UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 000-51401

Federal Home Loan Bank of Chicago

(Exact name of registrant as specified in its charter)

Federally chartered corporation

36-6001019

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

433 West Van Buren Street, Suite 501S

Chicago,

60607

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (312) 565-5700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~June 30, 2022, including mandatorily redeemable capital stock,~~March 31, 2023, the registrant had ~~27,179,010~~37,920,825 total outstanding shares of Class B Capital ~~Stock.~~Stock, including mandatorily redeemable capital stock.

Table of Contents

Federal Home Loan Bank of Chicago

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (unaudited)
	Condensed Statements of Condition	3
	Condensed Statements of Income	4
	Condensed Statements of Comprehensive Income	5
	Condensed Statements of Capital	6
	Condensed Statements of Cash Flows	87
	Note 1 - Background and Basis of Presentation	98
	Note 2 - Summary of Significant Accounting Policies	9
	Note 3 - Recently Issued but Not Yet Adopted Accounting Standards	109
	Note 4 - Interest Income and Interest Expense	1110
	Note 5 - Investment Debt Securities	1211
	Note 6 - Advances	1615
	Note 7 - MPF Loans Held in Portfolio	1716
	Note 8 - Allowance for Credit Losses	1817
	Note 9 - Derivatives and Hedging Activities	2019
	Note 10 - Consolidated Obligations	2524
	Note 11 - Capital and Mandatorily Redeemable Capital Stock (MRCS)	2625
	Note 12 - Accumulated Other Comprehensive Income (Loss)	2726
	Note 13 - Fair Value	2827
	Note 14 - Commitments and Contingencies	3130
	Note 15 - Transactions with Related Parties and Other FHLBs	3130
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3231
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5654
Item 4.	Controls and Procedures	5755

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	5856
Item 1A.	Risk Factors	5856
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5856
Item 3.	Defaults Upon Senior Securities	5856
Item 4.	Mine Safety Disclosures	5856
Item 5.	Other Information	5856
Item 6.	Exhibits	5957
	Glossary of Terms	6058
	Signatures	6361

Table of Contents

Federal Home Loan Bank of Chicago

PART I - FINANCIAL INFORMATION

Item 1. Condensed Financial ~~Statements~~Statements.

Condensed Statements of Condition (unaudited)

(U.S. Dollars in millions, except capital stock par value)


			June 30, 2022			December 31, 2021							March 31, 2023		December 31, 2022
Assets	Assets							Assets
Cash and due from banks	Cash and due from banks		$	49		$	45	Cash and due from banks					$	39	$	35
Interest bearing deposits		855			855
Interest-bearing deposits			Interest-bearing deposits						2,570		2,570
Federal funds sold	Federal funds sold		5,335			3,527		Federal funds sold					7,175		6,443
Securities purchased under agreements to resell	Securities purchased under agreements to resell		14,745			8,740		Securities purchased under agreements to resell					12,745		18,500
Investment debt securities -	Investment debt securities -							Investment debt securities -
Trading, 616 and 645 pledged		951			954
Trading, $— and $— pledged as collateral that may be repledged			Trading, $— and $— pledged as collateral that may be repledged						3		3

Available-for-sale, 18,639 and 22,340 amortized cost		18,625			22,706
Available-for-sale, $22,718 and $20,879 amortized cost, includes $804 and $692 pledged as collateral that may be repledged			Available-for-sale, $22,718 and $20,879 amortized cost, includes $804 and $692 pledged as collateral that may be repledged						22,377		20,700

Held-to-maturity, 1,206 and 1,832 fair value		1,206			1,801

Held-to-maturity, $636 and $1,419 carried at fair value			Held-to-maturity, $636 and $1,419 carried at fair value						642		1,431

Investment debt securities	Investment debt securities		20,782			25,461		Investment debt securities					23,022		22,134
Advances, 1,597 and 1,173 carried at fair value		52,811			48,049
Advances, $646 and $661 carried at fair value			Advances, $646 and $661 carried at fair value						79,584		66,288

MPF Loans held in portfolio, net of (5) and (5) allowance for credit losses		9,953			9,843
MPF Loans held in portfolio, net of $(5) and $(5) allowance for credit losses			MPF Loans held in portfolio, net of $(5) and $(5) allowance for credit losses						10,174		10,160

Derivative assets	Derivative assets		127			14		Derivative assets					39		25

Other assets, 86 and 104 carried at fair value		497			420
Other assets, $64 and $109 carried at fair value			Other assets, $64 and $109 carried at fair value						706		698

net of (7) and (7) allowance for credit losses
net of $(7) and $(7) allowance for credit losses			net of $(7) and $(7) allowance for credit losses

Assets	Assets		$	105,154		$	96,954	Assets					$	136,054	$	126,853

Liabilities	Liabilities							Liabilities
Deposits -	Deposits -							Deposits -
Demand and overnight - noninterest bearing		$	127		$	205
Demand and overnight - interest bearing, 10 and 11 from other FHLBs		528			829
Demand and overnight - noninterest-bearing			Demand and overnight - noninterest-bearing						$	102	$	94
Demand and overnight - interest-bearing, $11 and $11 from other FHLBs			Demand and overnight - interest-bearing, $11 and $11 from other FHLBs						744		477

Deposits	Deposits		655			1,034		Deposits					846		571
Consolidated obligations, net -	Consolidated obligations, net -							Consolidated obligations, net -
Discount notes, 865 and — carried at fair value		31,525			24,563
Discount notes, $5,037 and $253 carried at fair value			Discount notes, $5,037 and $253 carried at fair value						50,970		59,531

