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Governance Principles

Message from the Chairman

FHLBank Pittsburgh is committed to building and retaining the confidence and trust of all of its stakeholders. Your trust is essential to the Bank being able to fulfill its mission of assisting financial institutions meet the needs of the communities they serve. This commitment to gain your trust is built on a foundation of strong corporate governance.

Our commitment to good corporate governance starts at the top of the Bank with the role of the Board in overseeing how management serves the long-term interests of its stakeholders. Within the cooperative structure of the Home Loan Bank, the Board follows the best practices in corporate governance. The core of these practices is a committed, independent and engaged Board of Directors. These practices are set forth in our Principles of Corporate Governance (below).

However, the methods we use to achieve our mission are just as important as the results themselves. There is nothing more important to the business of the Bank than its reputation and integrity. Our decisions and behaviors are guided by the principles set forth in our Ethics Policy, which requires all directors, officers and employees to conform to the highest standards of honesty and integrity in every aspect of conducting the business of the Bank.

The Bank will remain committed to following both the best practices in corporate governance and the highest standards in ethical conduct throughout every business cycle and every changing political environment.

Dennis Marlo
Chairman of the Board of Directors

Governance Principles

Corporate Governance Principles

The Board of Directors of the Federal Home Loan Bank of Pittsburgh has adopted the following principles of corporate governance. The Board will review these principles from time to time and make such changes as it deems necessary and appropriate.

Mission of the Board

The Board of Directors provides oversight and strategic guidance to management. The core responsibility of the Board is to exercise its fiduciary duty to act in the best interest of the Bank and its shareholders. Directors are responsible for defining and advancing the mission and activities of the Bank and for addressing the interests of its constituencies. The Board's primary responsibilities are to:

A. Select, employ, and regularly evaluate a highly qualified President to provide leadership for the management of the Bank;

B. Ensure that the Bank maintains a highly qualified senior management team committed to fulfilling the Bank's mission with the highest standards of ethics and integrity;

C. Ensure that an internal control system is established and maintained and oversee Senior Management's implementation of such system;

D. Establish appropriate policies for the Bank's safe and sound management;

E. Provide strategic direction for the Bank's business; and

F. Review regularly the effectiveness of the Board corporate governance structure and the performance of the Board.

Mission of the Senior Management Team

The Bank's Senior Management team is accountable to the Board to manage the Bank in accordance with the policies and principles established by the Board and applicable legal requirements. Senior Management's primary responsibilities are to:

A. Manage the Bank safely and soundly, and in accordance with the highest standards of ethics and integrity;

B. Implement the strategic direction established by the Board;

C. Establish and maintain a strong system of internal controls;

D. Implement the policies established by the Board; and

E. Ensure the Bank's compliance with applicable legal and regulatory requirements.

Corporate Governance Principles

The Bank has designed and implemented an effective corporate governance structure based on these principles to ensure that the Bank is well managed and satisfies all legal and regulatory requirements. In order to carry out these objectives, the Bank and the Board are committed to operating in accordance with the following standards:

A. Directors should be independent and accountable to the Bank’s
shareholder members;

B. Directors should be committed to the Bank's mission and public sponsorship.

C. Directors’ oversight should be active and engaged;

D. Directors should be knowledgeable about the business and operations of
the Bank;

E. Directors and employees should act with absolute integrity and honesty;

F. The Bank should maintain a strong control environment; and,

G. The governance and operations of the Bank should be transparent to its constituencies.

Corporate Governance – Standards

The Bank’s corporate governance standards and procedures fully comply with all
applicable legal requirements. The Bank has also incorporated into its governance standards relevant “best practices” of companies generally. In addition, taking into account the requirements of the Bank Act and regulations of the Finance Board and the unique structure of the Banks, the Bank has made its corporate governance and disclosure policies and procedures consistent with the requirements applicable to companies with publicly traded securities.

Structure of the Board

Size

The Board of Directors is comprised of 15 Directors. By statute, the Board cannot expand or reduce the number of Directors that serve on the Board. Only the Federal Housing Finance Board (FHFB) has the authority to determine how many seats exist on the Board.

Board Composition – Appointed and Elected Directors

The law governing the Bank System does not allow management of the Bank to serve on its Board of Directors. Consequently, all Directors of the Bank are outside Directors. Directors are classified as either being an Elected Director, Appointed Director, or a Community Interest Director.

Elected Directors

Nine of the 15 Directors are elected by the member institutions. Elected Directors are required to serve as either an officer or director of a member institution that maintains its principal place of business within the district. The institution that the Director is associated with must meet its regulatory minimum capital requirements at all times. There are six elected Directorships in Pennsylvania, two in Delaware and one in West Virginia.

