Federal Home Loan Bank of Pittsburgh: Your 2023 Annual Report Snapshot

Curious about the Federal Home Loan Bank of Pittsburgh (FHLB Pittsburgh)? This summary provides a clear, investor-focused overview of their performance for the fiscal year ended December 31, 2023.

Business Overview

Who We Are and What We Do: FHLB Pittsburgh serves as a vital financial partner for its member institutions across Delaware, Pennsylvania, and West Virginia. As a wholesale bank, it provides essential funding and services to commercial banks, credit unions, insurance companies, and community development financial institutions. Our core mission is to support housing finance and community development by offering reliable, low-cost funding, primarily through "advances" (secured loans) to our members. We are part of the larger Federal Home Loan Bank System, a government-sponsored enterprise (GSE) with a public mission.

Financial Performance

Financial Highlights for 2023: FHLB Pittsburgh delivered a strong financial year, demonstrating both stability and growth.

• Net Income: The Bank's net income reached $385 million for the year ended December 31, 2023, a significant increase from $320 million in 2022. Higher net interest income, driven by an expanded asset base and a favorable interest rate environment, primarily fueled this growth.
• Total Assets: Total assets grew to $115 billion as of December 31, 2023, up from $105 billion at year-end 2022. Increased demand for advances from member institutions largely drove this expansion.
• Advances to Members: Advances to members, the Bank's primary business, totaled $88 billion at year-end 2023. These advances provided crucial liquidity to over 300 member institutions.
• Capital Position: The Bank maintained a robust capital position, holding total capital of $5.75 billion as of December 31, 2023. This resulted in a capital-to-assets ratio of 5.0%, comfortably exceeding the 4.0% regulatory minimum and underscoring our financial strength and stability.
• Funding: The Bank primarily funds its operations by issuing consolidated obligations in the capital markets. All eleven FHLBanks jointly and severally guarantee these obligations.

Management Discussion (MD&A Highlights)

Management Discussion and Analysis (MD&A) Highlights: Net interest income significantly increased in 2023, driving the rise in net income. An expanded average balance of interest-earning assets, particularly advances to members, and a higher net interest margin, reflecting the prevailing interest rate environment, fueled this growth. The Bank effectively managed its interest-rate sensitive assets and liabilities to optimize earnings while maintaining risk parameters. We also effectively managed operating expenses relative to the growth in assets and income. The Bank's capital management strategies ensured compliance with all regulatory capital requirements, supporting its financial stability and capacity for future growth. We regularly review and consistently apply critical accounting policies, especially those related to fair value measurements of financial instruments and the allowance for credit losses on advances.

Financial Health

Financial Health (Debt, Cash, Liquidity): The Bank maintains a strong financial health profile. We primarily fund our operations by issuing consolidated obligations in the global capital markets. These obligations receive high ratings because all FHLBanks jointly and severally guarantee them, providing a stable and cost-effective source of debt financing. The Bank manages its debt portfolio to align with the duration and characteristics of its assets, primarily advances to members and investment securities.

For liquidity, FHLB Pittsburgh holds a substantial portfolio of high-quality, liquid investment securities and accesses diverse funding markets. This ensures we can meet member demand for advances, manage our own obligations, and respond to market fluctuations. We actively manage cash and investment securities to optimize returns while adhering to strict liquidity and credit risk guidelines. Our robust capital position, evidenced by a capital-to-assets ratio exceeding regulatory minimums, further underpins our financial strength and ability to absorb potential losses, ensuring we can fulfill our mission.

Risk Factors

Key Risks to Consider: Investors should understand the following risks:

• Interest Rate Risk: As a financial institution, FHLB Pittsburgh faces exposure to interest rate fluctuations, which can impact net interest income. The Bank actively manages this risk through hedging strategies and asset-liability matching.
• Credit Risk: While advances are collateralized, economic downturns can affect the credit quality of member institutions and the underlying collateral. The Bank monitors the creditworthiness of its members and the value of collateral.
• Regulatory and Legislative Risk: As a GSE, the Federal Housing Finance Agency (FHFA) oversees the Bank. Changes in regulations or legislation could impact our operations or structure.
• Economic Conditions: Broader economic conditions, including inflation, recessionary pressures, and housing market trends, can influence member demand for advances and the Bank's overall financial health.
• Operational Risk: This includes the risk of loss from inadequate or failed internal processes, people, and systems, or from external events like cybersecurity threats and business continuity disruptions.

Future Outlook

Outlook for the Future: FHLB Pittsburgh expects to continue its vital role as a liquidity provider to its member institutions. The Bank anticipates navigating the evolving economic landscape, including potential interest rate volatility and changing demand for credit. Our focus remains on maintaining a strong capital base, effectively managing risks, and fulfilling our mission to support housing and community development across our district. We are committed to adapting our product offerings to meet the dynamic needs of our diverse membership.

Competitive Position

Competitive Position: As a government-sponsored enterprise (GSE) and a wholesale bank, FHLB Pittsburgh operates in a unique market segment. We do not compete with our member institutions for retail deposits or loans to the public. Instead, our "competitive" advantage lies in being a preferred and reliable funding source for our members compared to other wholesale funding options available to them, such as brokered deposits, other capital market instruments, or direct borrowing from other financial institutions. The FHLB System's unique structure, including its public mission, statutory advantages, and the collective guarantee of all FHLBanks for consolidated obligations, provides a distinct advantage in offering reliable, low-cost funding. The value we offer members extends beyond just funding; it also includes access to the Affordable Housing Program and Community Lending Program, which commercial funding providers typically do not offer.

Business Strategy and Operations

Business Strategy and Operations: The Bank's strategy centers on being a reliable partner for its members and fulfilling its public mission.

• Core Business: We provide a stable source of funding through a variety of advance products (fixed-rate, variable-rate, short-term, long-term) tailored to member needs.
• Community Investment: FHLB Pittsburgh significantly contributes to community development. In 2023, we committed $35 million in grants through our Affordable Housing Program (AHP) to support the creation and preservation of affordable housing units. We also continued to offer our Community Lending Program (CLP) to subsidize advances for targeted community development projects.
• Risk Management: A key focus remains on prudent asset-liability management, credit risk mitigation (as advances are collateralized), and operational efficiency. This includes robust internal controls and compliance frameworks.