Bonds, 661 and 665 carried at fair value		64,519			63,373
Bonds, $711 and $718 carried at fair value			Bonds, $711 and $718 carried at fair value						74,474		58,116

Consolidated obligations, net	Consolidated obligations, net		96,044			87,936		Consolidated obligations, net					125,444		117,647
Derivative liabilities	Derivative liabilities		152			32		Derivative liabilities					101		10
Affordable Housing Program assessment payable	Affordable Housing Program assessment payable		88			85		Affordable Housing Program assessment payable					105		99

Mandatorily redeemable capital stock	Mandatorily redeemable capital stock		273			247		Mandatorily redeemable capital stock					247		248
Other liabilities	Other liabilities		1,056			868		Other liabilities					1,353		813
Liabilities	Liabilities		98,268			90,202		Liabilities					128,096		119,388
Commitments and contingencies - see notes to the condensed financial statements	Commitments and contingencies - see notes to the condensed financial statements		0			0		Commitments and contingencies - see notes to the condensed financial statements
Capital	Capital							Capital

Class B1 activity stock, 17 and 14 million shares issued and outstanding		1,672			1,409
Class B1 activity stock, 29 and 23 million shares issued and outstanding			Class B1 activity stock, 29 and 23 million shares issued and outstanding						2,863		2,310

Class B2 membership stock, 8 and 7 million shares issued and outstanding		773			740
Class B2 membership stock, 7 and 7 million shares issued and outstanding			Class B2 membership stock, 7 and 7 million shares issued and outstanding						682		679

Capital stock - putable, $100 and $100 par value per share	Capital stock - putable, $100 and $100 par value per share		2,445			2,149		Capital stock - putable, $100 and $100 par value per share					3,545		2,989

Retained earnings - unrestricted	Retained earnings - unrestricted		3,661			3,558		Retained earnings - unrestricted					3,845		3,778
Retained earnings - restricted	Retained earnings - restricted		740			703		Retained earnings - restricted					814		786
Retained earnings	Retained earnings		4,401			4,261		Retained earnings					4,659		4,564
Accumulated other comprehensive income (loss) (AOCI)	Accumulated other comprehensive income (loss) (AOCI)		40			342		Accumulated other comprehensive income (loss) (AOCI)					(246)		(88)
Capital	Capital		6,886			6,752		Capital					7,958		7,465
Liabilities and capital	Liabilities and capital		$	105,154		$	96,954	Liabilities and capital					$	136,054	$	126,853

The accompanying notes are an integral part of these condensed financial statements (unaudited).

Table of Contents

Federal Home Loan Bank of Chicago

Condensed Statements of Income (unaudited)

(U.S. Dollars in millions)

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Interest income $ 357 $ 225 $ 584 $ 417
Interest expense 203 72 275 154
Net interest income 154 153 309 263
Provision for (reversal of) credit losses — 1 1 1
Net interest income after provision for (reversal of) credit losses 154 152 308 262
Noninterest income -
Trading securities 1 (13) (2) (31)
Derivatives 17 (13) 46 7
Instruments held under the fair value option (18) 3 (46) (26)
MPF fees, 6 , 6 , 12 and 13 from other FHLBs 9 13 19 25
Other, net (4) — (2) 2
Noninterest income (loss) 5 (10) 15 (23)
Noninterest expense -
Compensation and benefits 28 25 57 53
Nonpayroll operating expenses 24 20 45 40
Federal Housing Finance Agency and Office of Finance 4 3 10 8
Other, net 2 7 4 15
Noninterest expense 58 55 116 116
Income before assessments 101 87 207 123
Affordable Housing Program assessment 10 9 21 13
Net income $ 91 $ 78 $ 186 $ 110


	Three months ended March 31,
		2023		2022
Interest income		$	1,582	$	227
Interest expense		1,360		72
Net interest income		222		155
Provision for (reversal of) credit losses		—		1
Net interest income after provision for (reversal of) credit losses		222		154

Noninterest income -
Trading securities		—		(3)
Derivatives		(6)		29
Instruments held under the fair value option		(9)		(28)
MPF fees, $6 and $6 from other FHLBs		8		10

Other, net		3		2
Noninterest income (loss)		(4)		10

Noninterest expense -
Compensation and benefits		32		29
Nonpayroll operating expenses		21		21


Federal Housing Finance Agency and Office of Finance		5		6
Other, net		1		2
Noninterest expense		59		58

Income before assessments		159		106

Affordable Housing Program assessment		16		11

Net income		$	143	$	95

The accompanying notes are an integral part of these condensed financial statements (unaudited).

Table of Contents

Federal Home Loan Bank of Chicago

Condensed Statements of Comprehensive Income (unaudited)

(U.S. Dollars in millions)

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Net income $ 91 $ 78 $ 186 $ 110
Other comprehensive income (loss) -
Net unrealized gain (loss) available-for-sale debt securities (162) 54 (380) 252
Net unrealized gain (loss) cash flow hedges 25 (9) 81 32
Postretirement plans — 1 (3) (4)
Other comprehensive income (loss) (137) 46 (302) 280
Comprehensive income $ (46) $ 124 $ (116) $ 390


	Three months ended March 31,
		2023		2022
Net income		$	143	$	95

Other comprehensive income (loss) -
Net unrealized gain (loss) available-for-sale debt securities		(162)		(218)
Net unrealized gain (loss) cash flow hedges		(17)		56
Postretirement plans		21		(3)
Other comprehensive income (loss)		(158)		(165)

Comprehensive income (loss)		$	(15)	$	(70)

The accompanying notes are an integral part of these condensed financial statements (unaudited).

