The Federal Home Loan Bank of Pittsburgh (FHLBank or the Bank) announced unaudited financial results for full year and fourth quarter 2013.
In a release on February 21, the Bank noted that it recorded net income of $147.8 million for the year 2013 and $43.7 million for the fourth quarter. The Board of Directors declared a dividend of 2.50 percent annualized, payable to the Bank's stockholders on February 21.
"We have achieved a level of performance that supports a solid return to our stockholders and a meaningful contribution to affordable housing," said Winthrop Watson, president and chief executive officer. "We are committed to continuous improvement and returning value to our membership and communities."
The Bank's net income totaled $147.8 million for 2013, an increase of $18.1 million compared to $129.7 million for 2012. This increase was primarily driven by higher net gains on derivatives and hedging activities, lower net other-than-temporary impairment (OTTI) credit losses and net gains on the early extinguishment of debt, partially offset by lower net interest income and higher other expenses. Net gains on derivatives and hedging activities were $30.2 million for 2013 compared to $10.7 million for 2012, an increase of $19.5 million. OTTI credit losses on the private-label mortgage- backed securities (MBS) portfolio were $(0.4) million for 2013, an improvement of $11.0 million compared to $(11.4) million for 2012. Results for 2013 included net gains of $9.6 million from early extinguishment of debt. Partially offsetting these improvements, net interest income declined to $195.1 million in 2013 compared to $209.8 million for 2012, a decrease of $14.7 million. This decrease was primarily due to lower prepayment fees on advances. Additionally, total other expense was $80.0 million for 2013, an increase of $7.7 million from $72.3 million for 2012, primarily related to a voluntary contribution to the Bank's pension plan in the fourth quarter.
For the fourth quarter of 2013, net income was $43.7 million compared to $51.7 million for the same prior-year period, primarily due to lower net interest income, higher other expense and higher net losses on trading securities, partially offset by higher net gains on derivatives and hedging activities. Net interest income declined to $60.1 million for the fourth quarter, compared to $67.7 million for the fourth quarter of 2012, primarily due to a decrease in advance prepayment fees in the fourth quarter of 2013. Other expense increased $6.7 million in the fourth quarter of 2013 compared to the fourth quarter of 2012 primarily due to a voluntary pension plan contribution. The net loss on trading securities was $(5.1 million) in the fourth quarter of 2013 compared to a $0.1 million net gain in the fourth quarter of 2012. Partially offsetting the above were net gains on derivatives and hedging activities of $16.1 million for the fourth quarter of 2013, compared to $8.1 million in the fourth quarter of 2012.
As previously reported, the vast majority of the securities in the Bank's private-label MBS portfolio were AAA-rated at the time of purchase. Based on the performance of certain securities, among other information, it appears that the underwriting standards represented in the offering materials for these securities were not followed. As a result, the Bank owns certain private-label MBS, which it otherwise would not have owned, on which it has recognized losses. In 2009, the Bank filed lawsuits against certain issuers, underwriters and rating agencies related to these misrepresentations. As set forth in Form 8-K filed on January 28, the Bank has agreed with certain of its defendants to settle its claims against them arising out of certain investments the Bank made in private-label mortgage-backed securities. The Bank's litigation continues against various issuers, underwriters and credit rating agencies based on its investments in certain private-label mortgage- backed securities.
Balance Sheet Highlights
At December 31, 2013, total assets were $70.7 billion, an increase of $6.1 billion from $64.6 billion at December 31, 2012, primarily due to increased advances partially offset by a decrease in short-term liquidity balances. Advances totaled $50.2 billion at December 31, 2013, an increase of $9.7 billion compared to $40.5 billion at December 31, 2012, primarily due to the increased liquidity needs of several large members. Short-term liquidity balances, which includes Federal funds sold, securities purchased under agreements to resell and cash, declined approximately $2.5 billion in the comparison.
Total capital at December 31, 2013, was $3.7 billion, up from $3.4 billion at December 31, 2012. This increase was primarily driven by additional stock purchases from members to support advance activity, which more than offset the Bank's excess stock repurchases during 2013, and higher retained earnings. Total retained earnings were $685.7 million at December 31, 2013, an increase of $126.4 million from $559.3 million at December 31, 2012. Total retained earnings at December 31, 2013, included $60.1 million of restricted retained earnings. At December 31, 2013, FHLBank Pittsburgh had total regulatory capital of $3.6 billion and remained in compliance with all regulatory capital requirements.
The Board of Directors declared a dividend equal to an annual yield of 2.50 percent. The dividend will be calculated on stockholders' average balances during the period October 1, 2013, to December 31, 2013, and credited to stockholders' accounts on Friday, February 21.
FHLBank Pittsburgh is a wholesale bank that serves the housing finance and community and economic development needs of its owner- members.
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