Federal Home Loan Bank of Chicago

11/07/2025 | Press release | Distributed by Public on 11/07/2025 10:40

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
Below are selected financial data for the last five quarters.
September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024
Other selected data at period end
Member standby letters of credit outstanding $ 13,416 $ 13,983 $ 11,833 $ 12,908 $ 15,549
MPF Loans par value outstanding - FHLB System a
75,840 74,418 72,740 72,205 71,308
MPF Loans par value outstanding - FHLB Chicago PFIs a
20,909 20,584 20,334 20,243 20,076
Number of members 634 635 643 645 653
Total employees (full and part time) 476 478 472 481 481
Other selected MPF data a
MPF Loans par value amounts funded - FHLB System $ 3,481 $ 3,525 $ 2,092 $ 2,867 $ 3,142
Quarterly number of PFIs funding MPF products - FHLB System 634 610 552 607 608
MPF Loans par value amounts funded - FHLB Chicago PFIs $ 914 $ 794 $ 530 $ 797 $ 1,042
Quarterly number of PFIs funding MPF products - FHLB Chicago 160 162 155 167 170
Selected ratios (rates annualized)
Total regulatory capital to assets ratio 6.55 % 6.31 % 6.96 % 6.65 % 6.74 %
Market value of equity to book value of equity 102 % 101 % 102 % 101 % 104 %
Primary mission asset ratio b
71.2 % 71.6 % 71.2 % 71.4 % 71.6 %
Dividend rate class B1 activity stock-period paid 9.25 % 9.25 % 9.25 % 9.25 % 9.25 %
Dividend rate class B2 membership stock-period paid 4.35 % 4.35 % 4.20 % 4.65 % 5.13 %
Return on average assets 0.52 % 0.44 % 0.49 % 0.47 % 0.40 %
Return on average equity 8.00 % 6.78 % 7.12 % 7.00 % 6.12 %
Average equity to average assets 6.50 % 6.49 % 6.88 % 6.71 % 6.54 %
Net yield on average interest-earning assets
0.68 % 0.70 % 0.74 % 0.75 % 0.75 %
Cash dividends $ 79 $ 71 $ 72 $ 71 $ 71
Dividend payout ratio 42.70 % 47.02 % 45.57 % 46.45 % 54.62 %
a Includes all MPF products, whether on or off our balance sheet. See Mortgage Partnership Finance Program beginning on page 8 in our 2024 Form 10-K for details on our various MPF products.
b Annual average year to date basis. The FHFA issued an advisory bulletin that provides guidance relating to a primary mission asset ratio by which the FHFA will assess each FHLB's core mission achievement. See Mission Asset Ratioon page 5 in our 2024 Form 10-K for more information.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Forward-Looking Information
Statements contained in this report, including statements describing the plans, objectives, projections, estimates, strategies, or future predictions or commitments of the Bank, statements of belief, any projections or guidance on dividends or other financial items, or any statements of assumptions underlying the foregoing, may be "forward-looking statements." These statements may use forward-looking terminology, such as "anticipates," "believes," "expects," "could," "plans," "estimates," "may," "should," "will," their negatives, or other variations of these terms. We caution that, by their nature, forward-looking statements involve risks and uncertainties related to our operations and business and regulatory environment, all of which are difficult to predict and many of which are beyond our control. These risks and uncertainties could cause actual results to differ materially from those expressed or implied in these forward-looking statements and could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, undue reliance should not be placed on such statements.
These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
•political events, including legislative, regulatory, judicial, or other developments that affect us, our members, our counterparties and/or investors in consolidated obligations, including, among other things, changes in perception, guidance, regulation, and/or legislation relating to housing finance, the FHLBs, or GSE reform; changes in the federal executive administration and the Congress; changes in our regulator or changes affecting our regulator and changes in the FHLB Act or applicable regulations or changes in their application; the impact of government shutdowns; and the potential designation of us as a nonbank financial company for supervision by the Federal Reserve;
•general economic and market conditions, including the timing and volume of market activity, recession, prolonged inflation, unemployment rates, housing prices, the condition of the mortgage and housing markets, increased delinquencies and/or loss rates on mortgages, prolonged or delayed foreclosure processes, and the effects on, among other things, mortgage-backed securities; disruptions in the credit and debt markets and their effect on our members, future funding costs, and sources and availability of funds; volatility resulting from the effects of, and changes in, various monetary or fiscal policies and regulations or programs, such as those determined by the Federal Reserve Board and Federal Deposit Insurance Corporation; impacts from various measures to stimulate the economy and help borrowers refinance home mortgages; the impact of the occurrence of a major natural or other disaster, a pandemic or other disruptive event; the impact of climate events; and the impact of trade wars or geopolitical uncertainties or conflicts;
•the loss of or changes in business activities with significant members; changes in the demand by our members for advances, the impact of pricing increases, and the availability of other sources of funding for our members, such as deposits;
•regulatory limits on our investments;
•the impact of new business strategies; our ability to successfully maintain our balance sheet and cost infrastructure at an appropriate composition and size scaled to member demand; our ability to execute our business model, implement business process improvements and scale our size to our members' borrowing needs; the extent to which our members use our advances as part of their core financing rather than just as a back-up source of liquidity; and our ability to implement product enhancements and new products and generate enough volume in new products to cover our costs related to developing such products;
•the extent to which changes in our current capital stock requirements and/or our ability to continue to offer the Reduced Capitalization Advance Program (RCAP) for certain future advance borrowings, our ability to continue to pay enhanced dividends on our activity stock, our ability to maintain current levels of dividends, our ability to meet dividend guidance, and any amendments to our capital plan, impact Bank product usage and activity with members;
•our ability to meet required conditions to repurchase and redeem capital stock from our members (including maintaining compliance with our minimum regulatory capital requirements and determining that our financial condition is sound enough to support such repurchases), the amount and timing of such repurchases or redemptions, any changes in our repurchase processes, and our ability to maintain compliance with regulatory and statutory requirements relating to our dividend payments;
•volatility of market prices, rates, and indices, or other factors, such as natural disasters, that could affect the value of our investments or collateral; changes in the value or liquidity of collateral securing advances to our members;
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
•changes in the value of and risks associated with our investments in mortgage loans, mortgage backed securities and the related credit enhancement protections;
•changes in our ability or intent to hold mortgage backed securities to maturity;
•changes in mortgage interest rates and prepayment speeds on mortgage assets;
•membership changes, including the loss of members through mergers and consolidations or as a consequence of regulatory requirements or otherwise; changes in the financial health of our members, including the resolution of some members; risks related to expanding our membership to include more institutions with regulators and resolution processes with which we have less experience;
•increased reliance on short-term funding and changes in investor demand and capacity for consolidated obligations and/or the terms of interest rate derivatives and similar agreements, including changes in the relative attractiveness of consolidated obligations as compared to other investment opportunities; changes in our cost of funds due to concerns over U.S. fiscal policy, and any related rating agency actions impacting FHLB consolidated obligations;
•regulatory changes to FHLB membership requirements, capital requirements, MPF Program requirements, and liquidity requirements by the FHFA, and increased guidance from the FHFA impacting our balance sheet management, product structures, and collateral practices;
•the ability of each of the other FHLBs to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which we have joint and several liability;
•the pace of technological change and our ability to develop and support technology and information systems, including our ability to protect the security of our information systems and manage any failures, interruptions or breaches in our information systems or operations or technology services, including those provided to us through third party vendors;
•our ability to recruit and retain qualified personnel;
•the impact of new material accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;
•the volatility of reported results due to changes in the fair value of certain assets and liabilities;
•our ability to identify, manage, mitigate, and/or remedy internal control weaknesses and other operational risks; and
•the reliability of our projections, assumptions, and models on our future financial performance and condition, including dividend projections.
