10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2007
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 000-51395

FEDERAL HOME LOAN BANK OF PITTSBURGH

(Exact name of registrant as specified in its charter)


Federally Chartered Corporation		25-6001324
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

601 Grant Street Pittsburgh, PA 15219 (Address of principal executive offices)		15219 (Zip Code)

(412) 288-3400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer o Accelerated filer þ Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

There were 29,484,090 shares of common stock with a par value of $100 per share outstanding at April 30, 2007.

PART I — FINANCIAL INFORMATION

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Federal Home Loan Bank of Pittsburgh (Bank) is one of twelve Federal Home Loan Banks (FHLBanks). The FHLBanks operate as separate entities with their own managements, employees and boards of directors. The twelve FHLBanks, along with the Office of Finance (OF) (the FHLBanks’ fiscal agent) and the Federal Housing Finance Board (Finance Board) (the FHLBanks’ regulator) make up the Federal Home Loan Bank System (FHLBank System). The FHLBanks were organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (the Act). The FHLBanks are commonly referred to as government-sponsored enterprises (GSEs), which generally means they are a combination of private capital and public sponsorship. The public sponsorship attributes include: (1) being exempt from federal, state and local taxation, except real estate taxes; (2) being exempt from registration under the Securities Act of 1933 (1933 Act) (the FHLBanks are required by Finance Board regulation to register a class of their equity securities under the Securities Exchange Act of 1934 (1934 Act)); (3) having public interest directors appointed by its regulator; and (4) having a line of credit with the United States Treasury.

Business Segments. The Bank reviews its operations by grouping its products and services within two business segments. The products and services provided through these segments reflect the manner in which financial information is evaluated by management of the Bank. These business segments are:


	•	Traditional Member Finance

	•	Mortgage Partnership Finance^® (MPF^®) Program

Financial Highlights

The Statement of Operations data for the three months ended March 31, 2007 and 2006, and the Statement of Condition data as of March 31, 2007 are unaudited and are derived from the financial statements and footnotes included in this report. The Statement of Condition data as of December 31, 2006 is derived from the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Statement of Operations


	Three months ended March 31,
(in thousands)	2007			2006


Net interest income before provision for credit losses	$	83,654		$	78,250
Provision for credit losses		1,889			570
Other income, excluding net gain on derivatives and hedging activities		1,583			1,641
Net gain on derivatives and hedging activities		4,997			4,626
Other expense		15,161			16,303


Income before assessments		73,184			67,644
Assessments		19,429			17,957


Net income	$	53,755		$	49,687


Earnings per share⁽¹⁾	$	1.73		$	1.68


Dividends	$	49,246		$	24,014
Weighted average dividend rate⁽²⁾		5.83	%		3.30	%
Return on average capital		6.47	%		6.35	%
Return on average assets		0.29	%		0.28	%
Net interest margin⁽³⁾		0.46	%		0.44	%
Total capital ratio (at period-end)⁽⁴⁾		4.57	%		4.38	%
Total average capital to average assets		4.52	%		4.38	%

Notes:


⁽¹⁾		Earnings per share calculated based on net income.

⁽²⁾		Weighted average dividend rates are annualized dividends divided by the average of the daily balances of outstanding capital stock during the period that are eligible for dividends.

⁽³⁾		Net interest margin is net interest income before provision for credit losses as a percentage of average interest-earning assets.

⁽⁴⁾		Total capital ratio is capital stock plus retained earnings and accumulated other comprehensive income (loss) as a percentage of total assets at period end.

Statement of Condition


(in thousands)	March 31, 2007		December 31, 2006


Loans to members	$	45,801,468	$	49,335,377
Investments — Federal funds sold, interest-bearing deposits and investment securities⁽¹⁾		19,465,316		19,994,932
Mortgage loans held for portfolio, net		6,749,908		6,966,345
Total assets		73,010,980		77,376,458
Deposits and other borrowings⁽²⁾		1,807,108		1,433,889
Consolidated obligations, net⁽³⁾		67,129,280		71,472,618
AHP payable		51,582		49,386
REFCORP payable		13,544		14,531
Capital stock — putable		3,082,834		3,384,358
Retained earnings		259,286		254,777
Total capital		3,337,149		3,633,974

Notes:


⁽¹⁾		None of these securities were purchased under agreements to resell.

⁽²⁾		Includes mandatorily redeemable capital stock.

⁽³⁾		Aggregate FHLBank System-wide consolidated obligations (at par) were $951.5 billion and $952.0 billion at March 31, 2007 and December 31, 2006, respectively.

Forward-Looking Information

Statements contained in this quarterly report on Form 10-Q, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of Pittsburgh (Bank), may be “forward-looking statements.” These statements may use forward-looking terms, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or their negatives or other variations on these terms. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: economic and market conditions; volatility of market prices, rates, and indices; political, legislative, regulatory, or judicial events; changes in the Bank’s capital structure; 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; 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 Federal Home Loan Banks (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; and timing and volume of market activity. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Bank’s interim financial statements and notes and Risk Factors includes in Part II Item 1A of this report on Form 10-Q, and the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Earnings Performance

The following is Management’s Discussion and Analysis of the Bank’s earnings performance for the three months ended March 31, 2007. This discussion should be read in conjunction with the unaudited interim financial statements and notes included in the report as well as the audited financial statements and analysis for the year ended December 31, 2006, included in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Summary of Financial Results

Net Income and Return on Capital. The Bank’s net income totaled $53.8 million for the first quarter of 2007, an increase of $4.1 million from the first quarter of 2006. The primary reason for the earnings increase was an increase in net interest income which, for the first quarter of 2007, reflected a $5.4 million increase over first quarter 2006. The higher rate environment resulted in higher interest income, primarily on the loans to members portfolio. This increase was partially offset by higher interest expense on discount notes, due to both increased volume and higher interest rates paid. Details of the Statement of Operations are discussed more fully below. The Bank’s return on average capital increased to 6.47% in the first quarter of 2007, up from a return on average capital of 6.35% in the same year-ago period.

Dividend Rate. Because members may purchase and redeem their Bank capital stock shares only at par value, management has regarded quarterly dividend payments as an important vehicle through which a direct investment return is provided. The Bank’s weighted average dividend rate was 5.83% in the first quarter of 2007 compared to 3.30% in the first quarter of 2006. Retained earnings were $259.3 million as of March 31, 2007, compared to $254.8 million at December 31, 2006.

Net Interest Income

The following table summarizes the rate of interest income or interest expense, the average balance for each of the primary balance sheet classifications and the net interest margin for the three months ended March 31, 2007 and 2006.

Average Balances and Interest Yields/Rates Paid


	Three months ended March 31,
	2007							2006

				Interest		Avg.					Interest		Avg.
	Average			Income/		Rate		Average			Income/		Rate
(dollars in millions)	Balance			Expense		(%)		Balance			Expense		(%)


Assets
Federal funds sold⁽¹⁾	$	3,538		$	46		5.31	$	3,150		$	35		4.46
Interest-bearing deposits		3,901			52		5.37		3,364			38		4.53
Investment securities⁽²⁾		12,819			157		4.96		11,392			128		4.56
Loans to members⁽³⁾		46,204			623		5.47		45,951			527		4.66
Mortgage loans held for portfolio⁽³⁾		6,855			88		5.21		7,545			95		5.12


Total interest-earning assets		73,317			966		5.34		71,402			823		4.68
Allowance for credit losses		(7	)						(6	)
Other assets		1,260							956


Total assets	$	74,570						$	72,352


Liabilities and capital
Deposits	$	1,398		$	17		5.10	$	1,138		$	12		4.19
Consolidated obligation discount notes		16,851			218		5.24		11,678			127		4.42
Consolidated obligation bonds		51,996			647		5.04		55,350			606		4.44
Other borrowings		22			—		6.98		18			—		3.39


Total interest-bearing liabilities		70,267			882		5.09		68,184			745		4.43
Other liabilities		934							996
Total capital		3,369							3,172


Total liabilities and capital	$	74,570						$	72,352


Net interest spread							0.25							0.25
Impact of noninterest-bearing funds							0.21							0.19


Net interest income/net interest margin				$	84		0.46				$	78		0.44

Notes:


⁽¹⁾	The average balance of Federal funds sold, related interest income and average yield calculations may include loans to other FHLBanks.

⁽²⁾	The average balance of investment securities available-for-sale represents fair values. Related yield, however, is calculated based on cost.

⁽³⁾	Nonaccrual loans are included in average balances in determining the average rate.

Net interest income increased $5.4 million, or 6.9%, to $83.6 million for the first quarter of 2007. The increase was primarily rate driven, as indicated in the table below. Average interest-earning assets and average interest-bearing liabilities only increased 2.7% and 3.1%, respectively, over the prior year period. The net interest margin increased 2 basis points to 0.46% for the first quarter of 2007, due to an increase of 2 basis points in the impact of net noninterest-bearing funds. While the net interest spread is the same for both periods, the Bank has experienced some spread compression and expects this trend to continue. The impact of net noninterest-bearing funds is driven

primarily by short-term interest rates; as the short-term rates increase, the impact of net noninterest-bearing funds increases as well.

Rate/Volume Analysis. Changes in both volume and interest rates influence changes in net interest income and net interest margin. The following table summarizes changes in interest income and interest expense between the three months ended March 31, 2007 and 2006.


	2007 compared to 2006⁽¹⁾
(in millions)	Volume			Rate		Total


Increase (decrease) in interest income due to:
Federal funds sold	$	4		$	7	$	11
Interest-bearing deposits		6			8		14
Investment securities		16			13		29
Loans to members		3			93		96
Mortgage loans held for portfolio		(9	)		2		(7	)


Total		20			123		143
Increase (decrease) in interest expense due to:
Deposits		2			3		5
Consolidated obligation discount notes		57			34		91
Consolidated obligation bonds		(37	)		78		41


Total		22			115		137


Increase (decrease) in net interest income	$	(2	)	$	8	$	6

Note:


⁽¹⁾	The changes for each category of interest income and expense are divided between the portion of change attributed to volume or rate for that category.

The $1.9 billion, or 2.7%, increase in average interest-earning assets was driven primarily by increases in the investment securities portfolio, interest-bearing deposits and Federal funds sold balances. The loans to members average portfolio increased only slightly from the same year-ago period. These increases were offset by a decrease in the balance of mortgage loans held for portfolio.

The increases in investments, interest-bearing deposits and Federal funds sold totaled $2.4 billion, or 13.1%, and reflected the Bank’s ongoing strategy of increasing liquidity through increases in short-term investments. This focus was in response to the Federal Reserve Daylight Overdraft Policy, which became effective July 20, 2006. The Bank has been investing in these liquid assets when short-term rates have been increasing and, as a result, the interest income on these investments increased $54 million, or 26.9%, due both to volume and rates.

The loans to members portfolio increased only $253 million, or 0.6%, from the prior year period. The $96 million, or 18.2%, increase in interest income on this portfolio was almost entirely rate-driven. The portfolio has been affected by the flat yield curve, which has caused members to de-leverage their balance sheets. The fluctuations within the portfolio are discussed more fully below.

The mortgage loans held for portfolio decreased $690 million, or 9.1%, from the first quarter of 2006, with a related $7 million, or 7.4%, decrease in interest income. The level of mortgages available to be purchased from members, down in large part due to the charter consolidation of the Bank’s largest provider of mortgages, has not been able to keep pace with the existing portfolio run-off, resulting in a decline in the overall portfolio.

The composition of the consolidated obligation portfolio reflected a change from longer-term bonds to short-term discount notes, with bonds decreasing $3.4 billion, or 6.1%, while discount notes increased $5.2 billion, or 44.3%. The related interest expense on the bonds and discount notes increased $41 million, or 6.8%, and $91 million, or 71.7%, respectively. The increase in interest expense on discount notes was primarily volume-driven, while the increase in the interest expense on bonds was rate-driven. The primary drivers of the increase in the balance of discount notes, and related interest, were the funding requirements of interest-bearing deposits and

Federal funds sold as well as a need to provide additional funding flexibility relative to the changing mix of the loans to members portfolio.

Loans to Members Portfolio Detail:


		Average Balances
(in millions)		Three months ended March 31,
Product	Description	2007			2006


RepoPlus	Short-term fixed-rate loans; principal and interest paid at maturity.	$	4,758.8		$	5,597.4
Mid-Term RepoPlus	Mid-term fixed-rate and adjustable-rate loans; principal paid at maturity; interest paid quarterly.		19,746.6			18,756.0
Term Loans	Long-term fixed-rate and adjustable-rate loans; principal paid at maturity; interest paid quarterly; (includes amortizing loans with principal and interest paid monthly); Affordable Housing Loans and Community Investment Loans.		10,398.9			12,070.1
Convertible Select	Long-term fixed-rate and adjustable-rate loans with conversion options sold by member; principal paid at maturity; interest paid quarterly.		8,800.7			8,402.2
Hedge Select	Long-term fixed-rate and adjustable-rate loans with embedded options bought by member; principal paid at maturity; interest paid quarterly.		50.0			154.4
Returnable	Loans in which the member has the right to prepay the loan after a specified period.		2,515.0			1,068.9


Total par value			46,270.0			46,049.0
Discount on AHP loans to members			(1.5	)		(1.7	)
Deferred prepayment fees			(0.2	)		(0.3	)
SFAS 133 hedging adjustment			(64.2	)		(96.1	)


Total book value		$	46,204.1		$	45,950.9

As noted in the chart above, there was a slight shift from the RepoPlus product to the Mid-Term RepoPlus product. This is due in part to management efforts to extend the loans to members portfolio maturity and in part to the short-term interest rate environment. As short-term interest rates rise, overnight Federal funds and other sources of overnight funding become more attractive to members than Bank overnight loans. The short-term balances in the RepoPlus product tend to be extremely volatile as members borrow and repay frequently. The balances in the Mid-Term RepoPlus product tend to be somewhat variable, as these balances are driven by the members’ liquidity needs. Maturing loans are not always replaced if additional liquidity is not needed.

In addition, there was a shift from the Term Loan product to the Returnable product; the call option on the Returnable product was cheaper due to lower option volatility in the first quarter of 2007 than the first quarter of 2006, creating an opportunity for members to purchase prepayment protection at lower cost.

As of March 31, 2007, 36% of the loans in the portfolio had an original maturity of one year or less. Loans with an original maturity or next call date of one year or less comprised 41% of the portfolio at March 31, 2007; those with an original maturity or next convertible date of one year or less comprised 56% of the quarter-end balance.

The growth of the loans to members portfolio may be impacted by the following: (1) the Federal Reserve Daylight Overdraft Policy, which has put pressure on the Bank’s overnight cost of funds; (2) the slowing housing

market; (3) the flatter yield curve; and (4) any potential Finance Board retained earnings rule that could limit the Bank’s ability to declare dividends. These factors continue to put pressure on the Bank’s ability to grow the loans to members portfolio in the current pricing environment.

Net Interest Income Derivative Effects. The following tables separately quantify the effects of the Bank’s derivative activities on its interest income and interest expense for the three months ended March 31, 2007 and 2006. Derivative and hedging activities are discussed below in the other income (loss) section.

2007

Interest

Interest Inc./

Avg.

Inc./ Exp.

Avg.

Incr./

Average

Exp. with

Rate

without

Rate

Impact of

(Decr.)

(dollars in millions)

Balance

Derivatives

(%)

Derivatives

(%)

Derivatives

(%)

Assets

Federal funds sold

3,538

5.31

Interest-bearing deposits

3,901

5.37

Investment securities

12,819

157

4.96

157

4.96

Loans to members

46,204

623

5.47

568

4.98

0.49

Mortgage loans held for portfolio

6,855

5.21

5.26

)

(0.05

)

Total interest-earning assets

73,317

966

5.34

912

5.04

0.30

Allowance for credit losses

)

Other assets

1,260

Total assets

74,570

Liabilities and capital

Deposits

1,398

5.10

Consolidated obligation discount notes

16,851

218

5.24

218

5.24

Consolidated obligation bonds

51,996

647

5.04

611

4.76

0.28

Other borrowings

6.98

Total interest-bearing liabilities

70,267

882

5.09

846

4.88

0.21

Other liabilities

934

Total capital

3,369

Total liabilities and capital

74,570

Net interest income/interest rate spread

0.25

0.16

0.09

2006


				Interest Inc./		Avg.		Interest Inc./		Avg.					Incr./
	Average			Exp. with		Rate		Exp. without		Rate		Impact of			(Decr.)
(dollars in millions)	Balance			Derivatives		(%)		Derivatives		(%)		Derivatives			(%)


Assets
Federal funds sold	$	3,150		$	35		4.46	$	35		4.46	$	-
Interest-bearing deposits		3,364			38		4.53		38		4.53		-
Investment securities		11,392			128		4.56		128		4.56		-
Loans to members		45,951			527		4.66		499		4.40		28			0.26
Mortgage loans held for portfolio		7,545			95		5.12		96		5.18		(1	)		(0.06	)


Total interest-earning assets		71,402			823		4.68		796		4.52		27			0.16
Allowance for credit losses		(6	)
Other assets		956


Total assets	$	72,352


Liabilities and capital
Deposits	$	1,138		$	12		4.19	$	12		4.19	$	-
Consolidated obligation discount notes		11,678			127		4.42		127		4.42		-
Consolidated obligation bonds		55,350			606		4.44		572		4.18		34			0.26
Other borrowings		18			-		3.39		-		3.39		-


Total interest-bearing liabilities		68,184			745		4.43		711		4.22		34			0.21
Other liabilities		996
Total capital		3,172


Total liabilities and capital	$	72,352


Net interest income/interest rate spread				$	78		0.25	$	85		0.30	$	(7	)		(0.05	)

Mortgage Loan Premium/Discount. When mortgage loans are acquired by the Bank under the MPF Program, a premium or discount is typically paid to the participating financial institution. There are two primary reasons for these premiums or discounts: (1) prevailing market rates change between the date the mortgage loan is priced to the homeowner and the date the originating member locks in a commitment price at which to sell the loans to the Bank; or (2) borrowers elect to pay a higher than market rate on their mortgage loan in exchange for a reduction in up-front loan points, fees, and/or other loan closing costs. This practice of “financing the closing costs” results in a market-wide prevalence of premiums as opposed to discounts, which is reflected in the Bank’s mortgage loan portfolio. When mortgage loans pay off prior to their contractual terms, any associated unamortized premiums or discounts are recorded in net interest income.