Table of Contents

Federal Home Loan Bank of Chicago

Condensed Statements of Capital (unaudited)

(U.S. Dollars and shares in millions)

Capital Stock - Putable - B1 Activity Capital Stock - Putable - B2 Membership Retained Earnings
Shares Value Shares Value Unrestricted Restricted AOCI Total
March 31, 2022 13 $ 1,334 8 $ 798 $ 3,612 $ 722 $ 177 $ 6,643
Comprehensive income 73 18 (137) (46)
Issuance of capital stock 6 560 — 16 576
Repurchases of capital stock — — (2) (262) (262)
Capital stock reclassed to mandatorily redeemable capital stock liability — (1) — — (1)
Transfers between classes of capital stock (2) (221) 2 221
Cash dividends - class B1 annualized rate and amount 5.13 % (22) (22)
Cash dividends - class B2 annualized rate and amount 2.13 % (2) (2)
Total change in period, excl. cumulative effect 4 338 — (25) 49 18 (137) 243
June 30, 2022 17 $ 1,672 8 $ 773 $ 3,661 $ 740 $ 40 $ 6,886
March 31, 2021 13 $ 1,312 7 $ 707 $ 3,428 $ 654 $ 441 $ 6,542
Comprehensive income 62 16 46 124
Issuance of capital stock 1 92 — 13 105
Repurchases of capital stock — — (1) (112) (112)
Capital stock reclassed to mandatorily redeemable capital stock liability — — — (5) (5)
Transfers between classes of capital stock (1) (121) 1 121
Cash dividends - class B1 annualized rate and amount 5.00 % (19) (19)
Cash dividends - class B2 annualized rate and amount 2.00 % (2) (2)
Total change in period, excl. cumulative effect — (29) — 17 41 16 46 91
June 30, 2021 13 $ 1,283 7 $ 724 $ 3,469 $ 670 $ 487 $ 6,633

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

Capital Stock - Putable - B1 Activity Capital Stock - Putable - B2 Membership Retained Earnings
Shares Value Shares Value Unrestricted Restricted AOCI Total
December 31, 2021 14 $ 1,409 7 $ 740 $ 3,558 $ 703 $ 342 $ 6,752
Comprehensive income 149 37 (302) (116)
Issuance of capital stock 9 847 — 16 863
Repurchases of capital stock — — (4) (510) (510)
Capital stock reclassed to mandatorily redeemable capital stock liability (1) (55) — (2) (57)
Transfers between classes of capital stock (5) (529) 5 529
Cash dividends - class B1 annualized rate and amount 5.07 % (42) (42)
Cash dividends - class B2 annualized rate and amount 2.07 % (4) (4)
Total change in period excl. cumulative effect 3 263 1 33 103 37 (302) 134
June 30, 2022 17 $ 1,672 8 $ 773 $ 3,661 $ 740 $ 40 $ 6,886
December 31, 2020 13 $ 1,257 8 $ 753 $ 3,424 $ 648 $ 207 $ 6,289
Comprehensive income 88 22 280 390
Issuance of capital stock 2 260 — 13 273
Repurchases of capital stock — — (3) (270) (270)
Capital stock reclassed to mandatorily redeemable capital stock liability — (1) — (5) (6)
Transfers between classes of capital stock (2) (233) 2 233
Cash dividends - class B1 annualized rate and amount 5.00 % (38) (38)
Cash dividends - class B2 annualized rate and amount 2.00 % (5) (5)
Total change in period excl. cumulative effect — 26 (1) (29) 45 22 280 344
June 30, 2021 13 $ 1,283 7 $ 724 $ 3,469 $ 670 $ 487 $ 6,633


	Capital Stock - Putable - B1 Activity				Capital Stock - Putable - B2 Membership				Retained Earnings
	Shares	Value			Shares	Value			Unrestricted		Restricted		AOCI		Total


























December 31, 2022	23	$	2,310		7	$	679		$	3,778	$	786	$	(88)	$	7,465
Comprehensive income (loss)									115		28		(158)		(15)
Issuance of capital stock	14	1,336			—	—									1,336
Repurchases of capital stock	—	—			(8)	(779)									(779)
Capital stock reclassed to mandatorily redeemable capital stock liability	—	—			—	(1)									(1)
Transfers between classes of capital stock	(8)	(783)			8	783
Cash dividends - class B1 annualized rate and amount		7.13		%					(45)						(45)
Cash dividends - class B2 annualized rate and amount						3.06		%	(3)						(3)

Total change in period excl. cumulative effect	6	553			—	3			67		28		(158)		493
March 31, 2023	29	$	2,863		7	$	682		$	3,845	$	814	$	(246)	$	7,958


December 31, 2021	14	$	1,409		7	$	740		$	3,558	$	703	$	342	$	6,752
Comprehensive income (loss)									76		19		(165)		(70)
Issuance of capital stock	3	287			—	—									287
Repurchases of capital stock	—	—			(2)	(248)									(248)
Capital stock reclassed to mandatorily redeemable capital stock liability	(1)	(54)			—	(2)									(56)
Transfers between classes of capital stock	(3)	(308)			3	308
Cash dividends - class B1 annualized rate and amount		5.00		%					(20)						(20)
Cash dividends - class B2 annualized rate and amount						2.00		%	(2)						(2)
Total change in period excl. cumulative effect	(1)	(75)			1	58			54		19		(165)		(109)
March 31, 2022	13	$	1,334		8	$	798		$	3,612	$	722	$	177	$	6,643

The accompanying notes are an integral part of these condensed financial statements (unaudited).