For a more detailed discussion of the risk factors applicable to us, see Risk Factorsstarting on page 18 in our 2024 Form 10-K.
These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events, changed circumstances, or any other reason.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Executive Summary
Third Quarter 2025 Financial Highlights
•Advances outstanding increased to $61.0 billion at September 30, 2025, compared to $55.8 billion at December 31, 2024, driven by increased borrowings from insurance company and depository members.
•MPF Loans held in portfolio increased to $14.4 billion at September 30, 2025, compared to $13.3 billion at December 31, 2024, as new acquisition volume outpaced paydown activity.
•Total investment debt securities increased to $33.1 billion at September 30, 2025, compared to $29.6 billion at December 31, 2024, primarily attributable to an increase in investment in GSE mortgage-backed securities and U.S. Treasuries.
•Total liquid assets increased to $30.5 billion at September 30, 2025, compared to $29.7 billion at December 31, 2024. We intend to maintain a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
•Total assets increased to $139.7 billion as of September 30, 2025, compared to $129.1 billion as of December 31, 2024, mainly due to increased volume in advances and investment debt securities.
•Letters of credit commitments increased to $13.4 billion at September 30, 2025, compared to $12.9 billion at December 31, 2025, attributable to increased usage from members for public unit deposits.
•We recorded net income of $185 million in the third quarter of 2025, up $55 million compared to the third quarter of 2024. The increase was primarily driven by the decline in noninterest expense described below.
•In the third quarter of 2025, noninterest income (loss) was $36 million, up $16 million compared to the third quarter of 2024, primarily driven by gains on derivatives and hedging activities.
•In the third quarter of 2025, noninterest expense was $71 million, down $43 million compared to the third quarter of 2024, primarily driven by changes in the timing and availability, as well as member utilization of our community investment programs in 2025 compared to 2024.
•As of September 30, 2025, we remained in compliance with all our regulatory capital requirements.
Summary and Outlook
Third Quarter 2025 Dividends and Dividend Guidance
On October 29, 2025, the Board of Directors declared a dividend of 9.25% (annualized) for Class B1 activity stock and a dividend of 4.30% (annualized) for Class B2 membership stock based on preliminary financial results for the third quarter of 2025. The dividend for the third quarter of 2025 will be paid by crediting members' accounts on November 14, 2025. The Bank pays a higher dividend per share on activity stock compared to membership stock to recognize members' support of the cooperative through the use of our products. We expect to maintain at least an 8.75% (annualized) dividend for Class B1 activity stock for the fourth quarter of 2025 and the first quarter of 2026, based on current projections and assumptions regarding our financial condition. We are providing this information to assist members in planning their activity with us. Any future dividend payment remains subject to determination and declaration by our Board of Directors and may be impacted by further changes in financial or economic conditions, regulatory and statutory limitations, and any other relevant factors.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Housing and Community Development
Statutory Affordable Housing Program (AHP) Assessments: The Bank commits 10% of its income before assessments to support the affordable housing and community development needs of communities served by its members as required by regulation. As of September 30, 2025, the Bank accrued $55 million to its AHP pool of funds.
Voluntary Housing and Community Development Contributions: In addition to the Bank's statutory AHP assessments, the Board of Directors may elect to make voluntary contributions to the AHP or other housing and community investment activities to increase funding available to members. Through the third quarter of 2025, the Bank contributed $14 million toward community investment grants and $26 million in subsidies supporting its Community Advances and loans.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Critical Accounting Estimates
For a detailed description of our Critical Accounting Estimatessee page 38 in our 2024 Form 10-K.
There have been no significant changes to our critical accounting estimates subsequent to December 31, 2024.
Results of Operations
Net Interest Income
Net interest income is the difference between the amount we recognize into interest income on our interest-earning assets and the amount we recognize into interest expense on our interest-bearing liabilities. These amounts were determined in accordance with GAAP and were based on the underlying contractual interest rate terms of our interest-earning assets and interest-bearing liabilities as well as the following items:
•Amortization of premiums;
•Accretion of discounts;
•Hedge ineffectiveness, which represents the difference between changes in the fair value of the derivative and the hedged item attributable to the hedged risk, is recognized into either interest income or interest expense, whichever is appropriate. For cash flow hedges, recognition occurs only when amounts are reclassified out of accumulated other comprehensive income (loss). Such recognition occurs when earnings are affected by the hedged item;
•Net interest paid or received on interest rate swaps that are accounted for as fair value or cash flow hedges;
•Amortization of fair value and cash flow closed hedge adjustments;
•Advance and investment prepayment fees; and
•MPF credit enhancement income payments.
The following table presents the increase or decrease in interest income and expense due to volume or rate variances. The calculation of these components includes the following considerations:
•Average Balance: Average balances are calculated using daily balances. Amortized cost is used to compute the average balances for most of our financial instruments, including MPF Loans held in portfolio (including those that are on nonaccrual status) and available-for-sale debt securities. Fair value is used to compute average balances for our trading debt securities and financial instruments carried at fair value under the fair value option.
•Total Interest: Total interest includes the net interest income components, as discussed above, applicable to our interest-earning assets and interest-bearing liabilities.
•Yield/Rate:Effective yields/rates are based on total interest and average balances as defined above. Yields/rates are calculated on an annualized basis. The calculation of the yield on our available-for-sale securities does not give effect to changes in fair value that are reflected as a component of AOCI.