Appointed Directors

Six of the 15 Directors are appointed by the FHFB to serve as public interest directors. Appointed Directors may not 1) serve as an officer of any Home Loan Bank or 2) hold shares of stock or other financial interest in any member of any Home Loan Bank.

Community Interest Directors

Two of the six Appointed Directors must be representatives chosen from organizations with more than a two-year history of representing consumer or community interests on banking service, credit needs, housing or financial consumer protections.

All Directors must be U.S. citizens. Appointed and Community Interest Directors must also be bona fide residents of either Delaware, Pennsylvania or West Virginia. Elected Directors must be either an officer or director of a member institution that: (1) maintains its principal place of business in the state they are representing; (2) was a member of the Bank as of the record date of the election; and (3) meets all minimum capital requirements.

Core Competencies of the Board and Personal Characteristics

The Board has determined that its membership should possess specific core competencies in order to effectively fulfill their responsibilities and duties as Directors.

The Board as a whole should:

• Possess expertise in financial accounting and corporate finance;
• Possess a keen sense of business judgment;
• Have an understanding of best practices in the banking industry;
• Be able to perform their duties and make time during periods of crisis;
• Be able to motivate high-performing talent;
• Have the capacity to provide strategic insight and direction;
• Have in-depth industry specific knowledge of housing, community and economic development and banking;
• Be experienced in financial, operations, political and reputation risk management; and
• Possess the savvy to be influential with policymakers at the local, state and national levels.

The Board has determined that its membership should exhibit specific personal characteristics in order to effectively fulfill their responsibilities and duties as Directors.

All Directors should:

• Have high ethical standards and integrity in their personal and professional dealings;
• Be willing to act on and remain accountable for their Boardroom decisions;
• Be able to provide wise, thoughtful counsel on a wide range of issues;
• Have a general understanding of how to read a financial statement and understand financial ratios;
• Have a working familiarity of basic finance and accounting practices
• Be politically aware;
• Possess a mature confidence;
• Approach their peers on the Board with self-assurance, responsibly and supportively;
• Value Board and team performance over individual performance; and
• Be inquisitive and comfortable asking questions of senior management.

Selection of New Directors

Involvement in Director Selection

Except as in the case of filling a vacancy, the Board of Directors has only some say in who serves as Directors. The FHFB appoints six of the 15 Directors. Directors have little say in the selection of the remaining nine Elected Directors as FHFB regulation prohibits Board or individual Director advocacy for or against candidates. However, the board is permitted to assess how well skills and experiences of incumbent board members align with the needs of the Bank. The Board can then determine whether it could benefit from the addition of persons with particular skills or experience and if so, whether to provide members with that info in advance of nominations and voting. The Board has created a Board job description, individual director characteristics, and Board core competencies to this end.. These guidelines are sent to voting institutions during the election process and are also sent to the FHFB when they are appointing Directors to the Board.

Vacancies

Vacancies in Elected Directorships are filled by a vote of the Board of Directors of the Bank for the remainder of the unexpired term with a person who is a citizen of the United States and an officer or director of a member located in the state to which the Directorship is assigned. Vacancies in Appointed and Community Interest Directorships are filled by an appointment of the FHFB.

Retirement and Continuation as a Director

Terms and Term Limits

Each Director serves a three-year term. Elected Directors can only serve three consecutive three-year terms. There are no term limits on Appointed Directorships. Approximately one-third of the Directors’ terms expires each year, which provides for some continuity on the Board.

Loss of Director Eligibility

Upon determination that a Director no longer satisfies the eligibility requirements set forth by statute or has failed to comply with regulatory reporting requirements, a Directorship shall immediately become vacant. Any Elected or Appointed Director that is determined to have failed to comply with the eligibility or reporting requirements shall not continue to act as a Bank Director. Notwithstanding the vacancy, an Appointed Director may continue to serve until a successor assumes the Directorship or the term of office expires, whichever occurs first, and the FHFB, in its sole discretion, may allow an Appointed Director up to 90 calendar days to comply with the eligibility or reporting requirements.

Board Compensation and Stock Ownership

Each Director that attends a Board, Committee or Bank System meeting is paid a fee in order to compensate Directors for their time. Directors are provided cash compensation; there is no retainer and no stock options are offered. All fees are paid per meeting attended.

Limits in compensation are set by the Federal Home Loan Bank Act and adjusted by the FHFB. For calendar year 2008, the Chair of the Board may not receive more than $31,232 per year. The Vice Chair may not receive more than $24,986 per year. The other Directors may not receive more than $18,739 per year. The FHFB may raise the limits on compensation on an annual basis based on increases in the Consumer Price Index.

Board of Directors Meetings

The amount of the fee provided for attendance at Board of Directors meetings varies depending on the role served at the meeting. The Chairman receives $1,500 per meeting, the Vice Chair receives $1,250 per meeting and all other Directors receive $1,000 per meeting. If the Chairman is absent, the Acting Chairman shall receive the Chairman’s attendance fee.