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Federal Home Loan Bank of Chicago

Condensed Statements of Cash Flows (unaudited)

(U.S. Dollars in millions)

Six months ended June 30, 2022 2021
Operating Net cash provided by (used in) operating activities $ 1,065 $ 296
Investing Net change federal funds sold (1,808) (650)
Net change securities purchased under agreements to resell (6,005) (1,625)
Trading debt securities -
Proceeds from maturities and paydowns 1 1,751
Available-for-sale debt securities -
Sales — 20
Proceeds from maturities and paydowns 4,046 259
Purchases (1,887) (759)
Held-to-maturity debt securities -
Proceeds from maturities and paydowns 2,156 1,239
Purchases (1,561) (1,239)
Advances -
Principal collected 243,750 247,898
Issued (249,574) (247,793)
MPF Loans held in portfolio -
Principal collected 750 1,890
Purchases (886) (1,662)
Other investing activities (8) (7)
Net cash provided by (used in) investing activities (11,026) (678)
Financing Net change deposits, (1) and — from other FHLBs (379) (161)
Discount notes -
Net proceeds from issuance 435,410 300,754
Payments for maturing and retiring (428,474) (303,665)
Consolidated obligation bonds -
Net proceeds from issuance 12,781 21,133
Payments for maturing and retiring (9,649) (20,704)
Capital stock -
Proceeds from issuance 863 273
Repurchases (510) (270)
Cash dividends paid (46) (43)
Other financing activities (31) (36)
Net cash provided by (used in) financing activities 9,965 (2,719)
Net increase (decrease) in cash and due from banks 4 (3,101)
Cash and due from banks at beginning of period 45 3,541
Cash and due from banks at end of period $ 49 $ 440


	Three months ended March 31,	2023		2022
Operating	Net cash provided by (used in) operating activities	$	109	$	467

Investing	Net change federal funds sold	(732)		(904)
	Net change securities purchased under agreements to resell	5,755		(3,005)





	Available-for-sale debt securities -

	Proceeds from maturities and paydowns	320		1,091
	Purchases	(1,168)		(1,076)
	Held-to-maturity debt securities -
	Proceeds from maturities and paydowns	1,762		2,113
	Purchases	(973)		(967)
	Advances -
	Principal collected	594,788		88,038
	Issued	(607,774)		(87,614)
	MPF Loans held in portfolio -
	Principal collected	199		416
	Purchases	(218)		(387)
	Other investing activities	(2)		(4)
	Net cash provided by (used in) investing activities	(8,043)		(2,299)
Financing	Net change deposits, $— and $— from other FHLBs	275		(327)


	Discount notes -
	Net proceeds from issuance	67,426		232,034
	Payments for maturing and retiring	(76,006)		(230,139)
	Consolidated obligation bonds -
	Net proceeds from issuance	18,519		5,709
	Payments for maturing and retiring	(2,783)		(5,475)

	Capital stock -
	Proceeds from issuance	1,336		287
	Repurchases	(779)		(248)
	Cash dividends paid	(48)		(22)
	Other financing activities	(2)		(1)
	Net cash provided by (used in) financing activities	7,938		1,818
	Net increase (decrease) in cash and due from banks	4		(14)
	Cash and due from banks at beginning of period	35		45
	Cash and due from banks at end of period	$	39	$	31

The accompanying notes are an integral part of these condensed financial statements (unaudited).

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 1 – Background and Basis of Presentation

The Federal Home Loan Bank of Chicago is a federally chartered corporation and one of 11 Federal Home Loan Banks (the FHLBs) that, with the Office of Finance, comprise the Federal Home Loan Bank System (the System). The FHLBs are government sponsored enterprises (GSE) of the United States of America and were organized under the Federal Home Loan Bank Act of 1932, as amended (FHLB Act), in order to improve the availability of funds to support home ownership. We are supervised and regulated by the Federal Housing Finance Agency (FHFA), an independent federal agency in the executive branch of the United States (U.S.) government.

Each FHLB is a member-owned cooperative with members from a specifically defined geographic district. Our defined geographic district is Illinois and Wisconsin. All federally-insured depository institutions, insurance companies engaged in residential housing finance, credit unions and community development financial institutions located in our district are eligible to apply for membership with us. All our members are required to purchase our capital stock as a condition of membership. Our capital stock is not publicly traded, and is issued, repurchased or redeemed at par value, $100 per share, subject to certain statutory and regulatory limits. As a cooperative, we do business with our members, and former members (under limited circumstances). Specifically, we provide credit principally in the form of secured loans called advances. We also provide liquidity for home mortgage loans to members approved as Participating Financial Institutions (PFIs) through the Mortgage Partnership Finance® (MPF®) Program.