•The change in volume is calculated as the change in average balance multiplied by the current year yield. The change in rate is calculated as the change in yield multiplied by the prior year average balance. Any changes due to the combined volume/rate variance have been allocated to volume.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Increase or decrease in interest income and expense due to volume or rate variance
September 30, 2025 September 30, 2024 Increase (decrease) due to
Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Volume Rate Net Change
For the three months ended
Investment debt securities $ 32,909 $ 419 5.09 % $ 29,762 $ 453 6.09 % $ 48 $ (82) $ (34)
Advances 75,099 881 4.69 % 69,293 982 5.67 % 83 (184) (101)
MPF Loans held in portfolio 14,165 151 4.26 % 12,751 127 3.98 % 14 10 24
Federal funds sold 8,634 96 4.45 % 5,866 79 5.39 % 37 (20) 17
Securities purchased under agreements to resell 7,446 82 4.41 % 7,480 101 5.40 % (1) (18) (19)
Interest-bearing deposits 3,114 34 4.37 % 3,588 49 5.46 % (7) (8) (15)
Other interest-earning assets 77 - - % 65 1 6.15 % - (1) (1)
Interest-earning assets 141,444 1,663 4.70 % 128,805 1,792 5.57 % 174 (303) (129)
Noninterest-earning assets 1,699 1,631
Total assets $ 143,143 $ 130,436
Consolidated obligation discount notes 58,801 631 4.29 % 43,885 579 5.28 % 198 (146) 52
Consolidated obligation bonds 71,469 778 4.35 % 74,124 958 5.17 % (33) (147) (180)
Deposits and other interest-bearing liabilities
1,212 13 4.29 % 1,118 15 5.37 % 1 (3) (2)
Interest-bearing liabilities 131,482 1,422 4.33 % 119,127 1,552 5.21 % 166 (296) (130)
Noninterest-bearing liabilities 2,440 2,779
Total liabilities $ 133,922 $ 121,906
Net yield on interest earning assets $ 141,444 $ 241 0.68 % $ 128,805 $ 240 0.75 % $ 26 $ (25) $ 1
For the nine months ended
Investment debt securities $ 31,314 $ 1,207 5.14 % $ 27,417 $ 1,265 6.15 % $ 179 $ (237) $ (58)
Advances 72,113 2,518 4.66 % 70,336 2,998 5.68 % 72 (552) (480)
MPF Loans held in portfolio 13,773 435 4.21 % 12,130 349 3.84 % 48 38 86
Federal funds sold 8,218 270 4.38 % 6,131 247 5.37 % 84 (61) 23
Securities purchased under agreements to resell 6,266 205 4.36 % 7,641 308 5.37 % (56) (47) (103)
Interest-bearing deposits 3,195 106 4.42 % 3,741 155 5.52 % (23) (26) (49)
Other interest-earning assets 69 2 3.86 % 76 3 5.26 % - (1) (1)
Interest-earning assets 134,948 4,743 4.69 % 127,472 5,325 5.57 % 304 (886) (582)
Noninterest-earning assets 1,642 1,754
Total assets $ 136,590 $ 129,226
Consolidated obligation discount notes 48,846 1,562 4.26 % 40,912 1,611 5.25 % 314 (363) (49)
Consolidated obligation bonds 75,053 2,427 4.31 % 75,757 2,945 5.18 % (28) (490) (518)
Deposits and other interest-bearing liabilities
1,217 40 4.38 % 1,064 46 5.76 % 7 (13) (6)
Interest-bearing liabilities 125,116 4,029 4.29 % 117,733 4,602 5.21 % 293 (866) (573)
Noninterest-bearing liabilities 2,463 2,988
Total liabilities $ 127,579 $ 120,721
Net yield on interest-earning assets $ 134,948 $ 714 0.71 % $ 127,472 $ 723 0.76 % $ 42 $ (51) $ (9)
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following analysis and comparisons apply to the periods presented in the above table unless otherwise indicated.
•Interest income from investment debt securities decreased due to lower overall market interest rates in 2025 compared to 2024, partially offset by increased volume.
•Interest income from advances decreased primarily due to lower overall market interest rates in 2025 compared to 2024.
•Interest income from MPF Loans held in portfolio increased primarily due to new acquisition volume that outpaced paydown activity. Secondarily, the new loans acquired were originated at higher mortgage rates than the loans paid down, increasing the yield earned in 2025 compared to 2024.
•Interest income from overnight federal funds sold increased due to increased volume, despite lower overall market interest rates in 2025 compared to 2024.
•Interest income from securities purchased under agreements to resell for the three months ended September 30, 2025 decreased, primarily due to lower overall market interest rates in 2025 compared to 2024. A decline in volume was the primary driver for the decrease in interest income for the nine months ended September 30, 2025.
•Interest income from interest-bearing deposits decreased primarily due to lower overall market interest rates in 2025 compared to 2024 and a decline in volume.
•Interest expense on our consolidated obligation discount notes increased for the three months ended September 30, 2025, primarily due to increased volume. Lower overall market interest rates in 2025 compared to 2024 were the primary driver for the decrease in interest income for the nine months ended September 30, 2025, despite increased volume.
•Interest expense on our consolidated obligation bonds decreased primarily due to lower overall market interest rates in 2025 compared to 2024.
•For details of the effect our fair value and cash flow hedge activities had on our net interest income see the Total Net Effect Gain (Loss) of Hedging Activitiestable on page 42.
Noninterest Income
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Trading securities $ 11 $ 64 $ 48 $ 69
Derivatives and hedging activities
9 (70) (11) (53)
Instruments held under the fair value option (2) 14 (1) 8
MPF fees, $9, $7, $24 and $21 from other FHLBs
10 9 29 27
Other, net 8 3 12 10
Noninterest income (loss) $ 36 $ 20 $ 77 $ 61
The following analysis and comparisons apply to the periods presented in the above table.
Trading Securities, Derivatives and Hedging Activities, and Instruments Held Under the Fair Value Option
Noninterest income (loss) increased for the three months ended September 30, 2025, primarily driven by gains on derivatives and hedging activities. Noninterest income (loss) increased for the nine months ended September 30, 2025 compared to the comparable prior period in 2024, primarily driven by lower losses recognized on derivatives and hedging activities.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following table details the effect of hedging transactions recorded in the various line items in our Condensed Statements of Income. Hedge ineffectiveness on hedges qualifying for hedge accounting are recorded in net interest income rather than recorded in derivatives, as noted in the table below.
