fhlbpitex10152020-2021ex






      FEDERAL HOME LOAN BANK OF PITTSBURGH  EXECUTIVE OFFICER INCENTIVE COMPENSATION PLAN  2021      I. EFFECTIVE DATE    This Executive Officer Incentive Compensation Plan (“Executive Officer Plan” or “Plan”) of the Federal  Home Loan Bank of Pittsburgh was originally established effective as of January 1, 2013 and shall  continue in effect until terminated by the Bank’s Board of Directors.  Incentive Awards (“Awards”) may be  paid for the Plan Year (January 1 to December 31, each year) in accordance with the provisions of this  Plan.  The goals for the Plan Year and terms of the Awards shall be set forth in a separate Attachment to  this Plan.         II. PURPOSE AND OBJECTIVES    The Plan is designed to retain and motivate executive officers and reward the:  (i) achievement of key  annual goals and (ii) maintenance of satisfactory financial condition and member value over the longer  term.       III. PLAN ADMINISTRATION    The Plan is administered by the President; the Human Resources and  D&I 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 performance goals, Bank achievements, and Awards for the Bank’s executive officers.      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 the Bank’s other executive officers and  make recommendations regarding any Award payouts under the Plan.    C. Responsibilities of the Board    The Board will review and approve (as it determines appropriate) recommendations from the Committee.     IV. ELIGIBILITY    The Bank’s executive officers are eligible to participate on the terms described in this Executive Officer  Plan.  Upon designation as a participant, each participant will be provided a copy of the Plan.     V. EXECUTIVE OFFICER PLAN AWARD OPPORTUNITY LEVELS    A summary of the Award levels is attached as Attachment A.  Each participant shall be provided with a  separate document showing his/her level of participation in the Plan.      VI. PERFORMANCE MEASURES     





 






    The Plan Year for the Award opportunity shall mean the annual period ending December 31, (unless  otherwise specifically stated in regard to a goal(s) in the applicable goal attachment to this Executive  Officer Plan for the Plan Year).  The Plan goals can be both quantitative and qualitative.  Overall  performance of Bank goals, and individual and group goals (as applicable), as well as individual  performance objectives as measured through the Bank’s performance evaluation process, in aggregate,  quantify the performance measures under the Plan that will be considered when determining overall actual  performance and any Award payout amount.     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.  For executive management, generally, the greater the control  and influence a participant can exert over Bank goals, the larger a portion of their incentive Award will be  based on Bank performance.  Executive officer goals may consist solely of Bank goals or they may include  a combination of Bank goals and individual or group goals as determined by the Board.      In general, goals requiring attainment of specified performance or completion of specified tasks and  activities shall not be considered as having been met when the actual performance as measured by  completion of the activities has not been attained.  Interpolation of Award amounts is permissible for  achieved performance (measured by completion of the stated goals) at levels between threshold and  target, and target and maximum.  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.  Additionally, the specific terms of an  approved goal(s) may establish further standards for interpolation.        VII. AWARD DETERMINATION AND PAYMENT    No participant has a vested right to any Award under the Plan until: (i) a determination of an Award  payment has been made by the Board; (ii) the participant has met all applicable requirements for such  Award and for receiving payment of such an Award, including, without limitation, any continued service and  performance requirements as set forth in this Plan; and (iii) all the other conditions and criteria regarding  payment of such Award as set forth in this Executive Officer Plan are met.     At the conclusion of the applicable Plan Year after considering the Bank's performance against the Bank  goal(s), individual performance, and actual overall Bank performance, the President shall recommend to  the Committee the Awards to be paid to the Bank’s executive officers, excluding the President.   With  respect to the determination of any Awards to the executive officers under this Plan, the Committee and the  Board shall consider, in addition to individual and overall Bank performance, Bank financial condition,  operating environment, and any other factors it considers relevant, including, without limitation, the extent  (if any) to which any extraordinary or non-recurring transaction had a material effect on whether a goal(s)  was attained.     A participant who is on formal corrective action for performance at any time during the Plan Year will be  ineligible to receive any payment of any Award.    In order for any Award payment to be made, the most recent examination by the Federal Housing Finance  Agency (“Finance Agency”) of the participant’s area(s) of responsibility must not have identified any unsafe  or unsound practice or condition.      A. Assessment of Performance    Following December 31 of each year, the Board will evaluate performance against the incentive goals set  forth on the attached Annual Goal Scorecard and determine the total amount of the Award (if any) based  on that performance (such amount shall be referred to as the “Total Award”).  The Total Award, if any, will  be divided such that: 1) 50 percent of the Total Award shall be referred to as the “Current Incentive Award”  