Our accounting and financial reporting policies conform to generally accepted accounting principles in the United States of America (GAAP). ~~Amounts in prior periods may be reclassified to conform to the current presentation and, if material, are disclosed in the following notes.~~

In the opinion of management, all normal recurring adjustments have been included for a fair statement of this interim financial information. These unaudited condensed financial statements and the accompanying notes should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, ~~2021,~~2022, included in our ~~2021~~2022 Annual Report on Form 10-K ~~(2021~~(2022 Form 10-K) starting on page F-1, as filed with the Securities and Exchange Commission (SEC).

Unless otherwise specified, references to we, us, our, and the Bank are to the Federal Home Loan Bank of Chicago.

“Mortgage Partnership Finance”, “MPF”, “MPF Xtra”, "Downpayment Plus", "DPP", Downpayment Plus Advantage", "DPP Advantage", and "Community First" are federally registered trademarks of the Federal Home Loan Bank of Chicago.

Refer to the Glossary of Terms starting on page 6058 for the definitions of certain terms used herein.

Use of Estimates and Assumptions

We are required to make estimates and assumptions when preparing our condensed financial statements in accordance with GAAP. The most significant of these estimates and assumptions applies to fair value measurements, which includes derivative instruments. Our actual results may differ from the results reported in our condensed financial statements due to such estimates and assumptions. This includes the reported amounts of assets and liabilities, the reported amounts of income and expense, and the disclosure of contingent assets and liabilities.

Basis of Presentation

The basis of presentation pertaining to the consolidation of our variable interest entities has not changed since we filed our ~~2021~~2022 Form 10-K. The basis of presentation pertaining to our gross versus net presentation of derivative financial instruments also has not changed since we filed our ~~2021~~2022 Form 10-K. Refer to Note 1- Background and Basis of Presentation to the financial statements in our ~~2021~~2022 Form 10-K with respect to our basis of presentation for consolidation of variable interest entities and our gross versus net presentation of financial instruments for further details.

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 2 – Summary of Significant Accounting Policies

During March of 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides relief for qualifying contract modifications related to reference rate reform related to receivables, payables and hedging relationships. The guidance was effective upon issuance and through December 31, 2024, as amended, except for certain optional expedients elected for hedging relationships, which should be retained for the duration of the hedge term. The Bank elected to implement certain optional expedients in the first quarter of 2023. Application of these provisions did not have a material impact on the financial statements.

During March 2022, the FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU broadens the availability of fair value hedging to non-prepayable and prepayable portfolios. The guidance on hedging multiple layers in a closed portfolio is applied prospectively. The guidance on the accounting for fair value basis adjustments is applied on a modified retrospective basis. Further, an entity may reclassify debt securities from held-to-maturity to available for sale if it includes them in a closed portfolio that is hedged under the portfolio layer method. This ASU is effective for the Bank starting January 1, 2023. The Bank has not elected to apply this guidance as of this reporting period, but may do so in the future.

Also during March 2022, the FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures to eliminate the recognition and measurement guidance for troubled debt restructurings for creditors that have adopted Current Expected Credit Losses (CECL) methodology. The ASU also required enhanced disclosures about loan modifications for borrowers experiencing financial difficulty and required the presentation of gross write-offs by year of origination. ASU 2022-02 was effective for the Bank starting January 1, 2023. The Bank elected to implement the guidance prospectively. The adoption of the ASU did not have a material impact on the financial statements.

Our significant accounting policies adopted through December 31, ~~2021,~~2022, can be found in Note 2 – Summary of Significant Accounting Policies to the financial statements in our ~~2021~~2022 Form 10-K including details on any cumulative effect adjustments. ~~We have not yet adopted any significant new policies in 2022.~~

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~Notes to Condensed Financial Statements - (Unaudited)~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

Note 3 – Recently Issued but Not Yet Adopted Accounting Standards

~~During March 2022, the Financial Accounting Standards Board (FASB)~~No relevant accounting standards were recently issued ASU 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU broadens the availability of fair value hedging to non-prepayable and prepayable portfolios. The guidance on hedging multiple layers in a closed portfolio is applied prospectively. The guidance on the accounting for fair value basis adjustments is applied on a modified retrospective basis. Further, an entity may reclassify debt securities from held-to-maturity to available for sale if it includes them in a closed portfolio that is hedged under the portfolio layer method. This ASU is effective for the Bank starting January 1, 2023, with early adoption permitted. The Bank is in the process of evaluating the impact of adoption of this ASU.but not yet adopted.

Also during March 2022, the FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures to eliminate the recognition and measurement guidance for troubled debt restructurings for creditors that have adopted Current Expected Credit Losses (CECL) methodology. The ASU also requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty and requires the presentation of gross write-offs by year of origination. This ASU is effective starting January 1, 2023, with early adoption permitted. The Bank is evaluating the impact of adoption of this ASU.

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 4 – Interest Income and Interest Expense

The following table presents interest income and interest expense for the periods indicated.