The change in the amount of amortization and accretion of premiums and discounts on mortgage loans impacts the total and variability of the Bank’s net interest income. The combination of historically low residential mortgage rates, aggressive marketing by loan originators and the availability of low-cost loan products to prospective borrowers, had previously resulted in high levels of prepayment activity in the Bank’s mortgage loan portfolio. However, throughout 2006 and into 2007, prepayment activity decreased from prior levels, resulting in lower net premium/discount amortization. In the first quarter of 2007, amortization and accretion of mortgage loan premiums and discounts resulted in a net expense of $2.7 million, compared to $3.7 million during the first quarter of 2006.

The table below provides key information related to the Bank’s premium/discount on mortgage loans.


	Three months ended March 31,

(dollars in thousands)	2007			2006



Net premium/(discount) expense for the period	$	2,669		$	3,661
Mortgage loan related net premium balance at period-end	$	49,877		$	65,955
Mortgage loan par balance at period-end	$	6,681,725		$	7,351,701
Premium balance as a percent of mortgage loans		0.75	%		0.90	%

Other Income (Loss)



	Three months ended March 31,				% Change 2007/
(in thousands)	2007		2006		2006



Services fees	$	958	$	1,173		(18.3	)
Net gain on derivatives and hedging activities		4,997		4,626		8.0
Other, net		625		468		33.5


Total other income	$	6,580	$	6,267		5.0

First quarter 2007 results included other income of $6.6 million, compared with $6.3 million in first quarter 2006. Services fees decreased $215 thousand, or 18.3%, including declines in coin and currency and wire services. All other income increased $157 thousand, or 33.5%, including increased income on REO dispositions. Net gains on derivatives and hedging activities increased $371 thousand, or 8.0%, compared to the prior year quarter.

Derivatives and Hedging Activities. The Bank enters into interest rate swaps, caps, floors, swaption agreements and TBA securities, referred to collectively as derivative instruments. The Bank enters into derivatives transactions to offset all or portions of the financial risk exposures inherent in its member lending, investment and funding activities. All derivatives are recorded in the balance sheet at fair value. Changes in derivatives fair values are recorded in either the Statement of Operations or accumulated other comprehensive income within the capital section of the Statement of Condition depending on the hedge strategy.

The Bank’s hedging strategies consist of fair value and cash flow accounting hedges as well as economic hedges. Fair value and cash flow accounting hedges are discussed in more detail below. Economic hedges address specific risks inherent in the Bank’s balance sheet, but they do not qualify for hedge accounting. As a result, income recognition on the derivatives in economic hedges may vary considerably compared to the timing of income recognition on the underlying asset or liability. The Bank does not enter into derivatives for speculative purposes to generate profits.

Regardless of the hedge strategy employed, the Bank’s predominant hedging instrument is an interest rate swap. At the time of inception, the fair market value of an interest rate swap generally equals or is close to a zero value. Notwithstanding the exchange of interest payments made during the life of the swap, which are recorded as either interest income/expense or as a gain (loss) on derivative, depending upon the accounting classification of the hedge instrument, the fair value of an interest rate swap returns to zero at the end of its contractual term. Therefore, although the fair value of an interest rate swap is likely to change over the course of its full term, upon maturity any unrealized gains and losses net out to zero.

The following table details the net gains and losses on derivatives and hedging activities, including hedge ineffectiveness.


		Three months ended
		March 31,

(in thousands)
Type of Hedge	Asset/Liability Hedged	2007			2006


Fair value hedge ineffectiveness	Loans to members	$	2,635		$	1,437
	Consolidated obligations		2,689			560


	Total fair value hedge ineffectiveness		5,324			1,997
Economic hedges			(535	)		2,562
Intermediary transactions			52			(55	)
Other			156			122


Net gain on derivatives and hedging activities		$	4,997		$	4,626

Fair Value Hedges. The Bank uses fair value hedge accounting treatment for most of its fixed-rate loans to members and consolidated obligations using interest rate swaps. The interest rate swaps convert these fixed-rate instruments to a variable-rate (i.e., LIBOR). For the first quarter of 2007, total ineffectiveness related to these fair value hedges resulted in a gain of $5.3 million compared to a gain of $2.0 million in the first quarter of 2006. During the same period, the overall notional amount decreased from $68.9 billion in 2006 to $60.7 billion in 2007. Fair value hedge ineffectiveness represents the difference between the change in the fair value of the derivative compared to the change in the fair value of the underlying asset/liability hedged.

Economic Hedges. For economic hedges, the Bank includes the net interest income and the changes in the fair value of the hedges in net gain (loss) on derivatives and hedging activities. Total amounts recorded for economic hedges were a loss of $0.5 million in 2007 compared to a gain of $2.6 million in 2006. The overall notional amount of economic hedges decreased from $3.2 billion in 2006 to $2.9 billion in 2007.

Other Hedging Techniques. Other hedging techniques used by the Bank to offset the potential earnings effects of loan prepayments include callable debt instruments in the funding mix and the purchase of interest rate option contracts. Costs associated with callable debt instruments are reflected in the overall cost of funding included in the calculation of net interest margin. Gains and losses on purchased option positions are included in “other net gain (loss) on derivatives and hedging activities.”

Intermediary Transactions. Derivatives in which the Bank is an intermediary may arise when the Bank enters into derivatives with members and offsetting derivatives with other counterparties to meet the needs of members. The following table details the net gains and losses on intermediary transactions.


	Three months ended March 31,
(in thousands)	2007			2006


Contracts with members — fair value change	$	8		$	(1,567	)
Contracts with counterparties — fair value change		(16	)		1,492


Net fair value change		(8	)		(75	)
Interest income due to spread		60			20


Net gain (loss) on intermediary derivative activities	$	52		$	(55	)

Other Expense


	Three months ended March 31,				% Change
(in thousands)	2007		2006		2007/2006


Operating — salaries and benefits	$	9,387	$	9,832		(4.5	)
Operating — occupancy		801		761		5.3
Operating — other		3,689		4,577		(19.4	)
Finance Board		660		583		13.2
Office of Finance		624		550		13.5


Total other expenses	$	15,161	$	16,303		(7.0	)

Other expense totaled $15.2 million in the first quarter of 2007, compared to $16.3 million in the first quarter of 2006, a decrease of $1.1 million, or 7.0%. Excluding the operating expenses of the Finance Board and OF described below, total other expense decreased $1.3 million, or 8.5%. The decline was due to decreases in salaries and benefits of $445 thousand and other operating expenses of $888 thousand. Salaries and benefits expense in the first quarter of 2006 included $1.1 million related to a retirement plan lump sum payment for the former CEO, not recurring in 2007. Offsetting this decline were increases in incentive compensation and overall merit increases and promotions. Other operating expenses in the first quarter of 2006 included $460 thousand of grossed-up relocation expense for the newly-hired CEO.

Collectively, the twelve FHLBanks are responsible for the operating expenses of the Finance Board and the OF. These payments, allocated among the FHLBanks according to a cost-sharing formula, are reported as other expense on the Bank’s Statement of Operations and totaled $1.3 million and $1.1 million for the first three months of 2007 and 2006, respectively. The Bank has no control over the operating expenses of the Finance Board. The FHLBanks are able to exert a limited degree of control over the operating expenses of the OF due to the fact that two directors of the OF are also FHLBank presidents.

Affordable Housing Program (AHP) and Resolution Funding Corp. (REFCORP) Assessments


	Three months ended March 31,				% Change
(in thousands)	2007		2006		2007/2006


Affordable Housing Program (AHP)	$	5,990	$	5,535		8.2
REFCORP		13,439		12,422		8.2


Total assessments	$	19,429	$	17,957		8.2

Assessment Calculations. Although the FHLBanks are not subject to federal or state income taxes, the combined financial obligations of making payments to REFCORP (20%) and AHP contributions (10%) equate to a proportion of the Bank’s net income comparable to that paid in income tax by fully taxable entities. Inasmuch as both the REFCORP and AHP payments are each separately subtracted from earnings prior to the assessment of each, the combined effective rate is less than the simple sum of both (i.e., less than 30%). In passing the Financial Services Modernization Act of 1999, Congress established a fixed 20% annual REFCORP payment rate beginning in 2000 for each FHLBank. The fixed percentage replaced a fixed-dollar annual payment of $300 million which had previously been divided among the twelve FHLBanks through a complex allocation formula. The law also calls for an adjustment to be made to the total number of REFCORP payments due in future years so that, on a present value basis, the combined REFCORP payments of all twelve FHLBanks are equal in amount to what had been required under the previous calculation method. The FHLBanks’ aggregate payments through the first quarter of 2007 exceeded the scheduled payments, effectively accelerating payment of the REFCORP obligation and shortening its remaining term to a final payment during the second quarter of 2015. This date assumes that the FHLBanks pay exactly $300 million annually until 2015. The cumulative amount to be paid to REFCORP by the FHLBank is not determinable at this time due to the interrelationships of the future earnings of all FHLBanks and interest rates.

Application of the REFCORP percentage rate as applied to earnings during first quarter 2007 and first quarter 2006 resulted in expenses for the Bank of $13.4 million and $12.4 million, respectively. The year-to-year changes in AHP and REFCORP assessments for the Bank reflect the changes in pre-assessment earnings.

Financial Condition

The following is Management’s Discussion and Analysis of the Bank’s financial condition at March 31, 2007 compared to December 31, 2006. This should be read in conjunction with the Bank’s unaudited interim financial statements and notes in this report and the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Asset Growth and Composition. As a result of decreases in the loans to members and investment securities portfolios, the Bank’s total assets decreased $4.4 billion, or 5.6%, to $73.0 billion at March 31, 2007, down from $77.4 billion at December 31, 2006. Loans to members decreased $3.5 billion due primarily to a decline in loans outstanding to Sovereign Bank, the Bank’s largest member, discussed in further detail below. The short-term portion of the loans to members portfolio is volatile and can result in large swings in balances. For example, the March 31, 2007 portfolio balance included overnight funding to Lehman Brothers Bank FSB of $4.0 billion, which subsequently matured on April 2, 2007.

Total housing finance-related assets, which include MPF Program loans, loans to members, mortgage-backed securities and other mission-related investments, decreased by $3.9 billion, or 5.8%, to $64.0 billion at March 31, 2007, down from $68.0 billion at December 31, 2006. Total housing finance-related assets accounted for 87.7% of assets as of March 31, 2007 and 87.9% of assets as of December 31, 2006.

Loans to Members. At March 31, 2007, total loans to members reflected balances of $45.8 billion to 219 borrowing members, compared to $49.3 billion at year-end 2006 to 221 borrowing members, representing a 7.2% decrease in the portfolio balance. A significant concentration of the loans continued to be generated from the Bank’s four largest borrowers, generally reflecting the asset concentration mix of the Bank’s membership base.

The following table provides a distribution of the number of members, categorized by individual member asset size, that had an outstanding average balance during the three months ended March 31, 2007 and the year ended December 31, 2006.


Member Asset Size	2007			2006


Less than $100 million		45			54
Between $100 million and $500 million		124			137
Between $500 million and $1 billion		37			45
Between $1 billion and $5 billion		28			26
Greater than $5 billion		13			13


Total borrowing members		247			275


Total membership		337			334
Percent of members borrowing		73.3	%		82.3	%

As previously disclosed in the Bank’s 2006 Annual Report filed on Form 10-K, as amended, on December 21, 2006, Sovereign Bank announced a balance sheet restructuring including de-leveraging of approximately $10 billion in assets and $10 billion in wholesale funding, including FHLBank System debt, during the first quarter of 2007. As of March 31, 2007, Sovereign Bank’s loans outstanding declined $6.3 billion, to $11.7 billion, down from a December 31, 2006 balance of $18.0 billion.

Loans to members in the first quarter of 2007 reflected the residential real estate market and, to a lesser degree, small business and commercial real estate demand of members’ customers. Loan demand of members slowed due to the limited economic growth in the Bank’s market, which includes Pennsylvania, West Virginia and Delaware. In addition, the loans to members portfolio activity was impacted by the flat interest rate environment, which has made it difficult for members to profit from lending and investing activities, and intense competition for members’

funding requirements from capital markets and brokered CD organizations. As a result, the Bank expects moderate activity in this portfolio through the remainder of 2007.

As of March 31, 2007, the Bank’s loans to members portfolio was still weighted heavily in the combined mid-term and long-term products offered to members. These balances accounted for 61.2% of the total portfolio at March 31, 2007 compared to 65.5% of the portfolio at December 31, 2006. A number of members within the Bank’s market have a high percentage of long-term mortgage assets on their balance sheets; the members fund these assets through longer-term borrowings with the Bank to mitigate interest rate risk. Meeting the needs of such members will continue to be an important part of the Bank’s loans to members business.

Mortgage Loans Held for Portfolio. In addition to the reduction in loans to members, net mortgage loans held for portfolio have also decreased, declining 3.1% to $6.7 billion as of March 31, 2007, compared to $7.0 billion at December 31, 2006.

Loan Portfolio Analysis. The Bank’s outstanding loans, nonaccrual loans and loans 90 days or more past due and accruing interest are as presented in the following table.


(in thousands)	March 31, 2007		December 31, 2006


Loans to members	$	45,801,468	$	49,335,377
Mortgage loans held for portfolio, net⁽¹⁾		6,749,908		6,966,345
Nonaccrual mortgage loans, net		17,175		18,771
Mortgage loans past due 90 days or more and still accruing interest⁽²⁾		11,702		15,658
Banking on Business (BOB) loans, net⁽³⁾		10,782		11,469

Notes:


⁽¹⁾		All of the real estate mortgages held in portfolio by the Bank are fixed-rate. Balances are reflected net of allowance for credit losses.

⁽²⁾		Government-insured or -guaranteed loans (e.g., FHA, VA, HUD or RHS) continue to accrue interest after becoming 90 days or more delinquent.

⁽³⁾		Due to the nature of the program, all BOB loans are considered nonaccrual loans. Balances are reflected net of allowance for credit losses.

Allowance for Credit Losses. The allowance for credit losses is evaluated on a quarterly basis by management to identify the losses inherent within each portfolio and to determine the likelihood of collectibility. Due to the collateral held as security and the repayment history for member loans, management believes that an allowance for credit losses for member loans is unnecessary. Details regarding the Bank’s specific methodologies for calculation of allowance for credit losses is included in the Financial Condition section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

At March 31, 2007 and December 31, 2006, the allowance for credit losses on the mortgage loans held for portfolio was $883 thousand and $853 thousand, respectively. At March 31, 2007 and December 31, 2006, the allowance for credit losses on the BOB loans was $6.5 million and $6.7 million, respectively.

Interest-bearing Deposits and Federal Funds Sold. At March 31, 2007, these short-term investments totaled $6.8 billion, a slight decrease of $150 million, or 2.1% from the December 31, 2006 balance. However, these balances have grown over the last two years. This growth reflects the Bank’s strategy to continue to increase its short-term liquidity position in response to changes brought about by the Federal Reserve Daylight Overdraft Policy.

Investment Securities. The 2.9% decrease in investment securities from December 31, 2006 to March 31, 2007, was primarily due to a slight decrease in held-to-maturity investments. These investments include mortgage-backed securities (MBS) that are collateralized and provide a return that can significantly exceed the return on other types of investments. However, the amount that the Bank can invest in MBS is limited by regulation to 300% of regulatory capital. As a result of this limitation, and the existing portfolio, the Bank does not anticipate that it will be investing in additional MBS for the near term.

The following tables summarize key investment securities portfolio statistics.


	March 31,		December 31,
(in thousands)	2007		2006


Available-for-sale securities:
Equity mutual funds	$	5,463	$	5,362
Mortgage-backed securities		54,567		60,486


Total available-for-sale securities	$	60,030	$	65,848


Held-to-maturity securities:
Commercial paper	$	−	$	332,955
State or local agency obligations		779,932		779,780
U.S. government-sponsored enterprises		1,131,217		984,941
Mortgage-backed securities		10,654,151		10,841,424


Total held-to-maturity securities	$	12,565,300	$	12,939,100


Total investment securities	$	12,625,330	$	13,004,948

As of March 31, 2007, investment securities had the following maturity and yield characteristics.


