Attached files
| file | filename |
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| 8-K - 8-K - Federal Home Loan Bank of Pittsburgh | d251510d8k.htm |
 Member Audio/Web
Conference
November 4, 2011
Exhibit 99.1 |
 2
Cautionary Statement Regarding Forward-
Looking Information and Adjusted Information
Data set forth in these slides includes unaudited data. 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.” These
uncertainties may cause our actual future results to be materially different than those expressed in
our forward-looking statements. 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, other than temporary impairment of investment
securities, regulatory and accounting rule adjustments or
requirements, changes in interest rates, changes in projected business volumes, changes in prepayment
speeds on mortgage assets the cost of our funding, changes in our membership profile, the
withdrawal of one or more large members, competitive pressures, shifts in demand for our
products and consolidated obligations, changes in the System’s debt rating or the Bank’s rating, general
economic conditions (including effects on among other things, mortgage-backed securities),
applicable Bank policy requirements for retained earnings levels and the ratio of market value
of equity to par value of Bank capital stock, the Bank's ability to maintain adequate capital
levels (including meeting applicable regulatory capital requirements), business and capital plan adjustments and
amendments, legislative and regulatory actions or approvals, interest-rate volatility, our ability
to appropriately manage our cost of funds and the cost-effectiveness of our funding,
hedging and asset-liability management activities. We undertake no obligation to
revise or update publicly any forward-looking statements for any reason. This document also
contains non-GAAP financial information Because of the nature of (1) OTTI charges; (2) the
gains (losses) on sales of OTTI securities; and (3) gain on the sale of the Bank’s Lehman
derivatives claim, the Bank believes that adjusting net income for these items and evaluating results as adjusted (which the
Bank defines as “adjusted earnings") is important in order to understand how the Bank is
performing with respect to its primary business operations and to provide meaningful
comparisons to prior periods. Adjusted earnings are considered to be a non-GAAP
measurement. Management uses this information in its internal analysis of results and believes that
this information may be informative to investors in gauging the quality of our financial
performance, identifying trends in our results and providing meaningful
period-to-period comparisons.
|
 3
Financial Highlights –
Statement of Operations
(in millions)
2011
2010
Over/
(Under)
Net interest income
112.7
$
168.7
$
(56.0)
$
Provision (benefit) for credit losses
6.4
(2.7)
9.1
Net OTTI losses
(37.5)
(145.3)
107.8
All other income
11.5
7.8
3.7
Other expenses
46.0
47.1
(1.1)
Income (loss) before assessments
34.3
(13.2)
47.5
AHP/REFCORP
7.2
-
7.2
GAAP net income (loss)
27.1
$
(13.2)
$
40.3
$
Net interest margin (bps)
29
37
(8)
Nine
Months
Ended
September
30, |
 4
Quarterly Adjusted Earnings
3Qtr 11
2Qtr 11
1Qtr 11
4Qtr 10
3Qtr 10
GAAP net income
11.9
$
12.7
$
2.5
$
21.5
$
45.1
$
Adjustments:
Net OTTI credit losses
(6.2)
(10.8)
(20.5)
(13.1)
(7.0)
Gains on sales of OTTI
securities
-
7.3
-
-
8.4
Sale of Lehman claim
1.9
AHP/REFCORP
0.4
0.9
5.4
6.9
11.6
Adjusted earnings
15.8
$
15.3
$
17.6
$
27.7
$
32.1
$
(in millions) |
 5
Financial Highlights –
Selected Balance Sheet
2011
2010
Amount
YTD - Average:
Advances (par)
25,696
$
35,492
$
(9,796)
$
(28)
%
Total investments
20,792