Total Net Effect Gain (Loss) of Hedging Activities
Advances Investments MPF Loans Discount Notes Bonds Other Total
Three months ended September 30, 2025
Recorded in net interest income $ 95 $ 96 $ - $ 5 $ (167) $ - $ 29
Recorded in derivatives and hedging activities
- 4 2 3 - - 9
Recorded in trading securities - 11 - - - - 11
Recorded on instruments held under the fair value option 1 - - (3) - - (2)
Total net effect gain (loss) of hedging activities $ 96 $ 111 $ 2 $ 5 $ (167) $ - $ 47
Three months ended September 30, 2024
Recorded in net interest income $ 189 $ 156 $ 1 $ 9 $ (342) $ 1 $ 14
Recorded in derivatives and hedging activities
(4) (51) (4) - (12) 1 (70)
Recorded in trading securities - 63 - - - - 63
Recorded on instruments held under the fair value option 4 - 2 - 8 - 14
Total net effect gain (loss) of hedging activities $ 189 $ 168 $ (1) $ 9 $ (346) $ 2 $ 21
Nine months ended September 30, 2025
Recorded in net interest income $ 289 $ 290 $ 1 $ 15 $ (495) $ 1 $ 101
Recorded in derivatives and hedging activities
(2) (17) 4 3 - 1 (11)
Recorded in trading securities - 48 - - - - 48
Recorded on instruments held under the fair value option 5 - - (3) (3) - (1)
Total net effect gain (loss) of hedging activities $ 292 $ 321 $ 5 $ 15 $ (498) $ 2 $ 137
Nine months ended September 30, 2024
Recorded in net interest income $ 577 $ 439 $ 2 $ 28 $ (1,077) $ - $ (31)
Recorded in derivatives and hedging activities
1 (41) - - (12) (1) (53)
Recorded in trading securities - 69 - - - - 69
Recorded on instruments held under the fair value option 3 - - (2) 7 - 8
Total net effect gain (loss) of hedging activities $ 581 $ 467 $ 2 $ 26 $ (1,082) $ (1) $ (7)
MPF fees (including from other FHLBs)
A majority of MPF fees are from other FHLBs that pay us a fixed membership fee to participate in the MPF Program and a volume-based administration fee for us to provide services related to MPF Loans carried on their balance sheets. MPF fees also include income from other third party off-balance sheet MPF Loan products and other related administration fees. These administration and membership fees are designed to compensate us for the expenses we incur to administer the program. MPF fees earned for the three and nine months ended September 30, 2025 were comparable to the comparable prior periods in 2024.
Other, net
Other, net includes fee income we earn from member standby letters of credit products.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Noninterest Expense
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Compensation and benefits $ 32 $ 32 $ 98 $ 96
Nonpayroll operating expenses 26 27 79 77
Voluntary Community Investment contributions 7 49 44 69
Federal Housing Finance Agency and Office of Finance 4 5 14 14
Other, net 2 1 5 3
Noninterest expense $ 71 $ 114 $ 240 $ 259
The following analysis and comparisons apply to the periods presented in the above table.
Compensation and benefits for the three and nine months ended September 30, 2025 were comparable to the comparable prior periods in 2024. We had 476 employees as of September 30, 2025, compared to 481 employees as of September 30, 2024.
Nonpayroll operating expenses for the three and nine months ended September 30, 2025 were comparable to the comparable prior periods in 2024.
Voluntary Community Investment contributions for the three and nine months ended September 30, 2025 decreased compared to 2024, primarily driven by changes in the timing and availability, as well as member utilization of our community investment programs in 2025 compared to 2024.
As required by statute, we allocate 10% of net income before assessments to fund affordable housing grants through the AHP General Fund and the Downpayment Plus®(DPP®) Programs (see Note 11 - Affordable Housing Programto the financial statements in our 2024 Form 10-K for further details.) We appreciate that additional funds would be beneficial in meeting community needs in affordable housing, as well as business and community development. For 2025, in addition to the 10% statutory allocation, our Board of Directors approved an allocation of 10% of prior year net income before assessments to discretionary funds to support our community needs. We expect to expense these funds throughout the year in our financial statements; however, the Bank's voluntary Community Investment contributions remain subject to many factors, including progress on initiating new programs, the nature of the programs, and utilization by members. For further discussion of risks faced by the Bank, see Risk Factorsstarting on page 18 in our 2024 Form 10-K.
Federal Housing Finance Agency and Office of Finance expenses consist of our share of the funding for the FHFA, our regulator, and the Office of Finance, which manages the consolidated obligation debt issuances of the FHLBs.
As noted in Noninterest Incomeon page 41, we earn MPF fees from the MPF Program, a majority of which are from other FHLBs, but also include income from other third party investors. These fees are designed to compensate us for the expenses we incur to administer the program. Our expenses relating to the MPF fees earned are included in the relevant line items in the noninterest expense table shown above. The following table summarizes MPF related fees and expenses.
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
MPF fees earned $ 10 $ 9 $ 29 $ 27
Expenses related to MPF fees earned 9 8 25 25
Assessments
We record the AHP assessment expense at a rate of 10% of income before assessments, excluding interest expense on MRCS. SeeNote 11 - Affordable Housing Programto the financial statements in our 2024 Form 10-K for further details.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Other Comprehensive Income (Loss)
Three months ended September 30, Nine months ended September 30, Balance remaining in AOCI as of
2025 2024 2025 2024 September 30, 2025
Net unrealized gain (loss) available-for-sale debt securities $ 87 $ (36) $ 74 $ 205 $ 41
Net unrealized gain (loss) cash flow hedges (6) (38) (47) (36) 20
Postretirement plans - (2) - (4) 8
Other comprehensive income (loss) $ 81 $ (76) $ 27 $ 165 $ 69
The following analysis and comparisons apply to the periods presented in the above table.
Net unrealized gain (loss) on available-for-sale debt securities
The net unrealized gain on AFS securities for the periods presented in 2025 was primarily driven by tightening swap spreads in 2025. The net unrealized loss on AFS securities for the three months ended September 30, 2024 was primarily driven by spreads to swaps widening. The net unrealized gain on AFS securities for the nine months ended September 30, 2024 was primarily driven by spreads to swaps tightening. As these securities approach maturity, we expect the net unrealized losses in our AOCI as of September 30, 2025 to reverse over the remaining life of these securities (since we expect to receive par value at maturity).
Net unrealized gain (loss) on cash flow hedges
The net unrealized loss on cash flow hedges for 2025 and 2024 was primarily driven by the movement in market interest rates.
Postretirement plans
The loss on postretirement plans for 2024 was primarily due to an actuarial adjustment resulting from a slight decrease in the discount rate used to calculate postretirement benefits.