	Book
(dollars in thousands)	Value		Yield


Available-for-sale securities:
Equity mutual funds	$	5,463		n/a
Mortgage-backed securities		54,567		5.59%


Total available-for-sale securities	$	60,030		5.59%


Held-to-maturity securities:
State or local agency obligations:
After one but within five years	$	379,420		5.75%
After five but within ten years		14,820		4.52%
After ten years		385,692		5.61%


Total state or local agency obligations		779,932		5.66%


U.S. government-sponsored enterprises:
Within one year		300,000		4.96%
After one but within five years		700,000		5.35%
After five years		131,217		4.05%


Total U.S. government-sponsored enterprises		1,131,217		5.09%
Mortgage-backed securities		10,654,151		4.69%


Total held-to-maturity securities	$	12,565,300		4.79%

As of March 31, 2007, the held-to-maturity securities portfolio included unrealized losses of $177.8 million which are considered temporary. The basis for determination that these declines in fair value are temporary is explained in detail in Note 5 of the unaudited interim financial statements.

As of March 31, 2007, the Bank held securities from the following issuers with a book value greater than 10% of Bank total capital.


	Total		Total
(in thousands)	Book Value		Fair Value


Federal Home Loan Mortgage Corporation	$	1,522,639	$	1,502,679
Wells Fargo Mortgage Backed Securities Trust		1,253,496		1,246,291
Federal National Mortgage Association		1,204,174		1,180,181
J.P. Morgan Mortgage Trust		1,113,682		1,110,736
Countrywide Home Loans		583,682		572,493
Countrywide Alternative Loan Trust		559,506		556,558
Structured Adjustable Rate Mortgage Loan Trust		548,637		549,830
Structured Asset Securities Corporation		454,092		440,117
Citigroup Mortgage Loan Trust		396,077		393,813
Bear Stearns Adjustable Rate Mortgages		380,457		376,598
Washington Mutual		357,243		346,563


Total	$	8,373,685	$	8,275,859

Deposits. At March 31, 2007, time deposits in denominations of $100,000 or more totaled $1.0 million. The table below presents the maturities for time deposits in denominations of $100,000 or more:

Over 3 months

Over 6 months

(in thousands)

3 months

but within

By Remaining Maturity at March 31, 2007

or less

6 months

12 months

Total

Time certificates of deposit ($100,000 or more)

1,000

−

1,000

Commitment and Off-Balance Sheet Items. At March 31, 2007, the Bank is obligated to fund approximately $283 million in additional loans to members, $5.3 million of mortgage loans, $984.1 million in outstanding standby letters of credit and $70 million in consolidated obligations. The Bank does not have any special purpose entities or any other type of off-balance sheet conduits.

Retained Earnings. The Finance Board has issued regulatory guidance to the FHLBanks relating to capital management and retained earnings. The guidance directs each FHLBank to assess, at least annually, the adequacy of its retained earnings with consideration given to future possible financial and economic scenarios. The guidance also outlines the considerations that each FHLBank should undertake in assessing the adequacy of the Bank’s retained earnings.

At March 31, 2007, Bank retained earnings stood at $259.3 million, representing an increase of $4.5 million, or 1.8%, from December 31, 2006. The Bank exceeded its longer-term retained earnings target of $200 million by first quarter 2006. Prior to reaching the retained earnings target, the Bank paid out less than 100% of net income in dividends. Any future dividend payments are subject to the approval of the Board of Directors and the Bank may pay out less than 100% of net income in dividends.

The following table summarizes the change in retained earnings:


	Three months ended
	March 31,
(in thousands)	2007			2006


Balance, beginning of the period	$	254,777		$	188,479
Net income		53,755			49,687
Dividends		(49,246	)		(24,014	)


Balance, end of the period		259,286			214,152


Payout ratio (dividends/net income)		91.6%			48.3%

Operating Segment Results

The following is Management’s Discussion and Analysis of the Bank’s operating segment results for the three months ended March 31, 2007 and 2006, which should be read in conjunction with the unaudited interim financial statements and notes included in the report.

The Bank operates two segments differentiated by products. The first segment entitled Traditional Member Finance encompasses a majority of the Bank’s activities, including but not limited to, providing loans to members; investments; and deposit products. The MPF, or Mortgage Finance, segment purchases loans from members and funds and hedges the resulting portfolio.

Results of segments are presented based on management accounting practices and the Bank’s management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to Generally Accepted Accounting Principles (GAAP). Therefore, the financial results of the segments are not necessarily comparable with similar information at other FHLBanks or any other company.

The management accounting process uses various balance sheet and income statement assignments and transfers to measure performance of the segment. Methodologies are refined from time to time as management accounting practices change. Borrowings are allocated to the Mortgage Finance segment based on mortgage loans outstanding. All remaining borrowings and all capital remain in the Traditional Member Finance business. The allowance for credit losses pertaining to mortgage loans held for portfolio is allocated to the Mortgage Finance segment and the allowance for credit losses pertaining to Banking on Business loans is allocated to Traditional Member Finance. Derivatives are allocated to segments consistent with hedging strategies. Cost incurred by support areas not directly aligned with the segment are allocated based on estimated usage of services.

The following tables set forth the Bank’s financial performance by operating segment for the three months ended March 31, 2007 and 2006.


	Traditional		MPF^® or
	Member		Mortgage
(in thousands)	Finance		Finance			Total


2007
Net interest income	$	77,083	$	6,571		$	83,654
Provision for credit losses		1,860		29			1,889
Other income		6,634		(54	)		6,580
Other expenses		14,417		744			15,161


Income before assessments		67,440		5,744			73,184
Affordable Housing Program		5,521		469			5,990
REFCORP		12,384		1,055			13,439


Total assessments		17,905		1,524			19,429


Net income	$	49,535	$	4,220		$	53,755


Total assets	$	66,261,072	$	6,749,908		$	73,010,980


2006
Net interest income	$	69,791	$	8,459		$	78,250
Provision (benefit) for credit losses		710		(140	)		570
Other income		5,947		320			6,267
Other expenses		15,211		1,092			16,303


Income before assessments		59,817		7,827			67,644
Affordable Housing Program		4,896		639			5,535
REFCORP		10,984		1,438			12,422


Total assessments		15,880		2,077			17,957


Net income	$	43,937	$	5,750		$	49,687


Total assets	$	65,086,959	$	7,439,741		$	72,526,700

Results of Operations. Total net income increased $4.1 million to $53.8 million for the first quarter of 2007, compared to $49.7 million in the first quarter of 2006. An increase of $5.6 million in the net income of the Traditional Member Finance segment more than offset a $1.5 million decrease in the Mortgage Finance segment net income.

Traditional Member Finance Segment. The $5.6 million increase in net income in the Traditional Member Finance segment resulted primarily from a $7.3 increase in net interest income. Higher levels of investment securities, as well as the impact of a rising rate environment and a slight increase in net interest spread, contributed to the net income growth.

Mortgage Finance Segment. The $1.5 million decline in net income in the Mortgage Finance segment was primarily due to lower net interest income, which decreased $1.9 million from the prior year period. Lower interest-earning asset levels and a smaller net interest spread contributed to this decrease. Total assets declined in this segment, reflecting the continued run-off of the portfolio.

Capital Resources

The following is Management’s Discussion and Analysis of the Bank’s capital resources at March 31, 2007. This discussion should be read in conjunction with the unaudited interim financial statements and notes included in this report and the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Risk-Based Capital (RBC)

The Bank became subject to the Finance Board’s Risk-Based Capital (RBC) regulations upon implementation of its capital plan on December 16, 2002. This regulatory framework requires the Bank to maintain sufficient permanent capital, defined as retained earnings plus capital stock, to meet its combined credit risk, market risk and operational risk. Each of these components is computed in accordance with Finance Board regulations.


	March 31,		December 31,
(in thousands)	2007		2006


Permanent capital:
Capital stock⁽¹⁾	$	3,088,400	$	3,392,250
Retained earnings		259,286		254,777


Total permanent capital	$	3,347,686	$	3,647,027


Risk-based capital requirement:
Credit risk capital	$	185,282	$	191,810
Market risk capital		176,058		199,848
Operations risk capital		108,402		117,497


Total risk-based capital	$	469,742	$	509,155

Note:


⁽¹⁾		Capital stock includes mandatorily redeemable capital stock

The Bank held excess permanent capital over RBC requirements of $2.9 billion and $3.1 billion at March 31, 2007 and December 31, 2006, respectively.

Capital and Leverage Ratios

In addition to the requirements for RBC, the Bank must maintain total regulatory capital and leverage ratios of at least 4.0% and 5.0% of total assets, respectively. Management has an ongoing program to measure and monitor compliance with the ratio requirements. As a matter of policy, the Board of Directors has established an operating range for capitalization that calls for the capital ratio to be maintained between 4.08% and 5.0%. To enhance overall returns, it has been the Bank’s practice to utilize as much leverage as permitted within this operating range when market conditions permit, while maintaining compliance with statutory, regulatory and Bank policy limits.


	March 31,			December 31,
(dollars in thousands)	2007			2006


Capital Ratio
Minimum capital (4.0% of total assets)	$	2,920,439		$	3,095,058
Actual capital (permanent capital plus loan loss reserves)		3,355,061			3,654,615
Total assets		73,010,980			77,376,458
Capital ratio (actual capital as a percent of total assets)		4.6	%		4.7	%
Leverage Ratio
Minimum leverage capital (5.0% of total assets)	$	3,650,549		$	3,868,823
Leverage capital (permanent capital multiplied by a 1.5 weighting factor plus loan loss reserves)		5,028,905			5,478,130
Leverage ratio (leverage capital as a percent of total assets)		6.9	%		7.1	%

The Bank’s capital ratio decreased to 4.6% at March 31, 2007, from 4.7% at December 31, 2006. Under the Bank’s capital plan, overall capital stock levels are tied to both the level of member borrowings and unused borrowing capacity which is defined generally as the remaining collateral value against which a member may borrow. Therefore, the Bank’s capital ratios often fluctuate in response to changes in member borrowing activity and unused capacity.

Management reviews, on a routine basis, projections of capital leverage that incorporate anticipated changes in assets, liabilities, and capital stock levels as a tool to manage overall balance sheet leverage within the Board’s operating range. In connection with this review, when management believes that adjustments to the current member stock purchase requirements within the ranges established in the capital plan are warranted, a recommendation is presented for Board consideration. The member stock purchase requirements have been adjusted several times since the implementation of the capital plan in December 2002, and management expects that future adjustments are likely in response to future changes in borrowing activity.

As of March 31, 2007 and December 31, 2006, excess capital stock available for repurchase at a member’s request and at the Bank’s discretion totaled $126.4 million and $33.4 million, respectively. It is the Bank’s current practice to promptly repurchase the excess capital stock of its members upon their request, except with respect to directors’ institutions during standard blackout periods. The Bank does not honor other repurchase requests where the capital stock is required to meet a member’s minimum capital stock purchase requirement. Assuming the above amounts of excess stock had been repurchased as of the respective period ends, the resulting decrease in the capital and leverage ratios would have been immaterial.

Management believes that based on the Bank’s business profile, balance sheet composition and various potential economic scenarios, the current capital and leverage ratios are adequate to ensure the safe and sound operation of the Bank.

Critical Accounting Policies

The Bank’s financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Application of these principles requires management to make estimates, assumptions or judgments that affect the amounts reported in the financial statements and accompanying notes. The use of estimates, assumptions and judgments is necessary when financial assets and liabilities are required to be recorded at, or adjusted to reflect, fair value. Assets and liabilities carried at fair value inherently result in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When such information is not available, valuation adjustments are estimated in good faith by management, primarily through the use of internal cash flow and other financial modeling techniques.

The most significant accounting policies followed by the Bank are presented in Note 3 to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended. These policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates or assumptions, and those for which changes in those estimates or assumptions could have a significant impact on the financial statements.

We discuss the following critical accounting policies in more detail under this same heading in the Bank’s 2006 Annual Report filed on Form 10-K, as amended:


	•	Loans to Members and Related Allowance for Credit Losses

	•	Allowance for Credit Losses on Mortgage Loans Held for Portfolio

	•	Allowance for Credit Losses on Banking on Business Loans

	•	Accounting for Premiums and Discounts on Mortgage Loans and Mortgage-Backed Securities

	•	Guarantees and Consolidated Obligations


	•	Accounting for Derivatives

	•	Future REFCORP Payments

	•	Fair Value Calculations and Methodologies

The Bank did not implement any material changes to its accounting policies or estimates, nor did the Bank implement any new accounting policies that had a material impact on the Bank’s results of operations or financial condition, during the quarter ended March 31, 2007.

Recently Issued Accounting Standards and Interpretations. See Note 3 to the unaudited interim financial statements for a discussion of recent accounting pronouncements that are relevant to the Bank’s businesses.

Risk Management

Risk Governance

The Bank’s lending, investment and funding activities and its use of derivative hedging instruments expose the Bank to a number of risks, including the following: market and interest rate risk, credit risk, liquidity and funding risk and other risks, such as operating risk and business risk. These risks are discussed in detail further in this section.

The Bank’s Board of Directors and its committees have adopted a comprehensive risk governance structure to oversee the risk management process and manage the Bank’s risk exposures. The Finance and Risk Management Committee of the Board has responsibility to focus on balance sheet management and all risk management issues and is informed by regular and comprehensive reports covering all significant risk types. The Audit Committee has responsibility for monitoring certain operating and business risks and receives regular reports on control issues of significance and quarterly allowance for credit loss reports. Both Committees also receive reports and training dealing in more depth with specific risk issues relevant at the time. Additionally, the Bank conducts an annual bank-wide risk self-assessment which is reviewed and approved by the full Board of Directors.

The Board of Directors sets the risk appetite and risk limits for the Bank, which are reviewed and approved at least annually. The size of the risk limits reflects the Bank’s risk appetite given the market environment, the business strategy and the financial resources available to absorb losses. Risk limit breaches are reported in a timely manner to the Board and senior management and the affected business unit must take appropriate action to reduce affected positions. The risk governance structure also includes a body of risk management policies approved by the Board of Directors. These policies together with subordinate risk management Bank policies and procedures are reviewed on an ongoing basis to ensure that they provide effective governance of the Bank’s risk-taking activities.

In order to provide effective oversight for risk management strategies, policies and action plans, the Bank has created a formal review and reporting structure implemented by three management staff risk committees — the Risk Management Committee, the Asset/Liability Committee (ALCO) and the Credit Risk Committee.

The Bank’s 2006 Annual Report filed on Form 10-K, as amended provides additional information regarding risk governance and the types of policies, processes, instruments and measures used by the Bank to manage risk. For information regarding the Bank’s use of, and accounting policies for, derivative hedging instruments, see Note 10 to the unaudited interim financial statements included in this report and Note 16 to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended. Additionally, see the Capital Resources section above for further information regarding the Bank’s risk-based capital and regulatory capital ratios. As of March 31, 2007, there were no material changes in the Bank’s risk exposures since December 31, 2006.

Qualitative Disclosures Regarding Market Risk

Market risk is defined as the risk of loss arising from adverse changes in market rates and prices, such as interest rates, and other relevant market information, such as basis changes. Risk of loss is defined as the risk that the net market value or estimated fair value of the Bank’s overall portfolio of assets, liabilities and derivatives will decline as a result of changes in interest rates or financial market volatility, or that net earnings will be significantly reduced by interest rate changes. Interest rate risk is the risk that relative and absolute changes in prevailing market

interest rates may adversely affect an institution’s financial performance or condition. Interest rate risk arises from a variety of sources, including repricing risk, yield curve risk, basis risk, and options risk. The Bank faces repricing risk when a change in interest rates results in a mismatch in the repricing of the assets as compared to that of the liabilities and hedges.

The optionality embedded in certain financial instruments held by the Bank can create interest rate risk. When a member prepays a loan, the prepayment can result in lower future net interest income for the Bank. If the principal portion of the loan being prepaid is reinvested in assets yielding lower returns, but the principal amount continues to be funded by the original higher-cost debt, net interest income could be reduced. To protect against this risk, the Bank generally charges members a prepayment fee to compensate for this potential income reduction. When the Bank offers longer-term loans that a member may prepay without a prepayment fee, the Bank funds these loans with callable consolidated obligations or hedges this option. The Bank also invests in mortgage-related investments, such as MPF Program mortgage loans and collateralized mortgage obligations. Because mortgage-related investments contain prepayment options, changes in interest rates cause the expected maturities of these investments to become shorter or longer. Finance Board regulations and the Bank’s investment policy limit this risk by placing certain restrictions on the types of mortgage-related investments the Bank may own. Addressing the options risk embedded in mortgage-related investments has become increasingly important to the Bank’s earnings. The Bank hedges this prepayment option risk by funding some mortgage-related investments with consolidated obligations that contain call and/or similar prepayment options.