 






    and 2) the remaining 50 percent of the Total Award shall be referred to as the “Deferred Incentive Award.”   The following illustrates how the 2021 Current Award and Deferred Incentive Award would be paid:    Payment Description Payment Year*  Current Incentive Award 50% of the Total Award 2022  Deferred Incentive Award  installment  Up to 33 1/3% of the  Deferred Incentive Award  2023  Deferred Incentive Award  installment  Up to 33 1/3% of the  Deferred Incentive Award  2024  Deferred Incentive Award  installment  Up to 33 1/3% of the  Deferred Incentive Award  2025  *Payment will be made no later than March 15 in the year indicated.      All payments are subject to the terms of this Plan, including Section B below.  In no event shall the  aggregate amount of any Current Incentive Award and Deferred Incentive Award installments paid  to a participant in any payment year exceed 100 percent of the participant’s base salary.        B. Payment of Each Deferred Incentive Award Installment Contingent on the Bank Continuing to Meet  Stated Criteria and Contingent on the Participant Meeting Stated Payment Criteria    1. Maintenance of Satisfactory Bank Performance    Except as set forth in Subsection 2., it is intended that a condition to payment of each Deferred Incentive  Award installment is that in the annual period preceding the designated Payment Year for such installment,  the Board determines that the Bank has met at least one (1) of the Deferred Incentive Award criteria set  forth in Attachment B to this Plan.  If the Board determines that the Bank has not met any of the stated  criteria, then, such Deferred Incentive Award installment payment shall not be made.  For the avoidance of  doubt, if the Bank fails to meet at least one (1) of the criteria in the year preceding a designated Payment  Year for one installment of a Deferred Incentive Award and such installment payment is not made, but  then, the Bank meets at least one of the criteria in the annual period before the designated Payment Year  for the next installment payment, then, a subsequent Deferred Incentive Award installment payment shall  be made.  The actual amount of each Deferred Incentive Award installment payment shall be determined  pro-rata or on such other basis as the Board shall determine in assessing the extent to which the stated  criteria set forth on Attachment B were met by the Bank during the preceding annual period.  In no case  may the maximum amount of any Deferred Incentive Award installment be paid unless all of the stated  criteria in Attachment B have been met in the preceding year.  This provision shall not in any manner limit  the Board’s authority under Articles VIII. and IX. of the Plan.      2. Board Discretion—Strategic Transactions      If prior to the payout of all Deferred Incentive Award payments a Change in Control event occurs (as  defined below) then, in such case, the Deferred Incentive Award criteria set forth on Attachment B are  inapplicable and all unpaid Deferred Incentive Awards: (i) shall vest 30 days after the Finance Agency  issues its written approval of such a transaction and (ii) shall be paid to the participants 30 days after the  closing of the transaction.      For purposes of this section “Change in Control” shall mean:  (i) the merger, reorganization, or  consolidation of the Bank with or into another Federal Home Loan Bank or other entity, (ii) the sale or  transfer of all or substantially all of the business or assets of the Bank to another Federal Home Loan Bank  