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Interest income -
Trading $ — $ 13 $ — $ 34
Available-for-sale interest income 81 74 109 95
Available-for-sale prepayment fees 5 — 41 —
Available-for-sale 86 74 150 95
Held-to-maturity 7 7 14 15
Investment debt securities 93 94 164 144
Advances interest income 168 60 245 131
Advances prepayment fees 1 7 11 12
Advances 169 67 256 143
MPF Loans held in portfolio 69 60 134 123
Federal funds sold 15 1 17 2
Securities purchased under agreements to resell 6 — 7 1
Interest earning deposits 4 1 5 1
Other 1 2 1 3
Interest income 357 225 584 417
Interest expense -
Consolidated obligations -
Discount notes 51 10 63 25
Bonds 147 59 203 123
Other 5 3 9 6
Interest expense 203 72 275 154
Net interest income $ 154 $ 153 $ 309 $ 263


	Three months ended March 31,
		2023		2022
Interest income -



Available-for-sale interest income		$	297	$	28
Available-for-sale prepayment fees		—		36
Available-for-sale		297		64

Held-to-maturity		20		7

Investment debt securities		317		71

Advances interest income		939		77
Advances prepayment fees		—		10
Advances		939		87

MPF Loans held in portfolio		80		65
Federal funds sold		127		2
Securities purchased under agreements to resell		67		1
Interest-bearing deposits		52		1


Interest income		1,582		227

Interest expense -

Consolidated obligations -
Discount notes		673		12
Bonds		672		56

Other		15		4

Interest expense		1,360		72

Net interest income		$	222	$	155

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 5 – Investment Debt Securities

We classify debt securities as either trading, held-to-maturity (HTM), or available-for-sale (AFS). Our security disclosures within these classifications are disaggregated by major security types as shown below. Our major security types are based on the nature and risks of the security:

•U.S. Government & other government related - may consist of the sovereign debt of the United States; debt issued by ~~GSE;~~GSEs; debt issued by the Tennessee Valley Authority; and securities guaranteed by the Small Business ~~Administration.~~Administration (SBA).

•Federal Family Education Loan Program - asset-backed-securities (FFELP ABS).

•GSE mortgage-backed securities (MBS) - issued by Fannie Mae and Freddie Mac.

•Government guaranteed MBS.

•State or local housing agency obligations.

We have no allowance for credit losses on our investment debt securities and we have elected to exclude accrued interest receivable from the amortized cost in the following AFS and HTM tables. ~~Prior to 2022, we included accrued interest in the carrying value of our AFS securities.~~ See Note 8 - Allowance for Credit Losses for further details on these amounts.

Pledged Collateral

We disclose the amount of investment debt securities pledged as collateral pertaining to our derivatives activity on our Condensed Statements of Condition. See Note 9 - Derivatives and Hedging Activities for further details.

Trading Debt Securities

The following table presents the fair value of our trading debt securities.


As of	As of	June 30, 2022		December 31, 2021		As of	March 31, 2023		December 31, 2022
U.S. Government & other government related		$	947	$	948

MBS	MBS					MBS
GSE	GSE	4		6		GSE	$	3	$	3

Trading debt securities	Trading debt securities	$	951	$	954	Trading debt securities	$	3	$	3

The following table presents our gains and losses on trading debt securities recorded in ~~Noninterest Income~~noninterest income - ~~Other,~~other, net.


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021				2023			2022
Net unrealized gains (losses) on securities held at period end	Net unrealized gains (losses) on securities held at period end	$	1	$	(9)	$	(2)	$	(11)	Net unrealized gains (losses) on securities held at period end			$	—		$	(3)
Net realized gains (losses) on securities sold/matured during the period		—		(4)		—		(20)

Net gains (losses) on trading debt securities	Net gains (losses) on trading debt securities	$	1	$	(13)	$	(2)	$	(31)	Net gains (losses) on trading debt securities			$	—		$	(3)

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Available-for-Sale Debt Securities (AFS)

The following table presents the amortized cost and fair value of our AFS debt securities.


	Amortized Cost Basis		a	Gross Unrealized Gains in AOCI		Gross Unrealized (Losses) in AOCI		Net Carrying Amount and Fair Value
As of March 31, 2023
U.S. Government & other government related	$	2,195		$	2	$	(109)	$	2,088
State or local housing agency	8			—		—		8

FFELP ABS	2,100			46		(9)		2,137
MBS
GSE	18,319			18		(290)		18,047
Government guaranteed	96			1		—		97

Available-for-sale debt securities	$	22,718		$	67	$	(408)	$	22,377

As of December 31, 2022
U.S. Government & other government related	$	2,219		$	1	$	(132)	$	2,088
State or local housing agency	8			—		—		8
FFELP ABS	2,253			61		(10)		2,304
MBS
GSE	16,285			45		(145)		16,185
Government guaranteed	114			1		—		115
Available-for-sale debt securities	$	20,879		$	108	$	(287)	$	20,700

a Includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments.

We had no sales of AFS debt securities for the periods presented. Any gains or losses are determined on a specific identification basis.

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

~~Available-for-Sale~~

Held-to-Maturity Debt Securities ~~(AFS)~~(HTM)

The following table presents the amortized cost, carrying amount, and fair value of our ~~AFS~~HTM debt securities.


		Amortized Cost Basis		a	Gross Unrealized Gains in AOCI		Gross Unrealized (Losses) in AOCI		Net Carrying Amount and Fair Value			Amortized Cost and Net Carrying Amount		a	Gross Unrecognized Holding Gains		Gross Unrecognized Holding (Losses)		Fair Value
As of June 30, 2022
As of March 31, 2023											As of March 31, 2023
U.S. Government & other government related	U.S. Government & other government related	$	1,292		$	2	$	(89)	$	1,205	U.S. Government & other government related	$	434		$	1	$	(10)	$	425
State or local housing agency		8			—		—		8