The goal of an interest rate risk management strategy is not necessarily to eliminate interest rate risk, but to manage it by setting and operating within appropriate limits. The Bank’s general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities and hedges, which, taken together, limit the Bank’s expected exposure to market and interest rate risk. Management regularly monitors the Bank’s sensitivity to interest rate changes. Multiple methodologies are used to calculate the Bank’s potential exposure to these changes. These methodologies include measuring repricing gaps, duration and convexity under assumed changes in interest rates, the shape of the yield curve, and market volatility as implied in currently observable market prices. Interest rate exposure is managed by the use of appropriate funding instruments and by employing hedging strategies. Hedging may occur for a single transaction or group of transactions as well as for the overall portfolio. The Bank’s hedge positions are evaluated regularly and are adjusted as deemed necessary by management. The Bank’s market risk limits and measurement are described more fully below.

Quantitative Disclosures Regarding Market Risk

The Bank’s Market Risk Model. The Bank uses an externally developed model to perform its interest rate risk and market valuation modeling. This model and significant underlying assumptions were subject to Finance Board review and approval prior to its implementation. Several methodologies are incorporated into the modeling process, which identifies the fair value of an instrument as the expected present value of its future cash flows. The present value is based upon the discrete forward portion of the yield curve that relates to the timing of each cash flow. For option instruments, as well as instruments with embedded options, the value is determined by building a large number of potential interest rate scenarios, projecting cash flows for each scenario and then computing the present value averaged over all scenarios. It is important to note that the valuation process is an estimation of fair value, and there may be several approaches to valuation, each of which may produce a different result.

Critical interest rates for modeling and risk management include U.S. Treasury and agency rates, LIBOR, interest rate swap rates and mortgage loan rates. The LIBOR swap curve is the principal curve used in valuation modeling since it is reflective of a market that is central to the behavior of the majority of transactions and markets in which the Bank operates. Perhaps the most critical assumption relates to the prepayment of principal in mortgage-related instruments. The Bank utilizes prepayment models that incorporate several factors to project the cash flows of mortgage-related instruments. Beginning in January 2007, the Bank implemented a more robust market risk model which provides enhanced market risk metrics and measurement.

Duration measurements and market value of equity volatility are currently the primary tools used by the Bank to manage its interest rate risk exposure. Although the Bank is no longer required by Finance Board regulation to operate within a specified duration of equity limit, the Bank’s asset/liability management policies specify

acceptable ranges for duration of equity, and the Bank’s exposures are measured and managed against these limits. These tools are described in more detail below.

Duration of Equity. One key risk metric used by the Bank, and which is commonly used throughout the financial services industry, is duration. Duration is a measure of the sensitivity of a financial instrument’s market value, or the value of a portfolio of instruments, to a parallel shift in interest rates. Duration (typically measured in months or years) is commonly used by investors throughout the fixed income securities market as a measure of financial instrument price sensitivity. Longer duration instruments generally exhibit greater price sensitivity to changes in market interest rates than shorter duration instruments. For example, the value of an instrument with a duration of five years is expected to change by approximately five percent in response to a one percentage point change in interest rates. Duration of equity, an extension of this conceptual framework, is a measure designed to capture the potential for the market value of the Bank’s equity base to change with movements in market interest rates. Higher duration numbers, whether positive or negative, indicate a greater potential exposure of market value of equity in response to changing interest rates.

The Bank’s asset/liability management policy approved by the Board of Directors calls for duration of equity to be maintained within a ±4.5 year range in the base case. In addition, the duration of equity exposure limit in an instantaneous parallel interest rate shock of ±200 basis points is ±7 years. The following table presents the Bank’s duration of equity exposure in accordance with its current asset / liability management policies.


	Down 200			Down 100			Base		Up 100		Up 200
(in years)	basis points			basis points			Case		basis points		basis points


March 31, 2007		(4.2	)		(2.5	)		2.2		1.9		2.2


December 31, 2006		(5.3	)		(1.6	)		2.0		3.4		3.9


March 31, 2006		(3.6	)		0.9			3.7		4.0		4.5


December 31, 2005		(4.7	)		(1.2	)		2.7		4.6		5.3

In addition to actions taken by management to manage risk exposures, changes in market interest rates may also serve to change the Bank’s duration of equity profile. Along with the base case duration calculation, the Bank performs instantaneous parallel interest rate shocks in increments of 50 basis points up to the 200 basis point scenarios identified above. Duration of equity was primarily unchanged from December 31, 2006 to March 31, 2007, in the base case and decreased in the shock scenarios due to additional hedging activity.

Market Value of Equity Volatility. Market value of equity represents the difference between the current theoretical market value of all assets less the current theoretical market value of all liabilities. Market values of assets and liabilities vary as interest rates change. As such, theoretical market values can be calculated under various interest rate scenarios, and the resulting changes in net equity can provide an indicator of the exposure of the Bank’s market value of equity to market volatility. Although volatility and fluctuation in market values vary with changes in interest rates, the Bank seeks to manage this risk exposure by maintaining a relatively stable and non-volatile market value of equity. The Bank’s Board of Directors has established a policy limit that the market value of equity should decline by no more than five percent given a hypothetical ±100 basis point instantaneous parallel change in interest rates. Management analyzes the market value of equity exposure against this policy limit on a regular basis. In addition to measuring compliance against this policy limit, the Bank also analyzes the potential effects of a wide range of instant parallel yield curve shifts of as much as 300 basis points and evaluates the related impacts on market value of equity and duration of equity. The following table presents market value of equity volatility, including the percentage change from the base case.


	Down 100 basis points						Up 100 basis points

	Market Value		Pct. Change		Base		Market Value		Pct. Change
(dollars in millions)	of Equity		From Base		Case		of Equity		From Base

March 31, 2007	$	3,200		0.1	$	3,197	$	3,118		(2.5	)


December 31, 2006	$	3,454		0.4	$	3,442	$	3,342		(2.9	)


March 31, 2006		3,045		2.7		2,966		2,850		(3.9	)


December 31, 2005		3,134		0.9		3,105		2,986		(3.8	)

For the period December 31, 2006 to March 31, 2007, the market value of equity decreased in the base case as well as in both of the above shock scenarios. The decreases were driven primarily by a decrease of $297 million in total capital over the period. The hypothetical changes in the Bank’s market value of equity in the various scenarios shown above assume the absence of any management reaction to changes in market interest rates. Management monitors market conditions on an ongoing basis and takes what it deems to be appropriate action to preserve the value of equity and earnings by changing the composition of the balance sheet or entering into, terminating or restructuring hedges to mitigate the impact of adverse interest rate movements.

Credit and Counterparty Risk

Credit risk is the risk that the market value of an obligation will decline as a result of deterioration in the obligor’s creditworthiness. Credit risk arises when Bank funds are extended, committed, invested or otherwise exposed through actual or implied contractual agreements. The financial condition of Bank members and all investment, mortgage loan and derivative counterparties is monitored to ensure that the Bank’s financial exposure to each member and counterparty is in compliance with the Bank’s credit policies and Finance Board regulations. Financial monitoring reports evaluating each member and counterparty’s financial condition are produced and reviewed by the Bank’s Credit Risk Committee on an annual basis, or more often if circumstances warrant.

The Bank protects against credit risk on loans to members by monitoring the financial condition of borrowers and by requiring borrowers or their affiliates to pledge sufficient eligible collateral for all loans. In addition, the Bank has the ability to call for additional or substitute collateral during the life of a loan to protect its security interest. The Bank’s member loan portfolio is concentrated in commercial banks and thrift institutions. At March 31, 2007, the Bank had a concentration of loans to its ten largest borrowers totaling $34.6 billion, or 75.6%, of total loans outstanding. Average par balances to these borrowers for this period were $34.9 billion, or 75.3%, of total average loans outstanding. The following table lists the Bank’s top ten borrowers as of March 31, 2007, and their respective December 31, 2006, loan balances and percentage of the total loan portfolio.

March 31, 2007

December 31, 2006

Loan

Percent of

Loan

Percent of

(balances at par; dollars in millions)

Balance

total loans

Balance

total loans

Sovereign Bank, PA⁽¹⁾

11,697

25.6

18,047

36.5

GMAC Bank, UT⁽²⁾

8,313

18.2

7,279

14.7

Citicorp Trust Bank, DE

6,609

14.4

6,609

13.4

Lehman Brothers Bank FSB, DE

4,000

8.7

1,000

2.0

ING Bank, DE

700

1.5

200

0.4

Citizens Bank of Pennsylvania, PA

700

1.5

2,000

4.1

Wilmington Savings Fund Society FSB, DE⁽¹⁾

694

1.5

784

1.6

ESB Bank, PA

680

1.5

698

1.4

Fulton Bank, PA

640

1.4

500

1.0

National Penn Bank, PA

598

1.3

460

1.0

Subtotal

34,631

75.6

37,577

76.1

Other borrowers

11,149

24.4

11,821

23.9

Total loans to members

45,780

100.0

49,398

100.0

Note:


⁽¹⁾	These borrowers had an officer or director who served on the Bank’s Board of Directors as of March 31, 2007.

⁽²⁾	Formerly known as GMAC Automotive Bank. For Bank membership purposes, the principal place of business is Horsham, PA.

Because of this concentration in loans, the Bank has implemented specific credit and collateral review procedures for these members. Management believes that it has access to sufficient eligible collateral under written security agreements in which the member agrees to hold such collateral for the benefit of the Bank significantly in

excess of outstanding loan balances. Therefore, the Bank has not established an allowance for credit losses on loans to members. In addition, the Bank analyzes the implication for its financial management and profitability if it were to lose one or more of these members or if one or more of these members were to reduce its borrowings from the Bank. On December 21, 2006, Sovereign Bank announced a balance sheet restructuring to take place in the first quarter of 2007. As noted in the table above, outstanding loans to Sovereign as of March 31, 2007, declined $6.3 billion, or 35.2%, from December 31, 2006. However, Sovereign remains the Bank’s largest borrower. See Item 1A. Risk Factors for additional information.

The Bank has a number of large members with sizeable and diverse balance sheets, sophisticated financial management personnel and extensive access to the capital markets. These members may occasionally borrow from the Bank in significant amounts for relatively short periods of time to accommodate their internal funding needs, which can cause substantial volatility in the Bank’s reported period-end loan balances. For example, as of March 31, 2007, Lehman Brothers Bank FSB held $4.0 billion in loans outstanding, or 8.7% of total loans, and capital stock of $249.6 million, or 8.1% of total capital stock. These balances had matured as of April 2 and the Bank had repurchased $164.8 million of excess capital stock from the member.

In addition to loans to members, the Bank is also subject to credit risk on investments, mortgage loans, BOB loans, derivatives and off-balance sheet arrangements and guarantees as described below. None of the Bank’s credit risk policy parameters have materially changed since December 31, 2006. Further information regarding nonaccrual loan balances and related allowances, including delinquency ratios and a rollforward of the Bank’s allowance for credit losses, is provided in the Bank’s Annual Report on Form 10-K, as amended. Substantially all of the Bank’s credit losses occur in the BOB program.

The Bank is subject to credit risk on investments consisting primarily of money market investments and investment securities. The Bank places money market investments on an unsecured basis with large, high-quality financial institutions with long-term credit ratings of triple-A and double-A for terms up to nine months, with credit ratings of single-A for terms up to 90 days and with credit ratings of triple-B for terms up to 30 days. Most money market investments mature within 90 days. Management actively monitors the credit quality of these investment counterparties. The Bank also invests in and is subject to credit risk related to MBS that are directly supported by underlying mortgage loans. Investments in private label MBS are permitted as long as they are rated triple-A at the time of purchase. The Bank regularly monitors the mortgage collateral underlying each MBS. The collateral can be grouped into various categories, including subprime and reperforming, which are generally considered to represent lower credit quality loans. The Bank follows the definitions of these categories established by the credit rating agencies. Under these definitions, the Bank has infrequently purchased subprime or reperforming MBS and the Bank’s existing subprime and reperforming securities represent less than one percent of the total MBS portfolio. These securities also contain additional credit protection from subordination or Federal agency insurance or guarantees. Accordingly, the Bank does not believe it has material credit risk resulting from these securities.

The Bank has established as a service to members a mortgage loan purchase program under which the Bank acquires mortgage loans from members under a shared credit risk structure, including the necessary external credit enhancement, which gives the pools of mortgage loans purchased the equivalent of a double-A credit rating. The mortgage loan program uses insurance companies to provide both primary and supplemental mortgage insurance. All insurance providers must have a credit rating of double-A or better.

Members may also participate in the BOB loan program, which is targeted to small businesses in the Bank’s district. The program’s objective is to assist in the growth and development of small businesses, including both the start-up and expansion of these businesses. The BOB program is accounted for as an unsecured loan program and the outstanding loan balance is classified as nonaccrual due to doubt regarding the ultimate collection of the contractual principal and interest of the loan.

Finally, the Bank is subject to credit risk arising from the potential nonperformance by derivative counterparties with respect to the agreements entered into with the Bank, as well as certain operational risks related to the management of the derivative portfolio. Unsecured credit exposure to any counterparty is limited by the credit quality and capital level of the counterparty and by the capital level of the Bank. Derivative counterparty credit risk is managed through the combined use of credit analysis, collateral management and other risk mitigation techniques. The Bank requires collateral agreements on derivative financial instrument contracts. The extent to

which the Bank is exposed to counterparty risk on derivatives is partially mitigated through the use of netting procedures contained in the Bank’s master agreement contracts with counterparties. All derivative counterparties and/or guarantors are rated at least single-A.

Liquidity and Funding Risk

The Bank manages its liquidity position to satisfy member demand for short- and long-term funds, repay maturing consolidated obligations and meet other obligations. The Bank also maintains liquidity to repurchase excess capital stock at its discretion and upon the request of a member. Further, Finance Board regulations and the Bank’s liquidity policies established by management and the Board of Directors require the Bank to hold contingency liquidity sufficient to meet the Bank’s needs for a minimum of five business days without access to the consolidated obligation debt markets. The Bank’s sources of contingency liquidity include maturing overnight and short-term investments, maturing loans to members, securities available for repurchase agreements, available-for-sale securities maturing in one year or less and MBS repayments. Uses of contingency liquidity include net settlements of consolidated obligations, member loan commitments, mortgage loan purchase commitments, deposit outflows and maturing other borrowed funds. As of March 31, 2007, the Bank was in compliance with all Board of Directors and regulatory liquidity requirements.

In response to the Federal Reserve Daylight Overdraft Policy, which became effective on July 20, 2006, the Bank has implemented various changes to its cash and liquidity management practices, including continuing to maintain high levels of short-term money market investments.

Access to the capital markets is partially dependent on the Bank’s and the FHLB System’s credit ratings which are shown in the following table:


	Moody’s	Standard & Poor’s

	Rating / Outlook	Rating / Outlook


Bank Senior Unsecured Long-term Debt	Aaa / Stable	AAA/Stable
Bank Short-term Deposits	P-1	A-1+


FHLB System Consolidated Obligation Bonds	Aaa	AAA
FHLB System Consolidated Obligation Discount Notes	P-1	A-1+

Operating and Business Risks

The Bank is subject to other risks such as operating risk and business risk. Operating risks are managed by the Bank’s Risk Management Committee and are defined as the risk of unexpected loss resulting from human error, systems malfunctions, man-made or natural disasters, fraud, or circumvention or failure of internal controls. The Bank has established financial and operating policies and procedures and insurance coverage is in force, to mitigate the potential for material losses from such occurrences. The Bank’s Internal Audit department, which reports directly to the Audit Committee of the Board, as well as the Corporate Risk Management department regularly monitor compliance with established policies and procedures. In addition, the Bank has a business continuity plan that is designed to maintain critical business processes and systems in the event of a disaster or business disruption.

Business risk is defined as the risk of an adverse impact on the Bank’s profitability or financial or business strategies resulting from external factors that may occur in the short term and/or long term. The Risk Management Committee continually monitors economic indicators and the external environment in which the Bank operates and attempts to mitigate this risk through long-term strategic planning.

Item 1: Financial Statements

Financial Statements For the Three Months Ended March 31, 2007 and 2006

Federal Home Loan Bank of Pittsburgh

Statement of Operations (unaudited)


	For the three months ended March 31,
(in thousands, except per share amounts)	2007		2006


Interest income:
Loans to members	$	622,797	$	527,334
Prepayment fees on loans to members, net		345		95
Interest-bearing deposits		51,666		37,604
Federal funds sold		46,361		34,657
Available-for-sale securities		803		2,980
Held-to-maturity securities		155,992		125,230
Mortgage loans held for portfolio		88,026		95,219


Total interest income		965,990		823,119


Interest expense:
Consolidated obligation discount notes		217,594		127,253
Consolidated obligation bonds		646,766		605,710
Deposits		17,593		11,758
Mandatorily redeemable capital stock		152		132
Other borrowings		231		16


Total interest expense		882,336		744,869


Net interest income before provision for credit losses		83,654		78,250
Provision for credit losses		1,889		570


Net interest income after provision for credit losses		81,765		77,680
Other income:
Services fees		958		1,173
Net gain on derivatives and hedging activities (Note 10)		4,997		4,626
Other, net		625		468


Total other income		6,580		6,267
Other expense:
Operating		13,877		15,170
Finance Board		660		583
Office of Finance		624		550


Total other expense		15,161		16,303


Income before assessments		73,184		67,644
Affordable Housing Program		5,990		5,535
REFCORP		13,439		12,422


Total assessments		19,429		17,957


Net income	$	53,755	$	49,687


Earnings per share:
Weighted average shares outstanding (excludes mandatorily redeemable stock)		31,126		29,641


Basic and diluted earnings per share	$	1.73	$	1.68


Dividends per share	$	1.58	$	0.81

The accompanying notes are an integral part of these financial statements.