Standing Committees, Ad Hoc Committees, and Special Task Force Meetings

Each Director that attends standing Committee meetings, ad hoc Committee meetings or task force meetings shall also be paid a fee. This fee does not vary among Directors in attendance. All Directors receive $1,000 for attendance at these meetings.

Bank System Meetings

Each Director that attends Bank System meetings is also paid a fee which does not vary among Directors in attendance. Each Director receives $1,000 for attendance at these meetings.

Responsibilities

Basic Duties

The Bank’s business is conducted by its employees, managers and officers, under the direction of the Chief Executive Officer (CEO) and the oversight of the Board, to enhance the long-term value of the Bank for its shareholders. The Board of Directors is responsible to oversee management and to assure that the long-term interests of the shareholders are being served. Both the Board of Directors and management recognize that the long-term interests of shareholders are advanced by responsibly addressing the concerns of other stakeholders and interested parties including employees, recruits, customers, communities, government officials and the public at large.

Ethics and Conflicts of Interest

A Director is required to disclose any conflicts and all material facts concerning the transactions in question. Complete candor is the standard. Directors must abide by the Bank’s written Code of Conduct which addresses how Directors should handle conflicts of interest and confidential information and how to avoid “insider trading” while also outlining other responsibilities.
The Directors shall administer the affairs of the Bank fairly and impartially without discrimination in favor of or against any Member.

Securities Trading

If a director has material non-public information relating to the Bank, the directors must follow a standard that requires him to wait three business days until after the material non-public information has been made public to trade in FHLB securities.

Director Orientation and Continuing Education

The Board and management conducts a comprehensive orientation process for new Directors to become familiar with the Bank’s vision, mission, and core values including ethics, financial matters, risk management issues, corporate governance processes and other key policies and practices through a review of background material and meetings with senior management. All new directors must participate in the Bank’s director orientation program. Incumbent directors are encouraged to attend as well. The Board also recognizes the importance of continuing education for its Directors. It is the responsibility of the Governance Committee to identify training needs and provide Directors with continuing education.

Director Access to Employees, Management and Independent Advisors

Accessing Independent Advice

The Board routinely retains its own professionals to assist it in evaluating proposals from management. The Board, as well as each Committee, will retain independent outside financial, legal, compensation, or other advisors as it considers appropriate at the expense of the Bank.

Access to Senior Management

The CEO of the Bank provides reasonable opportunities for Directors to observe and become acquainted with other key members of management by arranging for them to report to, and meet periodically with, the Board of Directors and its Committees.

Regular Attendance of Non-Directors at Board Meetings

In addition to the Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, and General Counsel/Corporate Secretary routinely attend Board meetings.

Board’s Interaction with Stakeholders

Directors are encouraged to meet with the Affordable Housing Advisory Council (AHAC) at its quarterly meetings. Directors are also encouraged to attend member regional meetings and system meetings with the FHFB.

Standards of Director Etiquette

Directors are expected to conduct themselves in a manner consistent with fostering an environment of Director professionalism. Directors are expected to attend all Board meetings and assigned Committee meetings and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. They are also expected to be prompt for meetings, remaining engaged and actively participating during meetings, and avoiding early departures from Board events.

Leadership

Selection of the Chair and Vice Chair

The Board prefers that the Chair and Vice Chair of the Board be from different classes of Directors; one an Elected Director and one an Appointed Director. The Governance Committee nominates individuals for the positions of Chair and Vice Chair after making a determination that the candidates possess the characteristics and abilities required for the positions as set forth in the job description. Members of the Governance Committee are not precluded from being nominated for either position. The Chair and Vice Chair are elected for two-year terms.

Selection of the Committee Chairs and Vice Chairs

The Governance Committee, with direct input from the Chairperson, recommends to the Board the membership of the various Committees and their Chairs and Vice Chairs and the Board approves the Committee assignments. In making its recommendations to the Board, the Governance Committee takes into consideration the need for continuity, subject matter of expertise, tenure, and the desires of individual Board members. There is no rule against the number of years any Director can serve as chair or be on a certain Committee. The availability of an individual to work with staff will be considered during the selection of chairs. Individual Directors also have an opportunity to indicate which Committees they are interested in serving on for the next year. No Committee Chair shall be required to be either an Elected or Appointed Director. The Board believes that a mix of Elected and Appointed Directors on all Committees is good.

Duties of the Committee Chairs and Vice Chairs

The Committee Chair, when present, shall preside over all meetings of the Committee for which he/she chairs. The Chair shall perform all duties incident to the office and such other duties as shall be prescribed by the Board of Directors, from time to time.