 






    or other entity, (iii) the purchase by the Bank or transfer to the Bank of all or substantially all of the business  or assets of another Federal Home Loan Bank, (iv) a change in the composition of the Board of Directors,  as a result of one or a series of related transactions, that causes the number of directors of the Bank  elected by members of the Bank located in Pennsylvania, West Virginia, and Delaware to cease to  constitute a majority of the directors of the Bank that are elected by members of the Bank (excluding, for  purposes of this clause (v), non-member independent directors), or (vi) the liquidation of the Bank.   Provided that the term "reorganization" contained in this definition shall not include any reorganization that  is mandated by federal statute, rule, regulation, or directive, including 12 U.S.C. Section 1421, et seq., as  amended, and 12 U.S.C. Section 4501 et seq., as amended, and which the Director of the Finance Agency  (or successor agency) has determined should not be a basis for making payment under this Plan, by  reason of the capital condition of the Bank or because of unsafe or unsound acts, practices, or condition  ascertained in the course of the Agency's supervision of the Bank or because any of the conditions  identified in 12 U.S.C. Section 4617(a)(3) are met with respect to the Bank (which conditions do not result  solely from the mandated reorganization itself, or from action that the Agency has required the Bank to take  under 12 U.S.C. Section 1431(d)).      3. Termination of Employment; Pro-Rated and Deferred Incentive Award Payments; Participant  Performance Condition     Participants who terminate employment with the Bank for any reason, other than death, disability, or  retirement prior to the Current Incentive Award payout date will not be eligible for such an Award.   Participants who are hired during the Plan Year or whose employment ends due to involuntary termination1  (excluding involuntary termination for cause2), death, disability, or retirement prior to the Current Incentive  Award payout date may be eligible to be considered for a pro-rated Current Incentive Award.3      Participants who terminate employment due to retirement or involuntary termination (other than for cause)  after the Current Incentive Award payout date but before completion of the payment of all corresponding  Deferred Incentive Award installments (as set forth above) shall receive such Deferred Incentive Award  installment payments at the same time as such payments are made to Plan participants who are current  Bank employees.  Participants who otherwise resign employment before the completion of the payment of  all corresponding Deferred Incentive Award installments shall not receive payment of such installments.   Any participant that is terminated by the Bank for cause (as defined in this Plan) prior to receiving payment  of all corresponding Deferred Incentive Award installments shall not receive payment of any remaining  unpaid Deferred Incentive Award installments.  This provision shall not in any manner limit the Board’s  authority under Articles VIII. and IX. of the Plan.      In the case of a participant whose employment terminates due to death or disability before completion of  the payment of all corresponding Deferred Incentive Award installments, such installments shall promptly    1 “Involuntary termination” shall be interpreted consistent with “separation from service” as defined in the IRS 409A Regulations and exclude termination  for cause and shall include a “resignation for good reason” as defined by the IRS 409A Regulations.        2 For purposes of the Plan, “cause” means: (1) continued failure of the Participant to perform his or her duties with the Bank (other than any such failure  resulting from disability), after a demand for performance, pursuant to a resolution of the Board, is delivered to the participant by the chair of the board,  which specifically identifies the manner in which the participant has not performed his or her duties; (2) personal dishonesty, incompetence, willful  misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or willful violation of any law, rule, or  regulation (other than routine traffic violations or similar offenses); or (3) removal of the participant by or at the direction of the Federal Housing Finance  Agency pursuant to federal laws, rules, and regulations, including 12 U.S.C. §4501 et. seq. as amended or by any successor agency to the Federal Housing  Finance Agency pursuant to a similar statute.     3 “Retirement” for purposes of this Plan is defined as a participant meeting one of the following criteria: (1) 60 years of age or older with at least 5 years  of service; (2)  65 years of age or older regardless of service; (3) age 55 or older with at least 10 years of service; or (4) the combination of the  participant’s age and years of service equals or exceeds 70. , In all cases of retirement, the participant is required to enter into a non-solicitation agreement  in the form required by the Bank regarding the Bank’s customer’s and employees.  “Disability” shall be interpreted consistent with IRS 409A Regulations.       