Federal Home Loan Bank of Pittsburgh

Statement of Condition (unaudited)


	March 31,			December 31,
(in thousands, except par value)	2007			2006


ASSETS
Cash and due from banks	$	79,723		$	78,098
Interest-bearing deposits		3,729,986			3,619,984
Federal funds sold		3,110,000			3,370,000
Investment securities:
Available-for-sale securities, at fair value; amortized cost of $58,505 and $64,378, respectively (Note 4)		60,030			65,848
Held-to-maturity securities, at amortized cost; fair value of $12,426,177 and $12,758,889, respectively (Note 5)		12,565,300			12,939,100
Loans to members (Note 6)		45,801,468			49,335,377
Mortgage loans held for portfolio (Note 7), net of allowance for credit losses of $883 and $853, respectively		6,749,908			6,966,345
Banking on Business loans, net of allowance for credit losses of $6,493 and $6,735, respectively		10,782			11,469
Accrued interest receivable		361,610			416,407
Premises, software and equipment, net		22,683			22,142
Derivative assets (Note 10)		468,850			498,976
Other assets		50,640			52,712


Total assets	$	73,010,980		$	77,376,458



LIABILITIES AND CAPITAL

Liabilities
Deposits:
Interest-bearing	$	1,781,751		$	1,409,305
Noninterest-bearing		19,791			16,692


Total deposits		1,801,542			1,425,997


Consolidated obligations, net: (Note 8)
Discount notes		15,752,140			17,845,226
Bonds		51,377,140			53,627,392


Total consolidated obligations, net		67,129,280			71,472,618


Mandatorily redeemable capital stock (Note 9)		5,566			7,892
Accrued interest payable		498,071			566,350
Affordable Housing Program		51,582			49,386
Payable to REFCORP		13,544			14,531
Derivative liabilities (Note 10)		148,303			144,093
Other liabilities		25,943			61,617


Total liabilities		69,673,831			73,742,484


Commitments and contingencies (Note 14)		-			-


Capital (Note 9)
Capital stock — putable ($100 par value) issued and outstanding shares:
30,828 and 33,844 shares in 2007 and 2006, respectively		3,082,834			3,384,358
Retained earnings		259,286			254,777
Accumulated other comprehensive income (loss):
Net unrealized gain on available-for-sale securities (Note 4)		1,525			1,470
Net unrealized (loss) relating to hedging activities (Note 10)		(4,838	)		(4,973	)
Other		(1,658	)		(1,658	)


Total capital		3,337,149			3,633,974


Total liabilities and capital	$	73,010,980		$	77,376,458

The accompanying notes are an integral part of these financial statements.

Federal Home Loan Bank of Pittsburgh

Statement of Cash Flows (unaudited)


	For the three months ended
	March 31,
				2006
(in thousands)	2007			Restated


OPERATING ACTIVITIES
Net income	$	53,755		$	49,687
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,344			30,484
Change in net fair value adjustment on derivative and hedging activities		41,200			(32,059	)
Other adjustments		1,889			574
Net change in:
Accrued interest receivable		54,797			(31,054	)
Other assets		968			(50	)
Accrued interest payable		(68,279	)		29,958
Other liabilities		(805	)		(750	)


Total adjustments		38,114			(2,897	)


Net cash provided by operating activities	$	91,869		$	46,790


INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits (including $3 and $501 to other FHLBanks for mortgage loan programs)	$	(110,002	)	$	79,547
Federal funds sold		260,000			(2,280,000	)
Premises, software and equipment		(1,636	)		(1,660	)
Available-for-sale securities:
Proceeds		5,874			192,555
Held-to-maturity securities:
Net decrease in short-term		335,000			26,613
Proceeds from maturities long-term		469,246			372,838
Purchases of long-term		(424,290	)		(406,117	)
Loans to members:
Proceeds		108,827,509			244,647,273
Made		(105,209,159	)		(242,668,619	)
Mortgage loans held for portfolio:
Proceeds		234,098			256,145
Purchases		(21,230	)		(49,107	)


Net cash provided by investing activities	$	4,365,410		$	169,468

Federal Home Loan Bank of Pittsburgh

Statement of Cash Flows (continued) (unaudited)


	For the three months ended
	March 31,
				2006
(in thousands)	2007			Restated


FINANCING ACTIVITIES
Net change in:
Deposits	$	375,545		$	528,836
Net proceeds from issuance of consolidated obligations:
Discount notes		54,522,584			56,907,248
Bonds (including $0 from other FHLBanks)		4,273,604			8,344,926
Payments for maturing and retiring consolidated obligations:
Discount notes		(56,604,335	)		(61,082,827	)
Bonds (including $0 from other FHLBanks)		(6,669,956	)		(4,826,943	)
Proceeds from issuance of capital stock		589,134			1,319,471
Payments for redemption of mandatorily redeemable capital stock		(2,326	)		(540	)
Payments for redemption/repurchase of capital stock		(890,658	)		(1,428,021	)
Cash dividends paid		(49,246	)		(48,122	)


Net cash used in financing activities	$	(4,455,654	)	$	(285,972	)


Net increase (decrease) in cash and cash equivalents		1,625			(69,714	)
Cash and cash equivalents at beginning of the period		78,098			115,370


Cash and cash equivalents at end of the period	$	79,723		$	45,656


Supplemental disclosures:
Interest paid during the period	$	676,371		$	568,145
AHP payments, net		3,794			1,608
REFCORP assessments paid		14,426			11,988

The accompanying notes are an integral part of these financial statements.

Federal Home Loan Bank of Pittsburgh

Statement of Changes in Capital (unaudited)


										Accumulated
										Other
	Capital Stock - Putable						Retained			Comprehensive
(in thousands, except shares)	Shares			Par Value			Earnings			Income (Loss)			Total Capital


Balance December 31, 2005		30,786		$	3,078,583		$	188,479		$	(7,516	)	$	3,259,546


Proceeds from sale of capital stock		13,195		$	1,319,471								$	1,319,471
Redemption/repurchase of capital stock		(14,281	)		(1,428,021	)								(1,428,021	)
Comprehensive income (loss):
Net income								49,687						49,687
Net unrealized gain (loss) on available- for-sale securities											365			365
Net gain (loss) relating to hedging activities											666			666


Total comprehensive income (loss)								49,687			1,031			50,718
Cash dividends on capital stock								(24,014	)					(24,014	)


Balance March 31, 2006		29,700		$	2,970,033		$	214,152		$	(6,485	)	$	3,177,700


Balance December 31, 2006		33,844		$	3,384,358		$	254,777		$	(5,161	)	$	3,633,974


Proceeds from sale of capital stock		5,891		$	589,134								$	589,134
Redemption/repurchase of capital stock		(8,907	)		(890,658	)								(890,658	)
Comprehensive income (loss):
Net income								53,755						53,755
Net unrealized gain (loss) on available- for-sale securities											55			55
Net gain (loss) relating to hedging activities											135			135


Total comprehensive income (loss)								53,755			190			53,945
Cash dividends on capital stock								(49,246	)					(49,246	)


Balance March 31, 2007		30,828		$	3,082,834		$	259,286		$	(4,971	)	$	3,337,149

The accompanying notes are an integral part of these financial statements.

Federal Home Loan Bank of Pittsburgh
Notes to Unaudited Financial Statements

Note 1 – Background Information and Basis of Presentation

The Federal Home Loan Bank of Pittsburgh (The Bank), a federally chartered corporation, is one of twelve district Federal Home Loan Banks (FHLBanks). The FHLBanks serve the public by enhancing the availability of credit for residential mortgages and targeted community development. The Bank provides a readily available, low-cost source of funds to its member institutions. The Bank is a cooperative, which means that current members own nearly all of the outstanding capital stock of the Bank and may receive dividends on their investment. Regulated financial depositories and insurance companies engaged in residential housing finance that maintain their principal place of business in Delaware, Pennsylvania or West Virginia may apply for membership. State and local housing authorities that meet certain statutes or criteria may also borrow from the Bank. While eligible to borrow, state and local housing authorities are not members of the Bank and, as such, are not required or eligible to hold capital stock.

All members must purchase stock in the Bank. The amount of capital stock members own is based on their outstanding loans, their unused borrowing capacity and the principal balance of residential mortgage loans previously sold to the Bank. See Note 9 for additional information. As a result of these requirements, the Bank conducts business with members in the normal course of business. The Bank considers those members with capital stock outstanding in excess of ten percent of total capital stock outstanding to be related parties. See Note 11 for additional information.

The Federal Housing Finance Board (Finance Board), an independent agency in the executive branch of the United States government, supervises and regulates the FHLBanks and the Office of Finance (OF). The OF is a joint office of the FHLBanks established by the Finance Board to facilitate the issuance and servicing of the consolidated obligations of the FHLBanks and to prepare the FHLBank System combined financial reports. The Finance Board’s principal purpose is to ensure that the FHLBanks operate in a safe and sound manner, carry out their housing finance mission, remain adequately capitalized, and can raise funds in the capital markets. Also, the Finance Board establishes policies and regulations covering the operations of the FHLBanks. Each FHLBank operates as a separate entity with its own management, employees, and board of directors. The Bank does not have any special-purpose entities or any other type of off-balance sheet conduits.

As provided by the Federal Home Loan Bank Act of 1932 (the Act), as amended, or Finance Board regulation, the Bank’s debt instruments, referred to as consolidated obligations, are the joint and several obligations of all the FHLBanks and are the primary source of funds for the FHLBanks. Deposits, other borrowings, and capital stock issued to members provide other funds. The Bank primarily uses these funds to provide loans to members and to purchase mortgages from members through the MPF^® Program. The Bank also provides member institutions with correspondent services, such as wire transfer, safekeeping and settlement.

The accounting and financial reporting policies of the Bank conform to generally accepted accounting principles (GAAP). Preparation of the unaudited financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses. Actual results could differ from those estimates. In addition, certain amounts in the prior period have been reclassified to conform to the current presentation. In the opinion of management, all normal recurring adjustments have been included for a fair statement of this interim financial information. These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2006 included in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Note 2 – Restatement of Previously Issued Financial Statements

The Bank has restated the Statement of Cash Flows for the First Quarter of 2006. The restatement solely impacted the classification of line items in Operating Activities and Financing Activities, but had no impact on the Net Increase (Decrease) in Cash and Due from Banks as previously reported. In addition, the restatements had no affect on the Bank’s Statement of Operations, Statement of Condition, or Statement of Changes in Capital. During

Notes to Unaudited Financial Statements (continued)

preparation of the First Quarter 2007 Statement of Cash Flows, management became aware an incorrect classification in the First Quarter 2006 Statement of Cash Flows. This classification error related to treatment of the discounts and related accretion activity on Discount Notes issued by the Bank. Specifically, the Bank did not perform adequate validation of certain data used in the preparation of the Statement of Cash Flows to ensure line item accuracy. Following review and analysis, it was determined that cash provided by operating activities was overstated and cash used in financing activities was understated due to the incorrect classification of discount note related activity. Therefore, the Bank restated its Statement of Cash Flows for the quarter ended March 31, 2006.

Note 3 – Accounting Adjustments, Changes in Accounting Principle and Recently Issued Accounting Standards and Interpretations

SFAS 159. On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 creates a fair value option allowing, but not requiring, an entity to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as they occur. It requires entities to separately display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. Additionally, SFAS 159 requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. SFAS 159 is effective at the beginning of an entity’s first fiscal year beginning after November 15, 2007 (January 1, 2008 for the Bank). Early adoption is permitted at the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS 157. Although the Bank has not yet determined the effect that the implementation of SFAS 159 will have on its financial condition, results of operations or cash flows, the Bank believes that, if implemented, SFAS 159 could have a material impact on its Statement of Operations and Statement of Condition.

Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). In September 2006, the FASB issued SFAS 157 which addresses how to measure fair value. SFAS 157 provides a single definition of fair value, establishes a framework for measuring fair value, and requires expanded disclosures about fair value. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 is effective for the Bank’s fiscal year beginning on January 1, 2008. The Bank is currently evaluating what impact the adoption of this standard will have on its Statement of Operations and Statement of Condition.

Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments — an Amendment of FASB Statements No. 133 and 140 (SFAS 155). In February 2006, the FASB issued SFAS 155 which resolves issues addressed in SFAS 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. SFAS 155 amends SFAS 133 to simplify the accounting for embedded derivatives by permitting fair value remeasurement, on an instrument by instrument basis, for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 also establishes a requirement to evaluate interests in securitized financial assets in accordance with SFAS 133 to identify interests that are freestanding derivatives or embedded derivatives requiring bifurcation. SFAS 155 is effective for all financial instruments acquired or issued after January 1, 2007. The Bank’s adoption of SFAS 155 did not have a material impact on the Bank’s Statement of Operations or Statement of Condition.

SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets (DIG B40). In December 2006, the FASB issued DIG B40, which clarifies when a securitized interest in prepayable financial assets is subject to the conditions in paragraph 13(b) of SFAS 133. The Bank’s adoption of DIG B40 did not have a material impact on its Statement of Operations or Statement of Condition.

SFAS 133 Implementation Issue No. G26, Hedging Interest Cash Flows on Variable-Rate Assets and Liabilities That Are Not Based on a Benchmark Interest Rate (DIG G26). In December 2006, the FASB issued

Notes to Unaudited Financial Statements (continued)

DIG G26, which clarifies when the hedge of a designated risk related to variable — rate financial assets or liabilities qualifies as a cash flow hedge. DIG Issue G26 becomes effective with the first fiscal quarter beginning after January 8, 2007 (April 1, 2007 for the Bank). The Bank does not expect DIG Issue G26 to have a material impact on its Statement of Operations or Statement of Condition.

Note 4 – Available-for-Sale Securities

Available-for-sale securities as of March 31, 2007 and December 31, 2006 were as follows:


	March 31, 2007
			Gross Unrealized		Gross Unrealized			Estimated Fair
(in thousands)	Amortized Cost		Gains		Losses			Value


Equity mutual funds offsetting deferred compensation	$	4,014	$	1,449		-		$	5,463
Private label mortgage-backed securities		54,491		85	$	(9	)		54,567


Total available-for-sale securities	$	58,505	$	1,534	$	(9	)	$	60,030


	December 31, 2006
			Gross Unrealized		Gross Unrealized		Estimated
(in thousands)	Amortized Cost		Gains		Losses		Fair Value


Equity mutual funds offsetting deferred compensation	$	4,014	$	1,348		-	$	5,362
Private label mortgage-backed securities		60,364		122		-		60,486


Total available-for-sale securities	$	64,378	$	1,470		-	$	65,848

Certain equity mutual funds within the available-for-sale portfolio are maintained to generate returns that seek to offset changes in liabilities related to the equity market risk of certain deferred compensation arrangements. These deferred compensation liabilities were $6.7 and $6.2 million at March 31, 2007 and December 31, 2006, respectively, and are included in other liabilities on the Statement of Condition.

Available-for-sale securities with unrealized losses had fair values of $16.2 million as of March 31, 2007. The securities as of March 31, 2007 have been in a loss position for less than twelve months. There were no available-for-sale securities with unrealized loss positions as of December 31, 2006. The Bank reviewed its available-for-sale investment securities and determined that all unrealized losses reflected above are temporary as of March 31, 2007. The determination that the declines in fair value are temporary is based on several factors, including the fact that the Bank has the ability and the intent to hold such securities through to recovery of the unrealized losses. All private label mortgage-backed securities in the available-for-sale portfolio were rated AAA. The Bank reviewed the credit ratings of the entire portfolio and noted that there have been no downgrades. The unrealized loss position that has occurred in the portfolio is primarily due to cyclical interest rate patterns; therefore, the Bank has determined that all declines in fair value are temporary.

Redemption Terms. The amortized cost of the Bank’s mortgage-backed securities classified as available-for-sale includes net discounts of $13 thousand and $15 thousand at March 31, 2007 and December 31, 2006, respectively. Contractual maturity will occur over a period exceeding ten years. Expected maturities will differ from contractual maturities because borrowers will have the right to prepay obligations with or without call or prepayment fees.

Notes to Unaudited Financial Statements (continued)

Interest Rate Payment Terms. The following table details interest rate payment terms for available-for-sale mortgage-backed securities at March 31, 2007 and December 31, 2006.


	March 31,		December 31,
(in thousands)	2007		2006


Variable-rate pass-through securities	$	1,873	$	2,668
Variable-rate collateralized mortgage obligations		52,618		57,696


Total amortized cost	$	54,491	$	60,364

Realized Gains and Losses. No realized gains or losses were reported for the three months ended March 31, 2007 and 2006.