We did not recognize any instrument-specific credit risk in our Condensed Statements of Comprehensive Incomeas of September 30, 2025 due to our credit standing. For further details on the activity in our Other Comprehensive Income (Loss) see Note 12 - Accumulated Other Comprehensive Income (Loss) to the condensed financial statements.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Statements of Condition
September 30,
2025 		December 31, 2024
Cash and due from banks, interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell $ 30,536 $ 29,715
Investment debt securities 33,124 29,560
Advances 60,983 55,847
MPF Loans held in portfolio, net of allowance for credit losses 14,372 13,320
Other, net of allowance for credit losses 684 670
Assets $ 139,699 $ 129,112
Consolidated obligation discount notes $ 53,339 $ 36,739
Consolidated obligation bonds 74,769 81,859
Other 2,409 1,894
Liabilities 130,517 120,492
Capital stock 3,530 3,267
Retained earnings 5,583 5,311
Accumulated other comprehensive income (loss) 69 42
Capital 9,182 8,620
Total liabilities and capital $ 139,699 $ 129,112
The following is an analysis of the above table and comparisons apply to September 30, 2025 compared to December 31, 2024.
Cash and due from banks, interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell
Amounts held in these typically overnight accounts will vary each day based on the following:
•Interest rate spreads between federal funds sold and securities purchased under agreements to resell and our debt;
•Liquidity requirements;
•Counterparties available; and
•Collateral availability on securities purchased under agreements to resell.
In the third quarter of 2025, we maintained a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
Investment Debt Securities
Investment debt securities increased at the end of the third quarter of 2025 compared to year-end 2024, primarily attributable to an increase in investment in GSE mortgage-backed securities and U.S. Treasuries.
Advances
Advances increased at the end of the third quarter of 2025 compared to year-end 2024, driven by increased borrowings from insurance company and depository members. Advance balances will vary based primarily on member demand or need for wholesale funding and the underlying cost of the advance to the member. It is possible that member demand for our advances could decline in future periods should their funding needs change, or to the extent they elect alternative funding resources.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
MPF Loans Held in Portfolio, Net of Allowance for Credit Losses
MPF Loans held in portfolio increased at the end of the third quarter of 2025 compared to year-end 2024, as new acquisition volume outpaced paydown activity. In addition to our MPF Loans held in portfolio, we have MPF off-balance sheet products, where we buy and concurrently resell MPF Loans to Fannie Mae or pool and securitize them into Ginnie Mae MBS.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Liquidity, Funding, & Capital Resources
Liquidity
For the period ending September 30, 2025, we maintained a liquidity position in accordance with FHFA regulations and guidance, which may be amended from time to time, and policies established by our Board of Directors. Based upon our excess liquidity position described below, we anticipate remaining in compliance with our current liquidity requirements for the foreseeable future. See Liquidity, Funding, & Capital Resourceson page 50 in our 2024 Form 10-K for a detailed description of our current liquidity requirements. We use different measures of liquidity as follows:
Overnight Liquidity- Our policy requires us to maintain overnight liquid assets at least equal to 3.5% of total assets (or $4.9 billion as of September 30, 2025). As of September 30, 2025, our overnight liquidity was $37.1 billion or 27% of total assets, giving us an excess overnight liquidity of $32.2 billion.
Deposit Coverage- To support our member deposits, FHFA regulations require us to have an amount equal to the current deposits received from our members invested in obligations of the U.S. Government, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. As of September 30, 2025, we had excess liquidity of $60.5 billion to support member deposits.
Liquidity Reserves- As discussed on page 50 in the Liquidity, Funding, & Capital Resourcessection in our 2024 Form 10-K, the FHFA advisory bulletin on FHLB liquidity (the "Liquidity AB") requires that: (i) we hold positive cash flow assuming no access to the capital markets for a period of between ten to thirty calendar days and assuming renewal of all maturing advances, and (ii) we maintain liquidity reserves between one and 20 percent of our outstanding letter of credit commitments.
In an effort to satisfy our current liquidity requirements, we generally maintain increased balances in short-term or liquid investments. In addition, we target a minimum amount of positive cash flow for the next five calendar days at the beginning of each day. Depending on market conditions, the Liquidity AB may require the Bank to hold an additional amount of liquid assets, which could reduce the Bank's ability to invest in higher-yielding assets, and may in turn negatively impact net interest income. To the extent that the Bank adjusts pricing for its short-term advances and letters of credit, these products may become less competitive, which may adversely affect advance and capital stock levels as well as letters of credit levels. For additional discussion of how our liquidity requirements may impact our earnings, see Risk Factorson page 18 in our 2024 Form 10-K.
In addition, we fund certain shorter-term or overnight investments and advances with debt that has a maturity that extends beyond the maturities of the related investments or advances. The Liquidity AB provides guidance on maintaining appropriate funding gaps for three-month (-10% to -20%) and one-year (-25% to -35%) maturity horizons. Subject to market conditions, our cost of funding may increase if we are required to achieve the appropriate funding gap by using longer term funding, on which we generally pay higher interest than on our short-term funding.
We are sensitive to maintaining an appropriate liquidity and funding balance between our financial assets and liabilities, and we measure and monitor the risk of refunding such assets as liabilities mature (refunding risk). In measuring the level of assets requiring refunding, we take into account their contractual maturities, as further described in the notes to the condensed financial statements. In addition, we make certain assumptions about their expected cash flows. These assumptions include: calls for assets with such features, projected prepayments and scheduled amortizations for our MPF Loans held in portfolio, MBS and ABS investments.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following table presents the unpaid principal balance of (1) MPF Loans held in portfolio, (2) AFS securities, and (3) HTM securities (including ABS and MBS investments), by expected principal cash flows. The table is illustrative of our assumptions about the expected cash flows of our assets, including prepayments made in advance of maturity.
MPF Loans Investment Debt Securities
As of September 30, 2025 Held in Portfolio Available-for-Sale Held-to-Maturity
Year of Expected Principal Cash Flows
One year or less $ 2,242 $ 780 $ 333
After one year through five years 5,085 11,208 139
After five years through ten years 3,385 14,254 117
After ten years 3,479 2,561 31
Total $ 14,191 $ 28,803 $ 620
We consider our liabilities available to fund assets until their contractual maturity. For further discussion of the liquidity risks related to our access to funding, see Risk Factorson page 18 in our 2024 Form 10-K.
Funding
For a discussion of our sources of funding, see Sources of Fundingstarting on page 54 in our 2024 Form 10-K.