FFELP ABS		2,468			81		(10)		2,539

MBS	MBS										MBS
GSE	GSE	14,723			92		(92)		14,723		GSE	157			3		—		160
Government guaranteed	Government guaranteed	148			2		—		150		Government guaranteed	44			—		—		44
Other											Other	7			—		—		7
Held-to-maturity debt securities											Held-to-maturity debt securities	$	642		$	4	$	(10)	$	636

Available-for-sale debt securities		$	18,639		$	177	$	(191)	$	18,625
As of December 31, 2022											As of December 31, 2022
U.S. Government & other government related											U.S. Government & other government related	$	1,210		$	—	$	(14)	$	1,196

As of December 31, 2021
U.S. Government & other government related		$	4,659		$	34	$	(12)	$	4,681
State or local housing agency		8			1		—		9
FFELP ABS		2,642			130		—		2,772
MBS	MBS										MBS
GSE	GSE	14,849			234		(26)		15,057		GSE	164			3		—		167
Government guaranteed	Government guaranteed	182			5		—		187		Government guaranteed	49			—		—		49
Available-for-sale debt securities		$	22,340		$	404	$	(38)	$	22,706
Other											Other	8			—		(1)		7
Held-to-maturity debt securities											Held-to-maturity debt securities	$	1,431		$	3	$	(15)	$	1,419

a Includes adjustments made to the cost basis of an investment for accretion, ~~amortization, and fair value hedge accounting adjustments. This also includes accrued interest receivable of $54 million at December 31, 2021.~~and/or amortization.

We had no sales of ~~AFS~~HTM debt securities for the periods presented. Any gains or losses are determined on a specific identification basis.

Contractual Maturity

The maturity of our AFS and HTM debt securities is detailed in the following table. MBS and FFELP ABS are not presented by contractual maturity because their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.


	Available-for-Sale				Held-to-Maturity
As of March 31, 2023	Amortized Cost Basis		Net Carrying Amount and Fair Value		Amortized Cost and Net Carrying Amount		Fair Value
Non MBS and FFELP ABS Year of Maturity -
Due in one year or less	$	—	$	—	$	224	$	225
Due after one year through five years	1,037		1,035		28		26
Due after five years through ten years	359		337		182		174
Due after ten years	807		724		—		—

MBS and FFELP ABS	20,515		20,281		208		211
Total debt securities	$	22,718	$	22,377	$	642	$	636

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

~~Held-to-Maturity Debt Securities (HTM)~~

~~The following table presents the amortized cost, carrying amount, and fair value of our HTM debt securities.~~

Amortized Cost and Net Carrying Amount a Gross Unrecognized Holding Gains Gross Unrecognized Holding (Losses) Fair Value
As of June 30, 2022
U.S. Government & other government related $ 953 $ — $ (8) $ 945
MBS
GSE 184 8 — 192
Government guaranteed 60 — — 60
Other 9 — — 9
Held-to-maturity debt securities $ 1,206 $ 8 $ (8) $ 1,206
As of December 31, 2021
U.S. Government & other government related $ 1,506 $ 11 $ — $ 1,517
MBS
GSE 214 19 — 233
Government guaranteed 71 1 — 72
Other 10 — — 10
Held-to-maturity debt securities $ 1,801 $ 31 $ — $ 1,832

a ~~Includes adjustments made to the cost basis of an investment for accretion, and/or amortization.~~

~~We had no sales of HTM debt securities for the period presented. Any gains or losses are determined on a specific identification basis.~~

~~Contractual Maturity~~

The maturity of our AFS and HTM debt securities is detailed in the following table. FFELP ABS/MBS are not presented by contractual maturity because their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Available-for-Sale Held-to-Maturity
As of June 30, 2022 Amortized Cost Basis Net Carrying Amount and Fair Value Amortized Cost and Net Carrying Amount Fair Value
Non FFELP ABS/MBS Year of Maturity -
Due in one year or less $ — $ — $ 710 $ 709
Due after one year through five years 6 6 21 20
Due after five years through ten years 419 395 222 216
Due after ten years 875 812 — —
FFELP ABS and MBS 17,339 17,412 253 261
Total debt securities $ 18,639 $ 18,625 $ 1,206 $ 1,206

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~Notes to Condensed Financial Statements - (Unaudited)~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

AFS Securities in a Continuous Unrealized Loss Position

The following table presents unrealized losses on our AFS portfolio for periods less than 12 months and for 12 months or more. These losses are considered temporary as we expect to recover the entire amortized cost basis and neither intend to sell these securities nor consider it more likely than not that we will be required to sell these securities before the anticipated recovery of each security’s remaining amortized cost basis. In the tables below, in cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.


		Less than 12 Months				12 Months or More				Total					Less than 12 Months				12 Months or More				Total
		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
Available-for-sale debt securities	Available-for-sale debt securities													Available-for-sale debt securities
As of June 30, 2022
As of March 31, 2023														As of March 31, 2023
U.S. Government & other government related	U.S. Government & other government related	$	906	$	(53)	$	238	$	(36)	$	1,144	$	(89)	U.S. Government & other government related	$	689	$	(11)	$	815	$	(98)	$	1,504	$	(109)
State or local housing agency	State or local housing agency	5		—		—		—		5		—		State or local housing agency	3		—		5		—		8		—
FFELP ABS	FFELP ABS	390		(10)		—		—		390		(10)		FFELP ABS	335		(9)		—		—		335		(9)
MBS	MBS													MBS
GSE	GSE	4,719		(74)		246		(18)		4,965		(92)		GSE	13,764		(165)		2,280		(125)		16,044		(290)
Government guaranteed	Government guaranteed	11		—		—		—		11		—		Government guaranteed	29		—		—		—		29		—
Available-for-sale debt securities	Available-for-sale debt securities	$	6,031	$	(137)	$	484	$	(54)	$	6,515	$	(191)	Available-for-sale debt securities	$	14,820	$	(185)	$	3,100	$	(223)	$	17,920	$	(408)