Note 5 – Held-to-Maturity Securities

Held-to-maturity securities as of March 31, 2007 and December 31, 2006 were as follows:

March 31, 2007

Gross Unrealized

Estimated Fair

(in thousands)

Amortized Cost

Gains

Losses

Value

Commercial paper

Government-sponsored enterprises

1,131,217

885

(6,585

)

1,125,517

State or local agency obligations

779,932

8,094

(2,635

)

785,391

1,911,149

8,979

(9,220

)

1,910,908

Mortgage-backed securities:

U.S. agency

66,691

185

(2,512

)

64,364

Government-sponsored enterprises

1,695,595

5,492

(43,574

)

1,657,513

Private label

8,891,865

23,980

(122,453

)

8,793,392

Total mortgage-backed securities

10,654,151

29,657

(168,539

)

10,515,269

Total held-to-maturity securities

12,565,300

38,636

(177,759

)

12,426,177


	December 31, 2006
			Gross Unrealized		Gross Unrealized			Estimated Fair
(in thousands)	Amortized Cost		Gains		Losses			Value


Commercial paper	$	332,955	$	-	$	-		$	332,955
Government-sponsored enterprises		984,941		509		(7,729	)		977,721
State or local agency obligations		779,780		7,394		(4,178	)		782,996


		2,097,676		7,903		(11,907	)		2,093,672
Mortgage-backed securities:
U.S. agency		70,987		192		(2,649	)		68,530
Government-sponsored enterprises		1,766,871		3,647		(51,281	)		1,719,237
Private label		9,003,566		15,585		(141,701	)		8,877,450


Total mortgage-backed securities		10,841,424		19,424		(195,631	)		10,665,217


Total held-to-maturity securities	$	12,939,100	$	27,327	$	(207,538	)	$	12,758,889

Restricted securities relating to the Shared Funding Program are classified as held-to-maturity and are included in private label mortgage-backed securities above. They are reported at amortized cost of $59.0 million and

Notes to Unaudited Financial Statements (continued)

$60.4 million as of March 31, 2007 and December 31, 2006, respectively. No held-to-maturity securities were pledged as collateral as of March 31, 2007 and December 31, 2006.

The following tables summarize the held-to-maturity securities with unrealized losses as of March 31, 2007 and December 31, 2006. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

March 31, 2007

Less than 12 months

Greater than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(in thousands)

Value

Losses

Value

Losses

Value

Losses

Government-sponsored enterprises

449,225

(775

)

125,407

(5,810

)

574,632

(6,585

)

State or local agency obligations

183,786

(517

)

66,062

(2,118

)

249,848

(2,635

)

633,011

(1,292

)

191,469

(7,928

)

824,480

(9,220

)

Mortgage-backed securities:

U.S. agency

47,583

(2,512

)

47,583

(2,512

)

Government-sponsored enterprises

1,132,567

(43,574

)

1,132,567

(43,574

)

Private label

600,990

(3,354

)

5,406,386

(119,099

)

6,007,376

(122,453

)

Total mortgage-backed securities

600,990

(3,354

)

6,586,536

(165,185

)

7,187,526

(168,539

)

Total temporarily impaired

1,234,001

(4,646

)

6,778,005

(173,113

)

8,012,006

(177,759

)


	December 31, 2006

	Less than 12 months					Greater than 12 months					Total

	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(in thousands)	Value		Losses			Value		Losses			Value		Losses


Government-sponsored enterprises	$	677,212	$	(7,729	)	$	-	$	-		$	677,212	$	(7,729	)
State or local agency obligations		222,099		(4,178	)		-		-			222,099		(4,178	)


		899,311		(11,907	)		-		-			899,311		(11,907	)
Mortgage-backed securities:
U.S. agency		-		-			50,468		(2,649	)		50,468		(2,649	)
Government-sponsored enterprises		252,226		(1,058	)		1,116,169		(50,223	)		1,368,395		(51,281	)
Private label		1,046,250		(6,372	)		5,441,814		(135,329	)		6,488,064		(141,701	)


Total mortgage-backed securities		1,298,476		(7,430	)		6,608,451		(188,201	)		7,906,927		(195,631	)


Total temporarily impaired	$	2,197,787	$	(19,337	)	$	6,608,451	$	(188,201	)	$	8,806,238	$	(207,538	)

The Bank reviewed its held-to-maturity investment securities and determined that all unrealized losses reflected above are temporary as of March 31, 2007 and December 31, 2006. The determination that the declines in fair value are temporary is based on several factors, including the fact that the Bank has the ability and the intent to hold such securities through to recovery of the unrealized losses. Specific to the MBS portfolio, all investments are rated AAA, except for one with an AA rating. A portion of these securities are guaranteed payment of principal and interest by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. Additionally,

Notes to Unaudited Financial Statements (continued)

the Bank reviewed the credit ratings of the entire portfolio and noted that there have been no downgrades. The unrealized loss position that has occurred in the portfolio is primarily due to cyclical interest rate patterns; therefore, the Bank has determined that all declines in fair value are temporary.

Redemption Terms. The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity are shown below. Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.


(in thousands)	March 31, 2007				December 31, 2006

			Estimated Fair				Estimated Fair
Year of Maturity	Amortized Cost		Value		Amortized Cost		Value


Due in one year or less	$	300,000	$	299,330	$	432,955	$	432,587
Due after one year through five years		1,079,420		1,087,137		1,129,158		1,134,964
Due after five years through ten years		146,037		139,797		149,760		142,945
Due after ten years		385,692		384,644		385,803		383,176


		1,911,149		1,910,908		2,097,676		2,093,672
Mortgage-backed securities		10,654,151		10,515,269		10,841,424		10,665,217


Total	$	12,565,300	$	12,426,177	$	12,939,100	$	12,758,889

The amortized cost of the Bank’s mortgage-backed securities classified as held-to-maturity includes net discounts of $86.0 million and $88.4 million at March 31, 2007 and December 31, 2006, respectively.

Interest Rate Payment Terms. The following table details interest rate payment terms for held-to-maturity securities at March 31, 2007 and December 31, 2006.


	March 31,		December 31,
(in thousands)	2007		2006


Amortized cost of held-to-maturity securities other than mortgage-backed securities:
Fixed-rate	$	1,307,594	$	1,494,011
Variable-rate		603,555		603,665


		1,911,149		2,097,676
Amortized cost of held-to-maturity mortgage-backed securities:
Pass through securities:
Fixed-rate		4,471,608		4,630,851
Variable-rate		198,484		209,938
Collateralized mortgage obligations:
Fixed-rate		5,627,036		5,617,859
Variable-rate		357,023		382,776


		10,654,151		10,841,424


Total held-to-maturity securities	$	12,565,300	$	12,939,100

Realized Gains and Losses. There were no realized gains or realized losses on sale of held-to-maturity securities for the three months ended March 31, 2007 and 2006.

Notes to Unaudited Financial Statements (continued)

Note 6 – Loans to Members

Redemption Terms. At March 31, 2007, the Bank had loans to members outstanding including Affordable Housing Program (AHP) loans at interest rates ranging from 0% to 8.56% as summarized below. AHP subsidized loans have interest rates ranging between 0% and 6.50%.

March 31, 2007

December 31, 2006

Weighted

Weighted

(dollars in thousands)

Average

Average

Year of Original Maturity

Amount

Interest Rate

Amount

Interest Rate

Due in 1 year or less

16,319,348

5.00

18,942,187

5.02

Due after 1 year through 2 years

7,755,580

4.71

7,193,427

4.70

Due after 2 years through 3 years

5,130,150

4.93

6,707,084

4.89

Due after 3 years through 4 years

4,275,205

5.20

3,831,103

5.22

Due after 4 years through 5 years

2,655,118

5.27

3,266,398

5.20

Thereafter

9,610,949

4.77

9,417,517

4.66

Index amortizing loans

33,713

5.82

40,584

5.80

Total par value

45,780,063

4.93

49,398,300

4.91

Discount on AHP loans to members

(1,440

)

(1,493

)

Deferred prepayment fees

(137

)

(178

)

SFAS 133 hedging adjustments

22,982

(61,252

)

Total book value

45,801,468

49,335,377

Index amortizing loans require repayment according to predetermined amortization schedules linked to the level of various indices. Usually, as market interest rates rise (fall), the maturity of an index amortizing loan to member extends (contracts).

The Bank offers loans to members that may be prepaid on pertinent dates without incurring prepayment fees (returnable loans). Other loans to members may only be prepaid by paying a fee (prepayment fee) to the Bank that makes the Bank financially indifferent to the prepayment of the loan. At March 31, 2007 and December 31, 2006, the Bank had returnable loans of $2.8 billion and $2.4 billion, respectively.

The following table summarizes loans to members by year of original maturity or next call date for returnable loans to members.


(in thousands)	March 31,		December 31,
Year of Original Maturity or Next Call Date	2007		2006


Due or callable in 1 year or less	$	18,984,848	$	21,175,687
Due or callable after 1 year through 2 years		7,867,080		7,329,927
Due or callable after 2 years through 3 years		4,782,150		6,359,084
Due or callable after 3 years through 4 years		3,604,205		3,496,103
Due or callable after 4 years through 5 years		2,131,118		2,490,398
Thereafter		8,376,949		8,506,517
Index amortizing loans to members		33,713		40,584


Total par value	$	45,780,063	$	49,398,300

The Bank also offers convertible loans. With a convertible loan, the Bank purchases an option from the member that allows the Bank to convert the interest rate from fixed to floating by terminating the fixed loan, which the Bank normally would exercise when interest rates increase, and offering a floating-rate loan. At March 31, 2007

Notes to Unaudited Financial Statements (continued)

and December 31, 2006, the Bank had convertible loans outstanding of $8.8 billion and $8.9 billion, respectively. The following table summarizes loans to members by year of maturity or next convertible date for convertible loans.


(in thousands)	March 31,		December 31,
Year of Original Maturity or Next Convertible Date	2007		2006


Due or convertible in 1 year or less	$	23,871,818	$	27,050,857
Due or convertible after 1 year through 2 years		7,914,030		6,811,927
Due or convertible after 2 years through 3 years		4,440,430		6,132,834
Due or convertible after 3 years through 4 years		2,786,355		2,386,383
Due or convertible after 4 years through 5 years		2,094,018		2,227,948
Thereafter		4,639,699		4,747,767
Index amortizing loans to members		33,713		40,584


Total par value	$	45,780,063	$	49,398,300

At March 31, 2007 and December 31, 2006, the Bank had rights to collateral with an estimated value greater than its outstanding loans to members.

Details regarding security terms of the loans to members portfolio can be found in Note 9 of the footnotes to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Credit Risk. While the Bank has never experienced a loan loss on a loan to a member, the expansion of collateral for Community Financial Institutions (CFIs) and lending to nonmember housing associates provides the potential for additional credit risk for the Bank. The management of the Bank has the policies and procedures in place to appropriately manage this credit risk. Accordingly, the Bank has not provided any allowances for credit losses on loans to members.

The Bank’s potential credit risk from loans to members is concentrated in commercial banks and savings institutions. As of March 31, 2007, the Bank had loans to members of $26.6 billion outstanding to three members which represented 58.2% of total loans outstanding. As of December 31, 2006, the Bank had loans to members of $31.9 billion outstanding to three members which represented 64.6% of total loans outstanding. The Bank held sufficient collateral to secure loans to members and the Bank does not expect to incur any losses on these loans. See Note 11 for further information on transactions with related parties.

Interest Rate Payment Terms. The following table details interest rate payment terms for loans to members.


	March 31,		December 31,
(in thousands)	2007		2006


Fixed rate — overnight	$	4,873,531	$	1,651,474
Fixed rate — term		35,493,624		40,526,779
Variable-rate		5,412,908		7,220,047


Total par value	$	45,780,063	$	49,398,300

For loans to members due beyond one year, at March 31, 2007, the Bank had $24.5 billion of fixed rate loans and $4.9 billion of variable rate loans.

Note 7 – Mortgage Loans Held for Portfolio

The MPF^® Program involves investment by the Bank in mortgage loans which are purchased from its participating members. The total loans represent held-for-portfolio loans under the MPF Program whereby the Bank’s members originate, service, and credit enhance home mortgage loans that are then sold to the Bank. The Bank has historically sold participation interests in some of its MPF^® Program loans to other FHLBanks and holds the rest in portfolio. See Note 11 for further information on transactions with related parties.

Notes to Unaudited Financial Statements (continued)

The following table presents information on mortgage loans held for portfolio:


	March 31,			December 31,
(in thousands)	2007			2006


Fixed medium-term single-family mortgages⁽¹⁾	$	1,263,909		$	1,314,990
Fixed long-term single-family mortgages⁽¹⁾		5,417,816			5,579,605


Total par value	$	6,681,725		$	6,894,595


Premiums		76,032			79,579
Discounts		(26,155	)		(27,088	)
SFAS 133 hedging adjustments		19,189			20,112


Total mortgage loans held for portfolio	$	6,750,791		$	6,967,198

Note:


⁽¹⁾		Medium-term is defined as a term of 15 years or less. Long-term is defined as greater than 15 years.

The following tables detail the par value of mortgage loans held for portfolio outstanding categorized by type and by maturity.


	March 31,		December 31,
(in thousands)	2007		2006


Government-insured or -guaranteed loans	$	592,018	$	622,813
Conventional loans		6,089,707		6,271,782


Total par value	$	6,681,725	$	6,894,595


Year of maturity
Due within one year	$	9	$	13
Due after one year through five years		1,230		819
Due after five years		6,680,486		6,893,763


Total par value	$	6,681,725	$	6,894,595

Note 8 – Consolidated Obligations

Consolidated obligations are the joint and several obligations of the FHLBanks and consist of consolidated bonds and discount notes. The FHLBanks issue consolidated obligations through the OF as their agent. In connection with each debt issuance, each FHLBank specifies the amount of debt it wants issued on its behalf. The OF tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of consolidated obligations where it is the primary obligor for its specific portion of consolidated obligations issued. The Finance Board and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the OF. Consolidated bonds are issued primarily to raise intermediate and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity. Consolidated discount notes are issued primarily to raise short-term funds. These notes sell at less than their face amount and are redeemed at par value when they mature. Additional information regarding consolidated obligations, including general terms and interest rate payment terms, can be found in Note 14 of the footnotes to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Notes to Unaudited Financial Statements (continued)

The following table details interest rate payment terms for consolidated obligation bonds.


	March 31,		December 31,
(in thousands)	2007		2006


Fixed-rate	$	43,328,597	$	45,597,053
Floating-rate		2,770,000		2,325,000
Step-up		3,660,150		4,135,150
Conversion bonds:
Fixed to floating		155,000		170,000
Floating to fixed		65,000		100,000
Range bonds		647,380		657,380
Zero coupon		4,028,000		4,028,000


Total par value	$	54,654,127	$	57,012,583

Maturity Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding by year of original maturity.


	March 31, 2007					December 31, 2006
(dollars in thousands)
				Weighted Average					Weighted Average
Year of Original Maturity	Amount			Interest Rate		Amount			Interest Rate


Due in 1 year or less	$	14,436,050			4.31	$	14,799,570			4.18
Due after 1 year through 2 years		10,638,500			4.64		12,634,000			4.53
Due after 2 years through 3 years		4,825,530			4.47		5,006,530			4.45
Due after 3 years through 4 years		4,927,000			4.90		5,313,000			4.85
Due after 4 years through 5 years		2,568,000			5.16		2,468,000			5.02
Thereafter		13,617,000			3.49		13,185,000			3.40
Index amortizing notes		3,642,047			4.82		3,606,483			4.79


Total par value		54,654,127			4.31		57,012,583			4.24


Bond premiums		19,750					20,474
Bond discounts		(3,117,699	)				(3,135,236	)
SFAS 133 hedging adjustments		(179,038	)				(270,429	)


Total book value	$	51,377,140				$	53,627,392

Consolidated obligation bonds outstanding at March 31, 2007 and December 31, 2006, include callable bonds totaling $27.0 billion and $28.1 billion, respectively. The Bank primarily uses fixed-rate callable debt to finance loans to members (see Note 6) and mortgage-backed securities. Simultaneously with such a debt issue, the Bank may also enter an interest-rate swap (in which the Bank pays variable and receives fixed) with a call feature that mirrors the option embedded in the debt (a sold callable interest rate swap). The combined sold callable interest rate swap and callable debt allows the Bank to provide members attractively priced loans. The par value of the Bank’s non-callable consolidated obligation bonds at March 31, 2007 and December 31, 2006, was $27.6 billion and $28.9 billion, respectively.

Notes to Unaudited Financial Statements (continued)

The following table summarizes consolidated obligation bonds outstanding by year of original maturity or next call date.


(in thousands)	March 31,		December 31,
Year of Original Maturity or Next Call Date	2007		2006


Due or callable in 1 year or less	$	30,356,580	$	33,385,100
Due or callable after 1 year through 2 years		10,872,500		10,554,000
Due or callable after 2 years through 3 years		4,260,000		3,672,000
Due or callable after 3 years through 4 years		1,524,000		1,740,000
Due or callable after 4 years through 5 years		959,000		1,069,000
Thereafter		3,040,000		2,986,000
Index amortizing notes		3,642,047		3,606,483


Total par value	$	54,654,127	$	57,012,583

Consolidated Discount Notes. Consolidated discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to 365 days. These notes are issued at less than their face amount and redeemed at par value when they mature. The Bank’s participation in consolidated discount notes was as follows:


	March 31,			December 31,
(dollars in thousands)	2007			2006


Book value	$	15,752,140		$	17,845,226
Par value		15,825,000			17,933,218
Weighted average interest rate		5.25	%		5.26	%

The Act authorizes the Secretary of the Treasury, at his or her discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4.0 billion under certain conditions. The terms, conditions, and interest rates are determined by the Secretary of the Treasury. There were no such purchases by the U.S. Treasury during the three months ended March 31, 2007 or the year ended December 31, 2006.