 






    vest following the death or disability and the remaining installments shall be paid by the Bank within 90  days of the date of death or determination of disability.      C. Provisions Applicable to All Awards Under the Plan    Except as expressly set forth otherwise in this Plan, payments under the Plan are intended to satisfy the  “short-term deferral” exception under Section 409A of the Internal Revenue Code (“Code”).  Each payment  under the Plan will be treated as a separate payment for purposes of Section 409A of the Code and  corresponding IRS 409A Regulations.  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.  For the avoidance of doubt, Participants will  be solely responsible for any applicable taxes (including income and excise taxes) and penalties, and any  interest that accrues thereon, that they incur in connection with the receipt of any Award under the Plan.   This Plan and the payment of any Award hereunder shall be subject to the Finance Agency’s authority over  executive compensation pursuant to 12 U.S.C.§ 4518.  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.       VIII. CLAWBACK AND REDUCTION OF AWARDS    In the event of gross misconduct, gross negligence, materially inaccurate financial statements, erroneous  performance metrics related to incentive goal calculation or conviction of a felony, the Board will have the  authority to adjust Award amounts or reclaim Award payments.  For the avoidance of doubt, the Board may  in its sole discretion, decline to adjust the terms of any outstanding Award if it determines that such  adjustment would violate applicable law or result in adverse tax consequences to a participant or the Bank.      The Board will utilize its discretion to reduce the amount of any Current Award and Deferred Award  installments if it determines that:    (i) Operational errors or omissions result in material revisions to the financial results, information  submitted to the Finance Agency, or data used to determine incentive award payment amounts;  (ii) The submission of information to the Securities and Exchange Commission (“SEC”), the Office of  Finance (“OF”), and/or the Finance Agency has not been provided in a timely manner; or  (iii) The Bank fails to make sufficient progress, as determined by the Finance Agency and  communicated to Bank management and/or the Board by the Finance Agency, in the timely  remediation of examination, monitoring, and other supervisory findings and matters requiring  executive management’s attention.  





 






    IX. 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.  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. No provision of this Plan shall create any right to continued employment.                                                                                                  





 






    Attachments    Attachment A—2021 Award Levels                Participant  Level   Threshold  Incentive  Award  Opportunity   Target  Incentive  Award  Opportunity   Maximum  Incentive  Award  Opportunity  Level A 60%  75%  100%   Level B 55% 70% 85%  Level C 50% 65% 80%  Level D 40%  55%  70%        





 






    Attachment B      2021      Criteria for Payment of Deferred Award Installments      (1) Market Value of Equity to Par Value of Capital Stock (MV/CS) - Maintain MV/CS above 105% on      (2) Retained Earnings Level - Maintain enough retained earnings to exceed the Bank's retained earnings  target at each year end of deferred payment period.  The Board will consider the following criteria and may exercise its discretion to adjust an award based on  such criteria:    Remediation of Examination Findings. Defined as the Bank making sufficient progress, as determined by  the FHFA and communicated to Bank management or the Board of Directors by the FHFA, in the timely  remediation of examination, monitoring, and other supervisory findings and matters requiring executive  management's attention. Refers to examination findings from the examination during the applicable deferral  year for the installment. For example, for the 2014 installment (payable in 2015), the applicable  examination is the 2014 examination.    Timeliness of FHFA, SEC, and OF Filings. Filings defined as SEC periodic filings, call report filings with  FHFA, and FRS filings with OF that are timely filed and no material restatement by the Bank is required.  Notes: at least one of the (1) and (2) stated quantifiable criteria above must have been met in the preceding  year in order for any installment payment to be made. In the event that both of the (1) and (2) stated  quantifiable criteria are met in the preceding year, the payment will be made at 125% of the deferred  amount. In no event shall the aggregate amount of any Current Incentive Award and Deferred Incentive  Award installments paid to a participant in any payment year exceed 100 percent of the participant's base  salary.      