18,944
1,848
10
Total assets
52,512
61,063
(8,551)
(14)
Sept 30,
Dec 31,
2011
2010
Amount
PLMBS (par)
4,020
$
5,070
$
(1,050)
$
(21)
%
Retained earnings
424
397
27
7
AOCI
(137)
(223)
86
39
Percent
Over/(Under)
Over/(Under)
Nine months ended September 30,
Percent
(in millions)
(in millions) |
 6
Advance Trend
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Sept-
Sept-
Sept-
Sept-
Sept-
Dec-
Mar
-
Jun-
Sept-
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
$49.8
$64.0
$71.6
$39.6
$29.9
$28.4
$25.5
$25.7
$24.4
Par Spot
06
07
08
09
10
10
11
11
11
(Period End) |
 7
Net OTTI Recognized
•
No significant assumption changes in third quarter 2011 OTTI process
•
Overall portfolio performance has generally remained stable except for certain
Alt-A 2006 vintage bonds which continue to experience deterioration
•
At September 30, 2011, 51 securities had an OTTI credit loss recorded with current
par of $2.3 billion. This represents 56% of the PLMBS portfolio
•
No new CUSIPs were determined to be other-than-temporarily impaired in
third quarter 2011 •
Actual cash losses of approximately $17 million life-to-date
(in millions)
Par Balance
3rd Qtr
2nd Qtr
1st Qtr
Full Year
Life-to-
9/30/11
2011
2011
2011
2010
Date
% of Par
Private label MBS
Prime
1,169
$
2
$
3
$
7
$
109
$
217
$
18.6
%
Alt-A
1,053
4
7
13
48
209
19.8
Subprime & HELOC
33
-
1
-
1
8
24.2
Total
2,255
$
6
$
11
$
20
$
158
$
434
$
19.2
%
Total Credit Losses
Life-to-Date |
 8
PLMBS Portfolio –
Ratings and Price
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Millions
0
20
40
60
80
100
120
Price
06/30/2011
09/30/2011
06/30/2011
09/30/2011
Investment Grade
$1.4b of portfolio at 6/30/11
$1.2b of portfolio at 9/30/11
Below Investment Grade
$2.9b of portfolio at 6/30/11
$2.8b of portfolio at 9/30/11
Bars represent unpaid principal balance by credit rating
Lines represent price by credit rating |
 9
PLMBS -
Par and Price By Vintage
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
12/31/2008
12/31/2009
12/31/2010
09/30/2011
0
10
20
30
40
50
60
70
80
90
100
Millions
Price
Total Portfolio
2007
2006
2005
2004 & Earlier
Lines represent prices
2004 &
Earlier
2005
2006
2007
Bars represent
proportion of unpaid
principal balance |
 10
Capital and Risk-Based Requirements
Sept 30,
June 30,
Dec 31,
2011
2011
2010
Permanent capital
(1)
3,956
$
4,108
$
4,418
$
Risk-based capital requirement:
Credit risk capital
654
$
693
$
798
$
Market risk capital
268
398
448
Operations risk capital
277
327
374
Total risk-based capital requirement
1,199
$
1,418
$
1,620
$
Excess permanent capital
2,757
$
2,690
$
2,798
$
Percentage of requirement
330%
290%
273%
Capital ratio (4% minimum)
8.5%
7.9%
8.3%
Leverage ratio (5% minimum)
12.7%
11.9%
12.4%
Market value/capital stock (MV/CS)
96.0%
97.9%
93.3%
(in millions)
(1)
Permanent capital includes excess stock of $1,621, $1,730, and $1,897 at Sept 30, 2011, June
30, 2011 and December 31, 2010 respectively.
Second quarter 2011 capital classification “adequately capitalized.” However, our
regulator has maintained concerns regarding our level of retained earnings and the poor
quality of the PLMBS portfolio.
|
 11
•
Partial excess capital stock repurchase
°
Effective date: October 27, 2011
°
Payment date: October 28, 2011
•
No significant impact on:
°
Risk and capital adequacy measures
°
Members’
excess ownership percentage
•
Decisions for any future repurchases and/or dividend payment will be based
on the following:
°
Positive GAAP earnings which are sustainable for the foreseeable
future
°
Increased retained earnings
°
Reduced negative AOCI levels
°
Adequate excess regulatory capital
°
MV/CS > 87.5%
Excess Stock Repurchase |
 12
Member Audio/Web
Conference
November 4, 2011 |