Note 9 – Capital

The Bank is subject to three capital requirements under the current capital structure plan. The Bank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operations risk capital requirements, calculated in accordance with the Finance Board regulations. Only permanent capital, defined as retained earnings plus capital stock, satisfies the risk-based capital requirement. The Finance Board may require the Bank to maintain a greater amount of permanent capital than is required by the risk-based capital requirements, as defined. In addition, the Gramm-Leach-Bliley Act (GLB Act) requires the Bank to maintain at all times at least a 4.0% capital-to-asset ratio and at least a 5.0% leverage ratio, defined as the sum of permanent capital weighted 1.5 times plus loan loss reserves divided by total assets.

The following table demonstrates the Bank’s compliance with these capital requirements at March 31, 2007 and December 31, 2006:


	March 31, 2007						December 31, 2006

(dollars in thousands)	Required			Actual			Required			Actual


Regulatory capital requirements:
Risk-based capital	$	469,742		$	3,347,686		$	509,155		$	3,647,027
Total capital-to-asset ratio		4.0	%		4.6	%		4.0	%		4.7	%
Total regulatory capital	$	2,920,439		$	3,355,061		$	3,095,058		$	3,654,615
Leverage ratio		5.0	%		6.9	%		5.0	%		7.1	%
Leverage capital	$	3,650,549		$	5,028,905		$	3,868,823		$	5,478,130

Notes to Unaudited Financial Statements (continued)

Capital Concentrations. The following table presents member holdings of ten percent or more of the Bank’s total capital stock including mandatorily redeemable capital stock outstanding as of March 31, 2007 and December 31, 2006.

March 31, 2007

December 31, 2006

(dollars in thousands)

Percent of

Percent

Member

Capital Stock

total

Capital Stock

of total

Sovereign Bank, Reading PA

607,617

19.7

905,541

26.7

GMAC Bank, Midvale UT^(a)

396,260

12.8

354,900

10.5

Citicorp Trust Bank, FSB, Newark DE

338,437

11.0

438,641

12.9


^(a)		Formerly known as GMAC Automotive Bank. For Bank membership purposes, principal place of business is Horsham, PA.

Mandatorily Redeemable Capital Stock. At March 31, 2007 and December 31, 2006, the Bank had $5.6 million and $7.9 million in capital stock subject to mandatory redemption with payment subject to a five-year waiting period and the Bank meeting its minimum regulatory capital requirements. For the three months ended March 31, 2007 and 2006, dividends on mandatorily redeemable capital in the amount of $152 thousand and $132 thousand, respectively, were recorded as interest expense. There have been no reclassifications of mandatorily redeemable capital stock back into capital.

As of March 31, 2007, two members (one of which is in receivership) had notified the Bank to voluntarily redeem their capital stock and withdraw from membership. These redemptions were not complete as of March 31, 2007. The following table shows the amount of mandatorily redeemable capital stock by contractual year of redemption.


	March 31,		December 31,
(in thousands)	2007		2006


Due in 1 year or less	$	11	$	708
Due after 1 year through 2 years		5		-
Due after 2 years through 3 years		-		5
Due after 3 years through 4 years		5,526		7,155
Due after 4 years through 5 years		14		11
Thereafter		10		13


Total	$	5,566	$	7,892

The year of redemption in the table above is the later of the end of the five-year redemption period or the maturity date of the activity the stock is related to, if the capital stock represents the activity-based stock purchase requirement of a non-member (former member that withdrew from membership, merged into a non-member or was otherwise acquired by a non-member).

The Bank repurchased capital stock related to out-of-district mergers totaling $2.3 million and $540 thousand for the three months ended March 31, 2007 and 2006, respectively.

Notes to Unaudited Financial Statements (continued)

A rollforward of the Bank’s mandatorily redeemable capital stock activity is presented in the following table.


	For the three months ended
	March 31,
(in thousands)	2007			2006


Balance, beginning of the period	$	7,892		$	16,731
Capital stock subject to mandatory redemption reclassified from equity due to withdrawals		-			-
Redemption of mandatorily redeemable capital stock due to withdrawals		(2,326	)		(540	)


Balance, end of the period	$	5,566		$	16,191

Dividends. Prior to reaching the $200 million retained earnings target, the Bank paid out less than 100% of net income in dividends. This target was achieved by March 31, 2006. All future dividend payments are subject to the approval of the Board of Directors, and the Bank may pay out less than 100% of net income in dividends. Dividends may be paid in either capital stock or cash, although the Bank has historically paid cash dividends only.

New Finance Board Capital Rule. On December 22, 2006, the Finance Board published a rule, “Limitations on Issuance of Excess Stock,” which became effective on January 29, 2007. Under the rule, if the Bank’s excess stock is greater than one percent of its total assets, the Bank will be barred from further increasing member excess stock by paying dividends in the form of shares of stock (stock dividends) or otherwise issuing new excess stock. Excess stock is defined as the amount of capital stock greater than the member’s minimum capital stock requirements. In addition, the final rule includes a provision requiring the Bank to declare and pay dividends only out of known income. It is the Bank’s current practice to declare and pay dividends quarterly after net income has been determined.

Additional discussion regarding mandatorily redeemable capital stock, members’ capital requirements and the restrictions on capital stock redemption can be found in Note 15 of the footnotes to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

Note 10 – Derivatives and Hedging Activities

The components of net gain (loss) on derivatives and hedging activities for the three months ended March 31, 2007 and 2006 are presented in the following table.

Net Gain (Loss) on Derivatives and Hedging Activities


	For the three months ended
	March 31,
(in thousands)	2007			2006


Gains related to fair value hedge ineffectiveness	$	5,324		$	1,997
Gains (losses) on economic hedges		(535	)		2,562
Other		156			122
Gains (losses) on intermediary hedges		52			(55	)


Net gain on derivatives and hedging activities	$	4,997		$	4,626

There were no material amounts for the three months ended March 31, 2007 and 2006 that were reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two month period thereafter. As of March 31, 2007, the deferred net gains on derivative instruments accumulated in other comprehensive income expected to be reclassified to earnings during the next twelve months was $2.2 million. Normally, the maximum length of time over which the Bank hedges its exposure to the variability in future cash

Notes to Unaudited Financial Statements (continued)

flows for forecasted transactions, excluding those forecasted transactions related to the payment of variable interest on existing financial instruments, is 45 days or less. The Bank did not have any hedges related to the exposure to the variability in future flows for forecasted transactions at March 31, 2007.

The following table represents outstanding notional balances and estimated fair values of the derivatives outstanding at March 31, 2007 and December 31, 2006.


	March 31, 2007					December 31, 2006

			Estimated					Estimated
(in thousands)	Notional		Fair Value			Notional		Fair Value


Interest rate swaps
Fair value	$	60,462,587	$	188,226		$	62,895,887	$	162,107
Economic		1,564,713		(1,970	)		1,713,205		(1,115	)
Intermediation		16,689		26			27,388		34
Interest rate swaptions
Economic		1,300,000		598			750,000		506
Interest rate forward settlement agreements
Fair value		269,000		540			53,000		321
Mortgage delivery commitments
Economic		5,348		-			4,267		(8	)
Other
Economic		-		-			-		-


Total	$	63,618,337	$	187,420		$	65,443,747	$	161,845


Total derivatives excluding accrued interest				187,420					161,845
Accrued interest				133,127					193,038


Net derivative balances				320,547					354,883


Net derivative asset balances				468,850					498,976
Net derivative liability balances				(148,303	)				(144,093	)


Net derivative balances			$	320,547				$	354,883

Credit Risk. At March 31, 2007 and December 31, 2006, the Bank’s maximum credit risk, was approximately $468.9 million and $499.0 million, respectively. These totals include $103.9 million and $153.5 million, respectively, of net accrued interest receivable. In determining maximum credit risk, the Bank considers accrued interest receivables and payables, and the legal right to offset derivative assets and liabilities by counterparty. The Bank held cash collateral of $344.3 million and $351.9 million as collateral as of March 31, 2007 and December 31, 2006, respectively. As of March 31, 2007, two counterparties comprised 14.8% and 14.4% of the Bank’s total credit risk when measured after consideration of related collateral. Additionally, collateral with respect to derivatives with member institutions includes collateral assigned to the Bank, as evidenced by a written security agreement and held by the member institution for the benefit of the Bank.

The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. See Note 14 for further discussion regarding assets pledged by the Bank to these counterparties.

Details regarding the Bank’s derivatives and hedging policies and practices can be found in Note 16 of the footnotes to the audited financial statements in the Bank’s 2006 Annual Report on Form 10-K, as amended.

Notes to Unaudited Financial Statements (continued)

Note 11 – Transactions with Related Parties

The Bank is a cooperative whose member institutions own the capital stock of the Bank and may receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investment in Bank capital stock until the transactions mature or are paid off. All loans, including Banking on Business (BOB) loans, are issued to members and all mortgage loans held for portfolio are purchased from members. The Bank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to loans to members and mortgage loan purchases. All transactions with members are entered into in the normal course of business. In instances where the member also has an officer or director who is a director of the Bank, those transactions are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as all other transactions. In accordance with Statement of Financial Accounting Standards No. 57, Related Party Disclosures, the Bank defines related parties as other FHLBanks in the System, members with capital stock outstanding in excess of 10% of total capital stock outstanding and members that have an officer or director who is a director of the Bank.

The following table includes significant outstanding related party member balances.


	March 31,		December 31,
(in thousands)	2007		2006


Loans to members	$	28,465,051	$	33,845,223
Deposits		22,053		191,790
Capital stock		1,453,629		1,811,872

The following table summarizes the Statement of Operations effects corresponding to the above related party member balances.


	Three months ended
	March 31,

(in thousands)	2007		2006


Interest income on loans to members	$	449,410	$	210,138
Interest expense on deposits		224		100

Total mortgage loan volume purchased from related party members during the three months ended March 31, 2007 and 2006 was $0.2 million and $0.6 million, respectively. Interest income associated with outstanding mortgage loans purchased from related party members approximated $1.9 million and $2.2 million for the three months ended March 31, 2007 and 2006, respectively.

From time to time, the Bank may borrow from or lend to other FHLBanks on a short term uncollateralized basis. The following table includes gross amounts transacted under these arrangements.


	Three months ended
	March 31,

(in thousands)	2007		2006


Borrowed from other FHLBanks	$	1.5	$	100.0
Repaid to other FHLBanks		1.5		100.0
Loaned to other FHLBanks		-		-
Repaid by other FHLBanks		-		-

On occasion, an FHLBank may transfer its primary debt obligations to another FHLBank, which becomes the primary obligor on the transferred debt upon completion of the transfer. During the three months ended March 31, 2007 and 2006, there was no such transfer.

Prior to May 1, 2006, the Bank regularly sold participation interests in the mortgage loans purchased from members to the FHLBank of Chicago. Upon execution of a new service agreement, which became effective May 1, 2006, both parties agreed to discontinue the practice and a transaction services fee is now being paid to the

Notes to Unaudited Financial Statements (continued)

FHLBank Chicago in lieu of the participation. The par values of the mortgage loans participated to the FHLBank of Chicago were $25 thousand and $13 million during the three months ended March 31, 2007 and 2006, respectively. The servicing fee paid to FHLBank of Chicago was $36 thousand for the three months ended March 31, 2007.

Note 12 – Estimated Fair Values

The following estimated fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank as of March 31, 2007 and December 31, 2006. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a majority of the Bank’s financial instruments, in certain cases fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions. The fair value summary tables do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities.

Details regarding the estimation of fair value amounts for each category in the Statement of Condition can be found in Note 21 of the footnotes to the audited financial statements in the Bank’s 2006 Annual Report filed on Form 10-K, as amended.

The carrying value and estimated fair values of the Bank’s financial instruments at March 31, 2007 and December 31, 2006 are presented in the tables below.

March 31, 2007
Fair Value Summary Table

Net

Carrying

Unrealized

Estimated

(in thousands)

Value

Gains (Losses)

Fair Value

Assets

Cash and due from banks

79,723

Interest-bearing deposits

3,729,986

(1,170

)

3,728,816

Federal funds sold

3,110,000

)

3,109,996

Available-for-sale securities

60,030

Held-to-maturity securities

12,565,300

(139,123

)

12,426,177

Loans to members

45,801,468

41,125

45,842,593

Mortgage loans held for portfolio, net

6,749,908

(138,573

)

6,611,335

Accrued interest receivable

361,610

Derivative assets

468,850

Other assets, including BOB loans

84,105

(35,583

)

48,522

Liabilities

Deposits

1,801,542

)

1,801,536

Consolidated obligations:

Discount notes

15,752,140

(2,284

)

15,749,856

Bonds

51,377,140

(148,968

)

51,228,172

Mandatorily redeemable capital stock

5,566

Accrued interest payable

498,071

Derivative liabilities

148,303

Other liabilities

91,069

Notes to Unaudited Financial Statements (continued)

December 31, 2006
Fair Value Summary Table


			Net
	Carrying		Unrealized			Estimated
(in thousands)	Value		Gains (Losses)			Fair Value


Assets
Cash and due from banks	$	78,098	$	-		$	78,098
Interest-bearing deposits		3,619,984		(1,341	)		3,618,643
Federal funds sold		3,370,000		(517	)		3,369,483
Available-for-sale securities		65,848		-			65,848
Held-to-maturity securities		12,939,100		(180,211	)		12,758,889
Loans to members		49,335,377		(25,409	)		49,309,968
Mortgage loans held for portfolio, net		6,966,345		(157,135	)		6,809,210
Accrued interest receivable		416,407		-			416,407
Derivative assets		498,976		-			498,976
Other assets, including BOB loans		86,323		(36,046	)		50,277

Liabilities
Deposits	$	1,425,997	$	-		$	1,425,997
Consolidated obligations:
Discount notes		17,845,226		(3,682	)		17,841,544
Bonds		53,627,392		(295,474	)		53,331,918
Mandatorily redeemable capital stock		7,892		-			7,892
Accrued interest payable		566,350		-			566,350
Derivative liabilities		144,093		-			144,093
Other liabilities		125,534		-			125,534

Note 13 – Segments

The Bank operates two segments differentiated by products. The first segment, entitled Traditional Member Finance, houses a majority of the Bank’s activities, including, but not limited to, providing loans to members, investments and deposit products. The MPF Program or Mortgage Finance segment purchases mortgage loans from members and funds and hedges the resulting portfolio.

Results of segments are presented based on management accounting practices and the Bank’s management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP. Therefore, the financial results of the segments are not necessarily comparable with similar information at other FHLBanks or any other company.

The management accounting process uses various balance sheet and income statement assignments and transfers to measure performance of the segment. Methodologies are refined from time to time as management accounting practices change. Net mortgage loans held for portfolio are the only significant assets related to the operations of the Mortgage Finance segment. Borrowings are allocated to the Mortgage Finance segment based on loans outstanding. All remaining borrowings and all capital remain in the Traditional Member Finance segment. The allowance for credit losses pertaining to the mortgage loans held for portfolio is allocated to the Mortgage Finance segment and the allowance for credit losses pertaining to BOB loans is allocated to the Traditional Member Finance segment. Derivatives are allocated to segments consistent with hedging strategies. Costs incurred by support areas not directly aligned with the segment are allocated based on estimated usage of services.

Notes to Unaudited Financial Statements (continued)

The following table sets forth the Bank’s financial performance by operating segment for the three months ended March 31, 2007 and 2006.


	Traditional		MPF or
	Member		Mortgage
(in thousands)	Finance		Finance			Total


2007
Net interest income	$	77,083	$	6,571		$	83,654
Provision for credit losses		1,860		29			1,889
Other income (loss)		6,634		(54	)		6,580
Other expenses		14,417		744			15,161


Income before assessments		67,440		5,744			73,184
Affordable Housing Program		5,521		469			5,990
REFCORP		12,384		1,055			13,439


Total assessments		17,905		1,524			19,429


Net income	$	49,535	$	4,220		$	53,755


Total assets	$	66,261,072	$	6,749,908		$	73,010,980


2006
Net interest income	$	69,791	$	8,459		$	78,250
Provision (benefit) for credit losses		710		(140	)		570
Other income		5,947		320			6,267
Other expenses		15,211		1,092			16,303


Income before assessments		59,817		7,827			67,644
Affordable Housing Program		4,896		639			5,535
REFCORP		10,984		1,438			12,422


Total assessments		15,880		2,077			17,957


Net income	$	43,937	$	5,750		$	49,687


Total assets	$	65,086,959	$	7,439,741		$	72,526,700

Note 14 – Commitments and Contingencies

As described in Note 8, the twelve FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay its participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Board. No FHLBank has had to assume or pay the consolidated obligation of another FHLBank. The Finance Board, in its discretion and notwithstanding any other provision, may at any time order any FHLBank to make principal or interest payments due on any consolidated obligation, even in the absence of default by the primary obligor. The Bank has not recognized a liability for its joint and several obligation related to other FHLBanks’ consolidated obligations at March 31, 2007 and December 31, 2006.