The Committee Vice Chair, in the absence or disability of the Chair, shall exercise all powers and discharge all of the duties of the Chair, including presiding over Committee meetings. The Vice Chair shall also participate in the establishment of the agenda for each Committee meeting and shall otherwise be consulted regarding the strategic direction of the Committee. The Vice Chair shall perform all duties incident to the office and such other duties as shall be prescribed by the Board of Directors, from time to time

Formal Evaluations of the CEO

The Board conducts a formal evaluation of the CEO on an annual basis. The CEO is reviewed against pre-established performance factors that are set at the beginning of each year. The Governance Committee is responsible for developing the performance factors for the CEO.

Succession Planning

The CEO is responsible for developing and maintaining a process for advising the Board on planning for potential successor CEOs, as well as for other key senior leadership positions in the Bank. The Directors are responsible for oversight of the succession and management development program for senior leadership in the Bank. The chief executive reviews this plan with the Directors at least once annually.

Board Meetings

The Board of Directors holds regularly scheduled meetings and calls for special meetings as necessary. Occasionally, meetings of the Board may be held telephonically. Directors are expected to attend all Board meetings and meetings of the Committees of the Board on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their duties. It is understood that, on occasion, a Director may not be able to attend a meeting.

Selection of Agenda Items

The Chairperson of the Board, with input from other Directors, is responsible for the preparation of the agenda of the Board.

Distribution of Materials

Directors receive materials on topics to be discussed sufficiently in advance of the meeting date and Board members are kept abreast of developments between Board meetings. The Bank regularly informs Board members of Bank and competitive developments and distributes, sufficiently in advance of meetings to permit meaningful review, written materials for use at Board meetings.

Board Presentations

Presentations on specific subjects are sent to Directors in advance to save time at Board meetings and focus discussion on the Board's questions. On those occasions in which the subject matter is extremely sensitive, the presentation is discussed at the meeting.

Participation in Strategic Issues Discussions

The full Board engages in discussions on strategic issues and ensures that there is sufficient time devoted to Director interchange on these subjects.

Executive Sessions

The Directors routinely hold executive sessions where they can react to management proposals and/or actions in an environment free from formal or informal constraints. All Directors are independent of management in that the full Board regularly holds executive sessions. The CEO may also attend but departs the meeting when appropriate.

Board Committees

Number, Structure and Independence of Board Committees

The bylaws of the Bank provide that there will be an Executive Committee, an Audit Committee, and a Governance Committee. The bylaws also provide that the Board may establish other oversight Committees. The Board has a Community Investment and Public Policy Committee, a Finance and Risk Management Committee, a Human Resources Committee, and a Products and Services Committee. In addition, from time to time when the Board deems it either necessary or desirable, it can establish one or more ad hoc or special purpose committees.

Committee Charters

Each Committee has its own charter. The charter sets forth the purposes, goals and responsibilities of the Committees as well as qualifications for Committee membership, procedures for Committee member appointment and removal, Committee structure and operations and Committee reporting to the Board.

Frequency and Length of Board Committee Meetings

Each Committee meets as frequently and for such length of time as may be required to carry out its assigned duties and responsibilities. The schedule for regular meetings of the Board and Committees for each year is submitted and approved by the Board in advance. In addition, the Chairman of a Committee may call a special meeting at any time if deemed advisable.

Development of Committee Agenda

The Committee Secretaries, working with the Committee Chairman, Vice Chairman and the CEO, establish the agenda for each Committee meeting, although Board members are free to suggest items for inclusion on the agenda. At any Board meeting, each Director is free to raise subjects that are not on the agenda for that meeting.

Reports of Committee Action

Reports on each Committee meeting are made to the full Board. All Directors are furnished with copies of each Committee’s minutes.

Evaluation and Performance Assessment

Board Self-Evaluation

The Board conducts an annual self-assessment to determine whether it and its committees are functioning effectively... The evaluation process has three parts. Each Director evaluates the Board and the committee to which he belongs, as a whole. The committee assessment will also include an annual review of its compliance with the Committee charter.

The Governance Committee reports these results to the Board and the results of the process are used to make improvements in the governance processes. Each Director also evaluates other Directors’ performances in the context of committee work. This assessment will focus on the individual directors’ contribution to the committee. The summary of these results are used for both development purposes as well as in the reappointment and election process.

All evaluations serve as a training tool. Directors are able to anticipate what is expected from them while serving on the Board and are also alerted to areas for improvement.

Disclosure and review of these standards

It is the responsibility of the Corporate Secretary to assure that the current version of the corporate governance principles and standards be posted on the Bank’s website.

The Governance Committee will review these corporate governance standards periodically and will recommend to the Board such revisions, as it deems necessary or appropriate for the Board to discharge its responsibilities more effectively.

Adopted: June 2004
Revised: August 2008