Conditions in Financial Markets
While there were positive signs for the markets during the third quarter of 2025, uncertainty and concerns about the labor market, inflation, trade policies and geopolitical tensions continued. The Federal Open Market Committee (FOMC) kept the target federal funds rate unchanged at a range of 4.25-4.50% at its July 2025 meeting. However, in line with market expectations, at its meeting in September 2025, the FOMC cut rates for the first time since December 2024, lowering rates to a target range of 4.00%-4.25%. The FOMC further cut rates at its October 2025 meeting, lowering rates to 3.75%-4.0%. The statements accompanying the rate cut decisions expressed the FOMC's concerns about a cooling labor market while inflation remains above target. Additionally, the FOMC decided to stop reducing the Federal Reserve's asset holdings and reinvest principal payments from holding of agency securities into Treasury bills as of December 1, 2025, signaling the end of its quantitative tightening program.
Relative to the prevailing yields at the end of the second quarter 2025, yields for U.S. Treasuries at the end of the third quarter 2025 were lower across the curve. After declining 0.6% in the first quarter of 2025, U.S. Gross Domestic Product (GDP) grew by 3.8% in the second quarter of 2025. According to the Department of Commerce, the increase in GDP in the second quarter primarily reflected a decrease in imports and an increase in consumer spending. The U.S. stock market rose during the third quarter of 2025. The Dow Jones Industrial Average attained a record 46,398 points on September 30, 2025, versus 44,095 points on June 30, 2025.
Expectations of a federal government shutdown persisted throughout the third quarter of 2025, and effective October 1, 2025, the United States government partially shutdown due to a lapse in appropriations. The federal government shutdown has not yet had a significant impact on our business operations, including the FHLBs' ability to issue debt. Should the federal government shutdown persist, any future impacts on the financial markets, the broader economy, or the Bank remain uncertain. For a discussion of related risks, see Risk Factorsstarting on page 18 of the 2024 Form 10-K.
We maintained ready access to funding throughout the third quarter of 2025.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Condensed Statements of Cash Flows
Net cash flows from operating activities
Nine months ended September 30, 2025 2024
Net cash provided by (used in) operating activities $ (133) $ 352
In 2025, the majority of our operating cash outflows were related to cash paid to clearinghouses to settle mark-to-market positions. In 2024, the majority of our operating cash inflows was related to net income.
Net cash flows from investing activities with significant activity
Nine months ended September 30, 2025 2024
Liquid assets consisting of interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell $ (802) $ (8,643)
Investment debt securities (2,385) (2,570)
Advances (4,714) 6,368
MPF Loans held in portfolio (1,065) (1,641)
Other (16) (12)
Net cash provided by (used in) investing activities $ (8,982) $ (6,498)
Our investing activities consist predominantly of investments in liquid assets, investment debt securities, advances, and MPF Loans held in portfolio. The reasons for the changes in net cash provided by (used in) investing activities and changes in allocation within investing activities are discussed below for the nine months ended September 30, unless otherwise stated.
•The cash flows relating to our liquid assets fluctuate depending on the needs of our members, our investing strategy, the economic environment, and/or regulatory requirements. We maintain a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
•In 2025 and 2024, our net cash outflows from investment debt securities were primarily attributable to an increase in investment in GSE mortgage-backed securities and U.S. Treasuries.
•In 2025, our net cash outflows from advances were primarily attributable to increased borrowings from insurance company and depository members. In 2024, our net cash inflows for advances were attributable to depository members experiencing lower funding needs on their balance sheets along with reduced loan demand, which resulted in paydowns.
•In 2025 and 2024, our net cash outflows for MPF Loans held in portfolio were due to new acquisition volume that outpaced paydown activity.
Net cash flows from financing activities with significant activity
Nine months ended September 30, 2025 2024
Consolidated obligation discount notes $ 16,496 $ 7,704
Consolidated obligation bonds (7,714) (1,571)
Other 352 2
Net cash provided by (used in) financing activities $ 9,134 $ 6,135
Our financing activities primarily reflect cash flows related to issuing and repaying consolidated obligation bonds and discount notes. The change in net cash provided by (used in) financing activities and change in funding allocations are discussed below for the nine months ended September 30, unless otherwise stated.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
•In 2025 and 2024, bonds matured or were called without being replaced, and we increased our use of discount notes to replace this funding. The increased borrowing on our discount notes also reflects an increase in debt financing to match the overall increase in assets outstanding as discussed in investing activities above.
•In 2025, our net cash inflows for Other were primarily due to proceeds from issuance of our capital stock. In 2024, our net cash inflows for Other were primarily due to proceeds from issuance of our capital stock and cash from deposits.
Capital Resources
Capital Rules
Under our amended and restated Capital Plan, effective May 3, 2021 (the Capital Plan), our stock consists of two sub-classes of stock, Class B1 stock and Class B2 stock (together, Class B stock), both with a par value of $100 per share and redeemable on five years' written notice, subject to certain conditions. Under the Capital Plan, each member is required to own capital stock in an amount equal to the greater of a membership stock requirement or an activity stock requirement. All stock that supports a member's activity stock requirement with the Bank is classified as Class B1 activity stock. Any additional amount of stock necessary for the total amount of Class B stock held to equal a member's minimum investment amount will be classified as Class B2 membership stock. Members purchase Class B2 membership stock to satisfy their membership stock requirement with the Bank. Stock held in excess of a member's minimum investment requirement is classified as Class B2 excess capital stock. Any dividend declared on Class B1 activity stock must be greater than or equal to the dividend on Class B2 membership stock for the same period. The higher dividend paid on Class B1 activity stock since late 2013 acknowledges that members, through their utilization of Bank products, provide support to the entire cooperative.
Under the Capital Plan, each member's activity stock requirement is set at 4.5% for advances other than those borrowed under RCAP as further discussed below. The Capital Plan provides that the Board of Directors may periodically adjust members' activity stock requirement for advances between a range of 2% and 5% of a member's outstanding advances.
Additionally, for MPF on-balance sheet products (which includes MPF Original, MPF 125, MPF 35, and MPF Government loans), the activity stock requirement is 2% of the principal loan amount sold into master commitments opened or amended. Under the Capital Plan, the range within which our Board may adjust this requirement is between 0% and 5%. For letters of credit, the activity stock requirement is 0.10% of the notional amount of all new letters of credit issued, and all existing letters of credit renewed, extended or increased. Under the Capital Plan, the range for the letter of credit activity stock requirement is 0.10% to 2%.
Under the Capital Plan, each member's membership stock requirement is the greater of either $10,000 or 0.40% of a member's mortgage assets. The Capital Plan provides that the Board may periodically adjust members' membership stock requirement between a range of 0.20% to 1% of a member's mortgage assets. A member's investment in membership stock is capped at $5 million, subject to adjustment by the Board within a range between $1 million and $25 million.
Membership stock requirements are recalculated annually, whereas the activity stock requirement and any automatic conversion of Class B2 membership stock to Class B1 activity stock related to activity continue to apply on a daily basis.
We may only redeem or repurchase capital stock from a member if, following the redemption or repurchase, the member continues to meet its minimum investment requirement and we remain in compliance with our regulatory capital requirements as discussed in Note 11 - Capital and Mandatorily Redeemable Capital Stock (MRCS)to the condensed financial statements. Members that withdraw from membership must wait at least five years after their membership was terminated and all of their capital stock was redeemed or repurchased before being readmitted to membership in any FHLB.
For details on our capital stock requirements under our capital plan for year-end 2024, see Capital Resourceson page 56 in our 2024 Form 10-K. Under the terms of our Capital Plan, our Board of Directors is authorized to amend the Capital Plan, and the FHFA must approve all such amendments before they become effective.
For details on our minimum regulatory capital requirements seeNote 11 - Capital and Mandatorily Redeemable Capital Stock (MRCS)to the condensed financial statements in this Form 10-Q, and Minimum Capital Requirements in Note 12 - Capital and Mandatorily Redeemable Capital Stock (MRCS)to the financial statements in our 2024 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Reduced Capitalization Advance Program
RCAP allows members to borrow one or more advances with an activity stock requirement of only 2% for the life of the advance instead of the current 4.5% requirement under our Capital Plan's general provisions. At September 30, 2025, RCAP advances outstanding totaled $11.6 billion to 61 members and former members. We may implement future programs for advances with a reduced activity stock requirement that may or may not have the same characteristics as current RCAP offerings.
Repurchase of Excess Capital Stock
Members may request repurchase of excess capital stock on any business day. Additionally, on a monthly basis, the Bank will repurchase excess capital stock held by each member or former member that exceeds certain thresholds set by the Bank. All repurchases of excess capital stock, including any future monthly repurchases, will continue until otherwise announced, but remain subject to our regulatory requirements, certain financial and capital thresholds, and prudent business practices. For details on the financial and capital thresholds relating to repurchases, see Repurchase of Excess Capital Stockon page 59 in our 2024 Form 10-K.
Capital Amounts
The following table reconciles our capital reported in our Condensed Statements of Conditionto the amount of capital stock reported for regulatory purposes. MRCS is included in the calculation of the regulatory capital and leverage ratios but is recorded in liabilities in our Condensed Statements of Condition.
September 30, 2025 December 31, 2024
Capital stock $ 3,530 $ 3,267
Mandatorily redeemable capital stock (MRCS) recorded as a liability 32 4
Regulatory capital stock 3,562 3,271
Retained earnings 5,583 5,311
Regulatory capital $ 9,145 $ 8,582
Capital stock $ 3,530 $ 3,267
Retained earnings 5,583 5,311
Accumulated other comprehensive income (loss) 69 42
GAAP capital $ 9,182 $ 8,620
Accumulated other comprehensive income (loss) in the above table consists of changes in market value of various balance sheet accounts where the change is not recorded in earnings but is instead recorded in equity capital as the income (loss) is not yet realized. For details on these changes please see Note 12 - Accumulated Other Comprehensive Income (Loss)to the condensed financial statements.
We may not pay dividends if we fail to satisfy our minimum capital and/or liquidity requirements under the FHLB Act and FHFA regulations. On October 29, 2025, our Board of Directors declared a 9.25% dividend (annualized) for Class B1 activity stock and a 4.30% dividend (annualized) for Class B2 membership stock based on our preliminary financial results for the third quarter of 2025. This dividend totaled $81 million (recorded as $80 million dividends on capital stock and $1 million interest expense on mandatorily redeemable capital stock) and is scheduled for payment on November 14, 2025.
Although we continue to work to maintain our financial strength to support a reasonable dividend, any future dividend payment remains subject to declaration by our Board and will depend on future operating results, our Retained Earnings and Dividend Policy and any other factors the Board determines to be relevant. For further information on our Retained Earnings and Dividend Policy, see page 60 in our 2024 Form 10-K.
We continue to allocate 20% of our net income each quarter to a restricted retained earnings account in accordance with the Joint Capital Enhancement Agreement that we entered into with the other FHLBs, as further discussed in Joint Capital Enhancement Agreement in Note 12 - Capital and Mandatorily Redeemable Capital Stock (MRCS)to the financial statements in our 2024 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Additionally, an FHFA Advisory Bulletin sets forth guidance for each FHLB to maintain a ratio of at least two percent of capital stock to total assets. In accordance with this guidance, the FHFA considers the proportion of capital stock to assets, measured on a daily average basis at month end, when assessing each FHLB's capital management practices.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Credit Risk Management
Managing Our Credit Risk Exposure Related to Member Credit Products
Our credit risk rating system focuses primarily on our members' overall financial health and takes into account the member's asset quality, earnings, and capital position. For further information, please see Credit Risk Managementstarting on page 62 in our 2024 Form 10-K.
The following table presents the number of members and related credit outstanding to them by credit risk rating. Credit outstanding consists primarily of outstanding advances and letters of credit. MPF credit enhancement obligations, member derivative exposures, and other obligations make up the rest. Of the total credit outstanding, $61.2 billion were advances (par value) and $13.4 billion were letters of credit at September 30, 2025, compared to $56.5 billion and $12.9 billion at December 31, 2024.
September 30, 2025 December 31, 2024
Rating Borrowing Members Credit Outstanding
Total Collateral Value
Borrowing Members Credit Outstanding Total Collateral Value
1-3 500 $ 73,859 $ 187,525 510 $ 67,491 $ 177,577
4 11 833 1,115 11 2,044 2,324
5 5 271 306 5 126 168
Total 516 $ 74,963 $ 188,946 526 $ 69,661 $ 180,069
Members assigned a 4 rating in the above table were required to submit specific collateral listings and the members assigned a 5 rating were required to deliver collateral to us or to a third party custodian on our behalf.
MPF Loans and Related Exposures
For details on our allowance for credit losses on MPF Loans, please see Note 8 - Allowance for Credit Lossesto the condensed financial statements.