The FHLBanks considered the guidance under FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34 (FIN 45), and determined it was not necessary to recognize the fair value of the FHLBanks’ joint and several liability for all of the consolidated obligations. The Bank considers the joint and several liability as a related party guarantee. Related

Notes to Unaudited Financial Statements (continued)

party guarantees meet the recognition scope exceptions in FIN 45. Accordingly, the Bank has not recognized a liability for its joint and several obligation related to other FHLBanks’ consolidated obligations at March 31, 2007 and December 31, 2006.

Commitments that legally bind and unconditionally obligate the Bank for additional loans to members, including BOB loans, totaled approximately $283 million and $66.5 million at March 31, 2007 and December 31, 2006, respectively. Commitments generally are for periods up to twelve months. Standby letters of credit are executed for members for a fee. A standby letter of credit is a short-term financing arrangement between the Bank and its member. If the Bank is required to make payment for a beneficiary’s draw, these amounts are converted into a collateralized loan to the member. Outstanding standby letters of credit were approximately $984.1 million and $969.6 million at March 31, 2007 and December 31, 2006, respectively. Based on management’s credit analyses, collateral requirements, and adherence to the requirements set forth in Bank policy and Finance Board regulations, the Bank has not recorded any additional liability on these commitments and standby letters of credit. Excluding BOB, commitments and standby letters of credit are fully collateralized at the time of issuance.

Commitments that unconditionally obligate the Bank to purchase mortgage loans totaled $5.3 million and $4.3 million at March 31, 2007 and December 31, 2006, respectively. Commitments are generally for periods not to exceed 365 days. In accordance with Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS 149), such commitments entered into after June 30, 2003, are recorded as derivatives at their fair value.

The Bank generally executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. In the past, the Bank has pledged, as collateral, cash and securities to counterparties that have market risk exposure from the Bank related to derivative agreements. The Bank had no cash pledged at March 31, 2007 and December 31, 2006. There were no securities pledged as of March 31, 2007 and December 31, 2006.

The Bank charged to operating expense net rental costs of approximately $0.6 million for both the three months ended March 31, 2007 and 2006.

Lease agreements for Bank premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the Bank.

The Bank has committed to issue or purchase consolidated obligations totaling $70 million and $98 million for the periods ended March 31, 2007 and December 31, 2006.

Note 15 – Other Developments

The Bank is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the Bank’s financial condition or results of operation.

Item 4T: Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of the Bank’s management, including its principal executive officer and principal financial officer, the Bank conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, 2007. Based on this evaluation, the Bank’s principal executive officer and principal financial officer concluded that the Bank’s disclosure controls and procedures were not effective to ensure that such information relating to the Bank that is required to be disclosed in reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Bank’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In conjunction with the restatement of the 2006 annual and interim Statements of Cash Flows, discussed further in Note 1 to the audited financial statements included in Amendment No. 1 to the 2006 Annual Report filed on Form 10-K and in Note 2 to the unaudited March 31, 2007 financial statements included within this Form 10-Q, management has concluded that the internal control deficiency that led to the restatement constituted a material weakness in the Bank’s internal controls over financial reporting. A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Beginning in early 2006, the Bank did not maintain effective control over the accurate classification of certain items within the Statement of Cash Flows. Specifically, the Bank did not maintain effective control over the accurate review of certain data used in preparation of the Statement of Cash Flows to ensure line item accuracy. This control deficiency resulted in the restatement of the Bank’s Statements of Cash Flows for the 2006 fiscal year and each of the 2006 interim periods. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues will be or have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. As the Bank is not currently subject to the requirements of the Sarbanes-Oxley Act related to the required assessment of, and disclosure concerning, internal controls over financial reporting, management has not completed an assessment of all of the Bank’s internal controls over financial reporting. If not remediated, this control deficiency could result in a misstatement of operating and financing cash flows that could result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. However, the Bank has taken steps to remediate the material weakness. The remedial actions include the required use of a number of additional data validation steps. Management continues to monitor the status of this material weakness and anticipates that remediation will be complete by June 30, 2007.

Internal Control Over Financial Reporting

For the first quarter of 2007, other than those described above, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

Item 1A: Risk Factors

For a complete discussion of Risk Factors, see Item 1A. Risk Factors in the Bank’s 2006 Annual Report filed on Form 10-K, as amended. Other than as noted below, management believes that there have been no material changes from the risk factors disclosed in the 2006 Form 10-K, as amended. The following risk factor represents an update on the repayment of loans by and repurchase of excess capital stock from the Bank’s largest borrower and stockholder.

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 investment returns and higher borrowing costs for remaining members.

One or more significant Bank members or borrowers could withdraw their membership or decrease their business levels as a result of a consolidation with an institution that is not one of the Bank’s members, or for other reasons, which could lead to a significant decrease in the Bank’s total assets and capital. In some cases, acquired banks are merged into banks chartered outside the Bank’s district. Under the Act and the Finance Board’s current rules, the Bank can generally do business only with member institutions that have charters in its district. If member institutions are acquired by institutions outside the Bank’s district and the acquiring institution decides not to maintain membership by dissolving charters, the Bank may be adversely affected, resulting in lower demand for products and services and redemption of capital stock. For example, as of December 31, 2006, the Bank had 64.6% of its loans outstanding to three members, Sovereign Bank, GMAC Bank and Citicorp Trust Bank, and 50.1% of its capital stock was owned by the same three members. If Sovereign Bank, GMAC Bank or Citicorp Trust Bank paid off their outstanding loans or if they withdrew from membership, the Bank could experience a material adverse effect on its outstanding loan balance, and capital stock levels and net income, as well as lower demand for its products and services.

In the event the Bank would lose one or more large borrowers that represent a significant proportion of its business, the Bank could, depending on the magnitude of the impact, compensate for the loss by lowering dividend rates, raising loan rates, attempting to reduce operating expenses (which could cause a reduction in service levels or products offered) or by undertaking some combination of these actions. The magnitude of the impact would depend, in part, on the Bank’s size and profitability at the time the financial institution ceases to be a borrower.

On December 21, 2006, Sovereign Bank announced a balance sheet restructuring. This announcement included a de-leveraging of approximately $10 billion in assets and $10 billion in wholesale funding, including FHLBank System loans, during the first quarter of 2007. As of December 31, 2006, Sovereign Bank was the Bank’s largest borrower and stockholder and held outstanding loans of $18.0 billion, or 36.5% of total loans, and capital stock of $905.5 million, or 26.7% of total capital stock. As of March 31, 2007, loans outstanding to and capital stock held by Sovereign Bank declined $6.3 billion and $297.9 million, respectively. The first quarter loan repayments had an average yield of 5.3% and their repayment resulted in no prepayment fees. The Bank is currently evaluating the impact of these repayments and their effect on the Bank’s financial condition and forecasts of results of operations and cash flows. For additional information, see the Risk Management section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


PART I — FINANCIAL INFORMATION		1
Item 1:	Financial Statements	27
*Financial Statements for the Three Months Ended March 31, 2007 and 2006*		27
*Notes to Unaudited Financial Statements*		32
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	51
Item 4T:	Controls and Procedures	52

PART II — OTHER INFORMATION		53
Item 1:	Legal Proceedings	53
Item 1A:	Risk Factors	54
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3:	Defaults upon Senior Securities	56
Item 4:	Submission of Matters to a Vote of Security Holders	57
Item 5:	Other Information	58
Item 6:	Exhibits	59

SIGNATURE		60
Exhibit 10.12
Exhibit 10.13
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2


Exhibit 10.12		Federal Home Loan Bank of Pittsburgh Short-Term Incentive Compensation Plan#
Exhibit 10.13		Directors’ Fee Policy 2007#
Exhibit 31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
Exhibit 31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer
Exhibit 32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer
Exhibit 32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer


#	Denotes a management contract or compensatory plan or arrangement.

I.		EFFECTIVE DATE

		The Short-Term Incentive Compensation Plan (the Plan) of the Federal Home Loan Bank of Pittsburgh was originally established effective as of January 1, 1991. Short-Term Incentive Compensation Awards (Awards) may be paid for each Plan Year (January 1 to December 31), in accordance with the provisions of the Plan.

II.		PURPOSE AND OBJECTIVES

		The Short-Term Incentive Compensation Plan is designed to attract, retain and motivate Bank employees. The Plan seeks to support the annual planning process and achievement of the Bank’s operational and profitability goals. Within this overall purpose, there are three primary objectives:

	•		To focus attention on the establishment and achievement of objective goals which are linked to the Bank’s business plan and success factors.

	•		To provide opportunities to earn financial rewards based on improved Bank performance and individual contributions to that performance.

	•		To ensure that variable compensation opportunities are reasonable and comparable with incentive payments made to employees of other similar businesses, including financial institutions, with similar duties and responsibilities.

III.		PLAN ADMINISTRATION

		The Plan is administered by the President, the Human Resources Committee of the Board of Directors (the Committee), and the Board of Directors (the Board).

		A. Responsibilities of the President

		The President will provide recommendations to the Committee and the Board regarding Plan participation, Bank and individual performance goals, Bank and individual achievements, and Awards for executive management. The President is responsible for approval of Plan participation, Bank and individual performance goals, Bank and individual achievements, and Awards for staff below the executive management level. The President’s responsibilities also include monitoring the effectiveness of the Plan, the payment process, and providing recommendations to the Committee and the Board regarding modifications to the Plan.

		B. Responsibilities of the Committee

		The Committee will review all Plan recommendations and revisions (including all performance goals and Awards) from the President and present final recommendations to the Board for its approval. In addition, the Committee will review the performance of the President and determine a Short-Term Incentive Award, to be recommended to the Board for its approval.

		C. Responsibilities of the Board

		The Board will review and approve as appropriate all recommendations from the Committee and the President.

IV.		ELIGIBILITY

		All Bank staff is eligible to participate in the Plan. Participation for executive management is recommended by the President to the Committee and approved by the Board.

		Eligibility is reviewed annually to assure continued appropriateness, and participants are notified by Human Resources of their participation in the Plan. Upon designation as a participant, each participant will be given a copy of the Plan.

V.		INCENTIVE AWARD OPPORTUNITY

		Certain positions have a greater and more direct impact than others on the achievement of Bank performance. Those differences are recognized by varying the incentive opportunity, expressed as a percentage of a participant’s base salary or, in the case of non-exempt employees such employees’ total earnings over the plan year, as determined by the Bank in accordance with applicable legal requirements.

		A summary of the short-term incentive plan award levels is attached as Attachment I. Each participant shall be provided with a separate document showing his level of participation in the Plan. Awards for performance results between the threshold and target levels are calculated as a percentage of the target level. Awards for performance between the target and maximum levels are calculated as a percentage of maximum.

VI.		PERFORMANCE MEASURES

		The Plan is designed to reward participants to the extent the participant meets objective performance goals related to Bank and/or individual performance criteria established by the Board. The mix of Bank and individual performance goals is determined for each participant at the onset of each Plan Year.

		Bank-wide Performance Goal

		One or more Bank-wide goal(s) are established for each Plan Year. These goals can be both quantitative and qualitative, and are established on the basis of the annual operating budget and business plan as approved by the Board.

		A performance schedule is established to indicate potential total awards payable at various levels of performance: the threshold level below which no award is paid, the target objective, and a maximum level which defines the limit of maximum incentive payment under the plan.

		For executive management and various other positions in the Bank, generally the greater the control and influence a participant can exert over Bank-wide goals, the larger a portion of their incentive award will be based on Bank performance.

		Individual Goals

		The establishment of individual goals is based upon objective individual performance initiatives which are mutually agreed upon by the participant and Bank management. These goals represent clearly defined and meaningful accomplishments desired within the framework of the responsibilities of the participant. Each goal will be designed to be attainable, within specific timeframes, but not without significant effort.

		Goals may be related solely to one individual, or may relate to a group of two or more individuals whose efforts are required to produce the results. The goals may be equally weighted or assigned different weights and emphasis. The minimum weight is 10 percent and the total weightings equal 100 percent. Goals will be established at three performance levels: threshold, target, and maximum, if appropriate.

		Individual goals are normally established on the basis of the annual operating budget and business plan. Goals may apply to the full Plan Year or to a portion of the Plan Year, as appropriate. For the President, goals will be established by the Board. For the Chief Operating Officer, in addition to the Bank’s financial goal(s), the President establishes additional individual performance goals based upon criteria established by the Board.

		Revisions and Amendments

		Bank-wide and individual performance goals are determined for the entire year.

		Recognizing, however, that circumstances and priorities may change during the year, the President may submit to the Committee and the Board revisions to Bank-wide goals during the course of the Plan Year at such time as he may choose. The Committee and the Board will determine, at its discretion, whether Bank-wide goals will be amended. The President will inform the Committee of any revisions to executive management’s individual goals which are required throughout the Plan Year.

VII.		AWARD DETERMINATION

		At the conclusion of each Plan Year, the President, after considering the Bank’s performance against its Bank-wide goal(s) and each participant’s performance against his/her individual performance goals, shall recommend to the Committee and the Board the short-term incentive award to be paid to executive management for that Plan Year, if any. The President is responsible for approval of Awards to be paid to staff below the executive management level. A participant who is on formal corrective action for performance anytime during the plan year will only be eligible to receive a pro-rated award of up to 9/12 of his/her award amount. In order for any short-term incentive payment to be made, the most recent examination by the Federal Housing Finance Board of the participant’s area(s) of responsibility must not have identified any unsafe or unsound practice or condition.

		Unless otherwise directed by the Board, payments of Awards under the Plan shall be made as soon as possible after the Board has made a determination regarding the payment of Awards but no later than 2¹/2 months after the close of the Plan year. Appropriate provisions shall be made for any taxes that the Bank determines are required to be withheld from any Awards under the applicable laws or other regulations of any governmental authority, whether federal, state, or local. The payment of any Award shall be subject to such obligations, terms and conditions as the Committee or the Board may specify in making the Award and, in exercising its discretion to make any Award determination hereunder, the Board may choose to consider factors such as overall Bank financial performance, operating environment, and other relevant considerations. Acceptance of any Award shall constitute agreement by the participant to all obligations, terms, conditions and restrictions so imposed.

		Participants who terminate employment with the Bank for any reason, other than death, disability or retirement prior to the Award payout date will not be eligible for an Award. Participants who are hired prior to July 1 during the Plan year or whose employment ends due to involuntary termination (excluding involuntary termination for cause), death, disability or retirement prior to the Award payout date may be eligible to be considered for a prorated incentive award.

		Each payment of an Award shall be from the general assets of the Bank.

VIII.		TERMINATION OR AMENDMENT

		The Plan, in whole or in part, may at any time or from time-to-time be amended, suspended, or reinstated and may at any time be terminated by action of the Board. Until a determination of Award payment has been made by the Board and a participant has met the requirement to be an active employee on the actual Award payout date, no participant has a vested right to an Award under the Plan.

	A.		Neither the adoption of the Plan nor its operation shall in any way affect the right and power of the Bank to dismiss any employee, or otherwise terminate the employment or take other action including, but not limited to, removing the employee from the incentive-eligible position, at any time, for any reason, with or without cause.

	B.		No participant will have the right to alienate, assign, encumber, hypothecate, or pledge his or her interest in any Award under the Plan, voluntarily or involuntarily, and any attempt to do so dispose of any such interest will be void.

	C.		This document is a complete statement of the Plan and as of the date below, supersedes all prior plans, representations and proposals written or oral relating to its subject matter. The Bank will not be bound by or liable to any employee for any representation, promise, or inducement made by any person which is not embodied in this document.

	D.		The Board has the power and authority to construe, interpret and administer the Plan. Any decision arising out of or in connection with the construction, interpretation or administration of the Plan will lie within the Board’s absolute discretion and will be binding on all parties.


	Payout									Performance
Eligibility	Threshold			Target			Maximum			Bank			Shared/Individual
Level 1		20.0	%		35.0	%		50.0	%		75	%		25	%
Level 2		18.75	%		25.0	%		37.5	%	Up to 65		%	Up to 35		%
Level 3		15.0	%		20.0	%		30.0	%	Up to 45		%	Up to 100		%
Level 4		14.5	%		19.0	%		26.5	%	Up to 40		%	Up to 100		%
Level 5		11.0	%		14.0	%		19.0	%	Up to 40		%	Up to 100		%
Level 6		7.5	%		9.0	%		11.5	%	Up to 40		%	Up to 100		%
Level 7		3.5	%		5.0	%		7.5	%	Up to 40		%	Up to 100		%

	(i)		the sum of the total actual compensation paid to Directors;

	(ii)		the sum of the total actual expenses paid to Directors; and

	(iii)		a summary of this Policy.


1.	I have reviewed this quarterly report on Form 10-Q of the Federal Home Loan Bank of Pittsburgh (the registrant);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:


	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 11, 2007		/s/ John R. Price
	Name:	John R. Price
	Title:	President & Chief Executive Officer


Date: May 11, 2007		/s/ Kristina K. Williams
	Name:	Kristina K. Williams
	Title:	Chief Financial Officer


1.	I am the Chief Executive Officer of the Federal Home Loan Bank of Pittsburgh (the registrant).

2.	I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:


	•	the Quarterly Report on Form 10-Q of the registrant for the quarter ended March 31, 2007 (the periodic report) containing financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

	•	the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented.


1.	I am the Chief Financial Officer of the Federal Home Loan Bank of Pittsburgh (the registrant).

2.	I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: