advance prepayments; competitive forces, including the availability of other sources of funding for Bank members; changes in investor demand for consolidated obligations and/or the terms of interest rate exchange agreements and similar agreements; changes in the Federal Home Loan Bank (FHLBank) System’s debt rating or the Bank’s rating; the ability of the Bank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services; the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; applicable Bank policy requirements for retained earnings and the ratio of the market value of equity to par value of capital stock; the Bank’s ability to maintain adequate capital levels (including meeting applicable regulatory capital requirements); business and capital plan adjustments and amendments; technology risks; and timing and volume of market activity. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. FHLBank Pittsburgh does not undertake to update any forward-looking statements made in this announcement.

Unaudited Condensed Statements of Condition and Income
(in millions)

Condensed Statement of Condition	December 31, 2014			December 31, 2013
ASSETS:
Cash and due from banks		$	2,451.1	$	3,121.3
Federal funds sold			4,585.0		2,875.0
Trading securities			281.0		239.2
Available-for-sale securities			8,408.8		6,757.7
Held-to-maturity securities			3,246.8		3,995.5
Advances			63,408.4		50,247.5
Mortgage loans held for portfolio, net of allowance for credit losses of $7.3 and $11.4, respectively			3,123.3		3,224.1
All other assets			172.7		210.6
Total assets		$	85,677.1	$	70,670.9
LIABILITIES:
Consolidated obligations, net		$	80,772.6	$	65,934.6
All other liabilities			901.5		1,044.1
Total liabilities			81,674.1		66,978.7
CAPITAL:
Capital stock			3,041.0		2,962.2
Retained earnings			837.5		685.7
Accumulated other comprehensive income			124.5		44.3
Total capital			4,003.0		3,692.2
Total liabilities and capital		$	85,677.1	$	70,670.9

	For the three months					For the year ended
	ended December 31,					December 31,
Condensed Statement of Income	2014			2013		2014			2013
Total interest income	$	165.5		$	151.0	$	626.1		$	596.5
Total interest expense		82.8			90.9		343.0			401.4
Net interest income		82.7			60.1		283.1			195.1
Provision (benefit) for credit losses		(0.2	)		0.2		(4.1	)		(1.8	)
Gains on litigation settlements, net		20.2			—		70.9			1.5
All other income (loss)		(7.9	)		15.0		4.7			46.0
All other expense		23.8			26.3		78.6			80.0
Income before assessments		71.4			48.6		284.2			164.4
Affordable Housing Program assessment		7.1			4.9		28.4			16.6
Net income	$	64.3		$	43.7	$	255.8		$	147.8

From the President
February 19, 2015

TO: All Members

SUBJECT: Full Year 2014 Financial Results, Dividend Payments and Explanation of Differentiated Dividends Coming in 2015

I am pleased to share our year-end and fourth quarter 2014 earnings release along with announcements regarding dividend payments and differentiated dividends.

Year-end and Fourth Quarter Earnings Release

The attached news release includes information on our financial performance:

• Net income of $255.8 million for 2014, which is record earnings in the Bank’s 82-year history

• A quarterly dividend of 4.00 percent annualized

• A special dividend of 2.50 percent, payable to each stockholder based on their average stock for the full year

The Board of Directors and management are happy to pay these dividends, which reflect the strength of our cooperative. It is important to note that the special dividend paid for 2014 was positively impacted by net gains on litigation settlements. If a special dividend is paid again in the future, the level is unlikely to be as high.

Dividend Payments

Based on fourth quarter performance, the Board of Directors declared a quarterly dividend of 4.00 percent annualized. This dividend will be calculated on your average capital stock held during the period October 1 to December 31, 2014, and will be credited to your demand deposit account (DDA) tomorrow, February 20. Additionally, based on 2014’s record earnings, the Board declared a special dividend equal to an annual yield of 2.50 percent. This special dividend will be calculated on your average capital stock during the period January 1 to December 31, 2014, and credited to your DDA on Monday, February 23, 2015.

Dividend Differentiation Beginning in April

The attached communication outlines the last of the changes to the Bank’s capital structure: dividend differentiation, as we discussed throughout 2014. The first differentiated dividend is expected to be paid in April of 2015 based on first quarter 2015 performance. Please review this information carefully.

As a reminder, our quarterly conference call is scheduled for Wednesday, February 25, at 9 a.m. You will have an opportunity to ask questions regarding these announcements on the call. If you have yet to register, you may do so by clicking here.

Sincerely,

Winthrop Watson
President and Chief Executive Officer

February 19, 2015

To all members of FHLBank Pittsburgh:

This brochure provides a synopsis of the final changes to the Bank’s capital structure: differentiated dividends.