 






2021 Incentive Goal Scorecard Goal Weight Threshold Target Max YTD As of  __, 2021 Optimize member use of core products by year- end. Core products include: Advances, MPF,  letters of credit, safekeeping and five community  investment products (Affordable Housing  Program, Community Lending Program, Banking  On Business, First Front Door and Home4Good).  30% 695 725 775 Profitability as measured by adjusted earnings  relative to total GAAP capital in excess of full year  average Fed Funds rate within identified risk  parameters (Board duration of equity limits).  (see Attachment A) 30% 248 bps 293 bps 338 bps KRI Performance: performance of 12 KRIs over  12 months provides 144 measurement data points  (see Attachment B) 10% 120 130 140 Peer Operating Expense Scorecard: basket of 3  metrics  (see Attachment C) 10% Rank 9 Rank 6 Rank 3 D&I Strategic Plan (see Attachment D) 10% 4 of 13 8 of 13 13 of 13 LIBOR Transition Project (see Attachment E) 10% 3 of 5 4 of 5 5 of 5 





 






2021 Incentive Goal Scorecard Attachment A Goal Weight Excluded items include: Advance prepayment fees Mortgage delivery commitment changes from budget (MPF P&L) Mark- to- market adjustments on economic derivatives and unrealized gain/loss on trading  securities (change from budget assumptions). These amounts represent fair-value  adjustments based on the current market price.  Legal settlements (i.e., PLMBS) Derivative hedge ineffectiveness  30% 





 






2021 Incentive Goal Scorecard Attachment B Goal Weight KRI Performance  Consistent with the Bank’s Risk Appetite Statement that “everyone is a risk manager” and the continuous focus  on nurturing a risk-appropriate culture, KRIs provide a representation of the key risks to be managed and  monitored across the Bank.   KRI performance includes the following metrics: • Retained Earnings Adequacy • Return on Equity Spread Volatility • FHFA Liquidity Requirement • Aggregate Refunding Risk • Stress Test Collateral Shortfall • MPF Original Performance Ratio • Derivative Counterparty Credit • Unsecured Exposure to Low-Rated Counterparties  • Operating Incidents • Critical Services Availability • Security Protect and Detect Composite • Security Social Engineering Composite The performance of the selected KRIs above will be measured monthly and reported each month in the Risk  Appetite Report. There are 12 KRIs measured over 12 months of performance resulting in 144 data points.  Starting at a maximum score of 144, outside-of-risk-tolerance performance will result in a reduction in the total: - 1 for each yellow KRI and -3 for each red KRI. The range of incentive compensation measurement is below.  Interpolation between the compensation bands is expected. Threshold: 120 Target: 130 Maximum: 140 10% 





 






2021 Expense Scorecard Attachment C Total  1 Year 3 Years Combined Expense Change CAGR Total Rank FHLBank 1 - - - - 1 FHLBank 2 - - - - 2 FHLBank 3 - - - - 3 Max FHLBank 4 - - - - 4 FHLBank 5 - - - - 5 FHLBank 6 - - - - 6 Target FHLBank 7 - - - - 7 FHLBank 8 - - - - 8 FHLBank 9 - - - - 9 Threshold FHLBank 10 - - - - 10 FHLBank 11 - - - - 11 





 






2021 Incentive Goal Scorecard Attachment D Goal Weight Diversity & Inclusion Executing on the D&I Strategic Plan by implementing the action plans in order to achieve the  stated goals for the Workforce, Workplace, Marketplace and Sustainability.    The Human Resources and Diversity and Inclusion Committee of the Board will approve the  specific 2021 action plans to be implemented in order to achieve this goal. Note: Achievement levels are subject to the Bank’s practice of interpolation.  10% 





 






2021 Incentive Goal Scorecard Attachment E Goal Weight LIBOR Transition Project The LIBOR transition cuts across the organization and the successful transition is critical to  the Bank continuing to meet its mission and operate effectively with the expectation of LIBOR  elimination by end of 2021.  While there are many steps required for a successful transition,  an inventory of five critical activities have been identified that will ensure the Bank continues to  play a leadership role with the adoption of SOFR, while ensuring that the Bank is meeting  member needs while adhering to the expectations of the FHFA. Details of the five critical activities can be found in the goal memo. Given the dynamic nature  of SOFR marketplace adoption and evolving expectations, the five critical activities may be  adjusted (with appropriate approvals)  in order to ensure that stake holder expectations are  successfully met. Proposed Goal Measurement: Threshold: 3 Target: 4 Max: 5 10%