1330399--3/27/2009--Federal_Home_Loan_Bank_of

related topics

{loan, real, estate}

{capital, credit, financial}

{regulation, change, law}

{system, service, information}

{tax, income, asset}

{condition, economic, financial}

{debt, indebtedness, cash}

{stock, price, share}

{operation, international, foreign}

{control, financial, internal}

{financial, litigation, operation}

Global financial market disruptions during 2008 increased the uncertainty and unpredictability the Bank faces in managing its business. The continuing economic downturn, geopolitical conditions, or a natural disaster, especially one affecting the Bank s district, customers or counterparties, could adversely affect the Bank s business, results of operations or financial condition. The Bank may fail to meet its minimum regulatory capital requirements, which would impact the Bank s ability to conduct business as usual, result in prohibitions on dividends, excess capital stock repurchases and capital stock redemptions and potentially impact the value of Bank membership. In addition, the Bank may continue to be limited in its ability to pay dividends or to pay dividends at rates consistent with past practices. The Bank may be limited in its ability to access the capital markets, which could adversely affect the Bank s liquidity. In addition, the Bank s limited ability to access the long-term debt markets has had, and may continue to have, a material adverse effect on its liquidity, results of operations and financial condition, as well as its ability to fund operations, including loans to members. The Bank invests in MBS, including significant legacy positions in private label MBS, which share risks similar to the MPF Program as well as risks unique to MBS investments. The increased risks inherent with these investments have adversely impacted the Bank s profitability and capital position and are likely to continue to do so during 2009. The Bank s financial condition or results of operations may be adversely affected if MBS servicers fail to perform their obligations to service mortgage loans as collateral for MBS. Unexpected sizeable adverse movements in market conditions, driven by ongoing market uncertainty and volatility, would continue to adversely affect the Bank s business, financial condition and results of operations. The Bank is subject to credit risk due to default, including failure or ongoing instability of any of the Bank s member, derivative, money market or other counterparties, which could adversely affect its profitability or financial condition. The Bank is subject to legislative and regulatory actions, including a complex body of regulations, including Finance Agency regulations, which may be amended in a manner that may affect the Bank s business, operations and/or financial condition and members investment in the Bank. The Bank is jointly and severally liable for the consolidated obligations of other FHLBanks. Changes in the Bank s, other FHLBanks or other GSEs credit ratings may adversely affect the Bank s ability to issue consolidated obligations and enter into derivative transactions on acceptable terms. Fluctuating interest rates or the Bank s inability to successfully manage its interest rate risk may adversely affect the Bank s net interest income, overall profitability and the market value of its equity. The loss of significant Bank members or borrowers may have a negative impact on the Bank s loans and capital stock outstanding and could result in lower demand for its products and services, lower dividends paid to members and higher borrowing costs for remaining members, all which may affect the Bank s profitability and financial condition. The Bank faces competition for loans, mortgage loan purchases and access to funding, which could negatively impact earnings. The MPF Program has different risks than those related to the Bank s traditional loan business, which could adversely impact the Bank s profitability. The Bank s Affordable Housing Program and other related community investment programs may be severely affected if the Bank s annual net income is reduced or eliminated. The Bank relies on externally developed models to manage market risk, to make business decisions and for financial accounting and reporting purposes. These models are run and maintained by the Bank and the Bank s business could be adversely affected if these models fail to produce reliable and useful results. The Bank s business is dependent upon its computer information systems. An inability to process information or implement technological changes, or an interruption in the Bank s systems, may result in lost business. The Bank s accounting policies and methods are fundamental to how the Bank reports its market value of equity, financial condition and results of operations, and they require management to make estimates about matters that are inherently uncertain. The Bank may be adversely affected by litigation. The Bank s controls and procedures may fail or be circumvented, and risk management policies and procedures may be inadequate. Additionally, circumstances beyond the Bank s control could cause unexpected operating losses.

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1330399--3/27/2009--Federal_Home_Loan_Bank_of_Pittsburgh