As we have been discussing over the past two years, management, along with the Board, re-evaluated the Bank’s capital structure in response to our improved financial performance and historic high levels of retained earnings. We implemented a series of changes, all with an eye toward the most efficient use of capital:

• Reduced activity stock requirements on advances and letters of credit

• Widened ranges for activity stock, but no changes to current requirements

• Created two subclasses of stock: B1 membership and B2 activity, but no differentiation in dividends throughout 2014

• Reduced membership stock requirement: same access to liquidity for less cost

The next – and final – of these changes to the Bank’s capital structure is dividend differentiation, which will begin with dividends paid on first quarter 2015 performance. We expect to pay the first differentiated dividends in April, 2015.

Why Differentiate the Dividends?

Product usage is the main driver of the Bank’s earnings and financial success. Because the business we do with our customers – especially in advances, the MPF^® Program and letters of credit – drives our financial performance, we believe that users of the cooperative should be rewarded with higher dividends. It is important to note that the impact of dividend differentiation is proportional and affects all members the same, regardless of asset size. Users are rewarded for using the cooperative; non-users continue to enjoy access to liquidity and receive a dividend.

The Bank has historically capitalized itself with both membership stock and activity stock. Membership stock provides required capital. It can be thought of as the cost of membership in FHLBank Pittsburgh and on-demand access to liquidity at an attractive cost. Activity stock, by contrast, allows the Bank to be self-capitalizing, expanding and contracting according to the membership’s borrowing needs. This accordion-like quality, or scalability, is crucial to our business model and ability to optimize financial returns across business cycles. Because activity stock maintains the dynamic nature of our balance sheet, it is appropriate that it earns a higher dividend.

We will communicate more about dividends in our quarterly conference call on February 25, where you will have the opportunity to ask questions. In the meantime, please don’t hesitate to call me, Kris Williams or your relationship manager with comments or questions. As always, you may call the Product Delivery Service Center at 1-800-288-3400, option 2.

Thank you for your continuing business and support.

Winthrop Watson

B1 and B2 Capital Stock Dividends

Summary of Changes to FHLBank Pittsburgh’s Capital Structure

	Implementation Date
Increased frequency of excess capital stock repurchases n Began repurchasing quarterly n Began repurchasing monthly n Began repurchasing weekly	n October 2010 n August 2013 n December 2014
Reduced activity stock requirements n On advances n On letters of credit	n September 2013 n March 2014
Reduced membership stock requirement	October 2014
Widened ranges (not requirements) for activity stock	October 2014
Created two subclasses of stock n B1 membership n B2 activity	October 2014
Will begin paying differentiated dividends on B1 and B2 stock	April 2015

Timing of Differentiation

The first payment of differentiated dividends is expected to be in April 2015 for first quarter 2015 performance. While the exact percentages have not yet been announced, the Bank anticipates that the dividend on membership stock will fall below the current level and the dividend on activity stock will rise above the current level. The dividend differential is expected to hold relatively stable throughout 2015.

In 2016 the differential will most likely widen: percentages paid on membership stock will decrease and percentages paid on activity stock will increase. By the end of 2016, it is anticipated that the phase-in of differentiated dividends will be completed.

How Much Differentiation?

Management and the Board continue to work toward the appropriate level of return for each subclass. The eventual amount of variance between the two subclasses has not yet been determined. However, it will start out as a modest differentiation during 2015, then most likely increase gradually during 2016. Management and the Board agree that rewarding users of the cooperative is important, so it is likely that the variance could be substantial by the end of 2016.

A Note on Special Dividends

It is important to note that the special dividend paid for 2014 was positively impacted by net gains on litigation settlements. If a special dividend is paid again in the future, the level is unlikely to be as high.

This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements will often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Actual performance or events may differ materially from that expected or implied in forward-looking statements because of many factors. Such factors may include, but are not limited to, economic and market conditions, real estate, credit and mortgage markets; volatility of market prices, rates and indices related to financial instruments; political, legislative, regulatory, litigation or judicial events or actions; changes in assumptions used in the quarterly other-than-temporary impairment (OTTI) process; risks related to mortgage-backed securities; changes in the assumptions used in the allowance for credit losses; changes in the Bank’s capital structure; changes in the Bank’s capital requirements; membership changes; changes in the demand by Bank members for Bank advances; an increase in advances’ prepayments; competitive forces, including the availability of other sources of funding for Bank members; changes in investor demand for consolidated obligations and/or the terms of interest rate exchange agreements and similar agreements; changes in the Federal Home Loan Bank (FHLBank) System’s debt rating or the Bank’s rating; the ability of the Bank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services; the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; applicable Bank policy requirements for retained earnings and the ratio of the market value of equity to par value of capital stock; the Bank’s ability to maintain adequate capital levels (including meeting applicable regulatory capital requirements); business and capital plan adjustments and amendments; technology risks; and timing and volume of market activity. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. FHLBank Pittsburgh does not undertake to update any forward-looking statements made in this announcement.

“MPF” is a registered trademark of the Federal Home Loan Bank of Chicago