Credit Risk Exposure- Our credit risk exposure on conventional MPF Loans held in portfolio is the potential for financial loss due to borrower default and depreciation in the value of the real estate collateral securing the MPF Loan, offset by the borrower's equity, which represents the fair value of the underlying property in excess of the outstanding MPF Loan held in portfolio balance, our ability to recover losses from primary mortgage insurance, Recoverable CE Income, and the CE Amount which may include supplemental mortgage insurance (SMI). The PFI is required to pledge collateral to secure any portion of its CE Amount that is a direct obligation of the PFI. For further details see Loss Structure for Credit Risk Sharing Productson page 9 in our 2024 Form 10-K, and Credit Risk Exposureand Setting Credit Enhancement Levelsstarting on page 65 in our 2024 Form 10-K.
Mortgage Repurchase Risk
We are exposed to mortgage repurchase risk in connection with our sale of MPF Loans to Fannie Mae under the MPF Xtra product and to Ginnie Mae for MPF Loans securitized in Ginnie Mae MBS if a loan eligibility requirement or other representation or warranty is breached. We may require the PFI from which we purchased the ineligible MPF Loan to repurchase that loan from us or to indemnify us for related losses, or request indemnification from the PFI's MPF Bank. Of these two products, our MPF Xtra product is the more popular, and during the nine months ended September 30, 2025 and 2024, we purchased and concurrently delivered $417 million and $518 million in unpaid principal balance of these loans to Fannie Mae.
For additional details on our mortgage repurchase risk in connection with our sale of MPF Loans to third party investors and MPF Loans securitized into MBS when a loan eligibility requirement or other warranty is breached, see Mortgage Repurchase Riskon page 67 in our 2024 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Investment Debt Securities
We hold a variety of investment debt securities, mostly government backed or insured securities. There have been no material changes in the credit ratings of these securities since December 31, 2024. We believe these investments are currently low risk. For further details seeInvestment Debt Securitieson page 69 in our 2024 Form 10-K.
Unsecured Short-Term Investments
See Unsecured Short-Term Investmentson page 71 in our 2024 Form 10-K for further details on our unsecured short-term investments as well as policies and procedures to limit and monitor our unsecured credit risk exposure.
The following table presents the credit ratings of our unsecured investment counterparties, organized by the domicile of the counterparty or, where the counterparty is a U.S. branch or agency office of a foreign commercial bank, by the domicile of the counterparty's parent. This table does not reflect the foreign sovereign government's credit rating. The ratings shown in the following table reflect the lowest long-term debt rating reported among the three largest Nationally Recognized Statistical Rating Organizations (NRSROs). FHFA regulations require the Bank to develop and assign internal credit ratings for its counterparties that do not rely exclusively on ratings reported by NRSROs. As such, the ratings shown in the following table are for presentation purposes only. The unsecured investment credit exposure presented in the table may not reflect the average or maximum exposure during the period as the table reflects only the balances at period end.
As of September 30, 2025 AA A Total
Domestic U.S.
Interest-bearing deposits
$ 800 $ 1,990 $ 2,790
Foreign commercial banks - federal funds sold:
Australia 1,100 - 1,100
Canada - 2,850 2,850
Finland 495 - 495
Germany - 1,100 1,100
Netherlands - 1,400 1,400
Norway 750 - 750
Sweden 1,000 - 1,000
Total U.S. branches and agency offices of foreign commercial banks 3,345 5,350 8,695
Total unsecured credit exposure $ 4,145 $ 7,340 $ 11,485
All $11.49 billion of the unsecured credit exposure shown in the above table were overnight investments.
Managing Our Credit Risk Exposure Related to Derivative Agreements
See Note 9 - Derivatives and Hedging Activitiesto the condensed financial statements for a discussion of how we manage our credit risk exposure related to derivative agreements. We have credit exposure on net asset positions where we have not received adequate collateral from our counterparties. We also have credit exposure on net liability positions where we have pledged collateral in excess of our liability to a counterparty.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following table presents our derivative positions where we have such credit exposures. The ratings shown in the following table reflect the lowest long-term debt rating reported among the three largest NRSROs. FHFA regulations require the Bank to develop and assign internal credit ratings for its counterparties that do not rely exclusively on ratings reported by NRSROs. As such, the ratings shown in the following table are for presentation purposes only. Noncash collateral pledged consists of initial margin we posted through our FCMs, on behalf of the DCOs for cleared derivatives and is included in our cleared derivative positions with credit exposure. Noncash collateral pledged also consists of net initial margin exchanged on our bilateral derivatives, which for presentation purposes we have reported on a net basis.
Net Derivative Fair Value Before Collateral Cash Collateral Pledged Noncash Collateral Pledged Net Credit Exposure to Counterparties
a
As of September 30, 2025
Nonmember counterparties -
Undercollateralized asset positions -
Bilateral derivatives -
AA $ 8 $ (8) $ - $ -
A 26 (26) - -
Overcollateralized liability positions -
Bilateral derivatives -
AA (21) 21 - -
A (84) 93 - 9
BBB (304) 305 - 1
Cleared derivatives (21) - 827 806
Nonmember counterparties (396) 385 827 816
Member counterparties 1 - - 1
Total $ (395) $ 385 $ 827 $ 817
a Less than $1 million is shown as zero.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Legislative and Regulatory Developments
Significant regulatory actions and developments are summarized below.
The Bank is subject to various legal and regulatory requirements and priorities. Certain actions by the current federal executive administration are changing the regulatory environment, including regulatory priorities and areas of focus, such as deregulation, which have affected, and will likely continue to affect, certain aspects of the Bank's business operations, and could impact the Bank's financial condition, results of operations and reputation.
As of the third quarter of 2025, the FHFA has rescinded the regulatory interpretation that had imposed detailed criteria on FHLB acceptance of municipal securities as eligible collateral and outlined how to determine and verify eligibility of municipal securities. The Bank has reviewed this rescission and will be updating its eligibility guidelines. In addition, the FHFA has withdrawn two proposed rules published in 2024: (i) the proposed rule published in November 2024 that would have amended regulations addressing boards of directors and overall corporate governance of the FHLBs and the Office of Finance, and (ii) the proposed rule published in October 2024 that would have amended the Bank's capital requirements by modifying limits on the Bank's extensions of unsecured credit. In October 2025, the FHFA rescinded several advisory bulletins and technical guidance documents. The Bank is reviewing these rescissions and assessing any potential impact they may have on the Bank and its policies and procedures.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the ultimate impact they may have on the Bank and the FHLB System. The Bank continues to monitor these actions as they evolve and will evaluate their potential impact on us. For further discussion of related risks, see Risk Factorsstarting on page 18 in the 2024 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Federal Home Loan Bank of Chicago published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 16:41 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]