As of December 31, 2021
As of December 31, 2022														As of December 31, 2022
U.S. Government & other government related	U.S. Government & other government related	$	3,764	$	(12)	$	—	$	—	$	3,764	$	(12)	U.S. Government & other government related	$	1,130	$	(60)	$	386	$	(72)	$	1,516	$	(132)

State or local housing agency														State or local housing agency	8		—		—		—		8		—
FFELP ABS														FFELP ABS	347		(10)		—		—		347		(10)
MBS	MBS													MBS
GSE	GSE	1,549		(23)		54		(3)		1,603		(26)		GSE	8,922		(89)		992		(56)		9,914		(145)

Government guaranteed														Government guaranteed	33		—		—		—		33		—
Available-for-sale debt securities	Available-for-sale debt securities	$	5,313	$	(35)	$	54	$	(3)	$	5,367	$	(38)	Available-for-sale debt securities	$	10,440	$	(159)	$	1,378	$	(128)	$	11,818	$	(287)

Credit Loss Analysis

We recognized no credit losses on HTM or AFS debt securities for the periods presented.

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 6 – Advances

We offer a wide range of fixed and variable-rate advance products with different maturities, interest rates, payment characteristics and options.

We have no allowance for credit losses on our advances and we have elected to exclude accrued interest receivable from the amortized cost in the following tables. See Note 8 - Allowance for Credit Losses for further details on these amounts.

The following table presents our advances by terms of contractual maturity and the related weighted average contractual interest rate. For amortizing advances, contractual maturity is determined based on the advance’s amortization schedule. Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay advances with or without penalties.


As of June 30, 2022		Par Value Amount			Weighted Average Contractual Interest Rate
As of March 31, 2023							As of March 31, 2023	Par Value Amount			Weighted Average Contractual Interest Rate
Due in one year or less	Due in one year or less	$	21,261		1.50	%	Due in one year or less	$	44,735	a	4.79	%
One to two years	One to two years	9,851		a	1.30	%	One to two years	13,061		a	4.21	%
Two to three years	Two to three years	7,284		a	1.31	%	Two to three years	5,212			3.31	%
Three to four years	Three to four years	3,019			1.40	%	Three to four years	4,265			3.37	%
Four to five years	Four to five years	3,965			1.83	%	Four to five years	4,270			3.68	%
Five to fifteen years	Five to fifteen years	7,644			1.75	%	Five to fifteen years	8,393			2.61	%
More than fifteen years	More than fifteen years	507			5.13	%	More than fifteen years	507			5.13	%
Total	Total	$	53,531		1.53	%	Total	$	80,443		4.24	%

a Of the advances due in one year or less and one to two ~~years and two to three~~ years, $7.0 billion and $4.0 billion, respectively, were issued to One Mortgage Partners Corp. (now JPMorgan Chase Bank NA), our former captive insurance company member, whose membership was terminated in 2021 in connection with an FHFA rule.

The following table reconciles the par value of our advances to the carrying amount on our Condensed Statements of Condition as of the dates indicated.

As of June 30, 2022 December 31, 2021
Par value $ 53,531 $ 47,708
Fair value hedging adjustments (763) 227
Other adjustments 43 114
Advances $ 52,811 $ 48,049


As of	March 31, 2023		December 31, 2022
Par value	$	80,443	$	67,457
Fair value hedging adjustments	(885)		(1,191)
Other adjustments	26		22
Advances	$	79,584	$	66,288

The following advance borrowers exceeded 10% of our advances outstanding.


As of June 30, 2022		Par Value			% of Total Outstanding
As of March 31, 2023							As of March 31, 2023	Par Value			% of Total Outstanding
The Northern Trust Company							The Northern Trust Company	$	11,100		13.8	%
JPMorgan Chase Bank NA	JPMorgan Chase Bank NA	$	11,000	a	20.5	%	JPMorgan Chase Bank NA	11,000		a	13.7	%
BMO Harris Bank NA	BMO Harris Bank NA	5,500			10.3	%	BMO Harris Bank NA	9,300			11.6	%

a Effective February 19, 2021, we terminated One Mortgage Partners Corp.'s ~~("OMP")~~(OMP) membership in connection with the FHFA rule that made captive insurance companies ineligible for FHLB membership. In December 2021, OMP merged with and into its parent company, JPMorgan Chase Bank NA ~~(“JPM”)~~(JPM). For details on the contractual maturity terms of JPM’s advances, see the table above presenting advances by terms of contractual maturity.

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 7 – MPF Loans Held in Portfolio

We acquire MPF Loans from PFIs to hold in our ~~portfolio and historically purchased participations in pools of eligible mortgage loans from other FHLBs (MPF Banks).~~portfolio. MPF Loans that are held in portfolio are fixed-rate conventional and Government Loans secured by one-to-four family residential properties with maturities ranging from 5 years to 30 ~~years or participations in pools of similar eligible mortgage loans from other MPF Banks.~~years.

The following table presents information on MPF Loans held in portfolio by contractual maturity at the time of purchase. We have an allowance for credit losses on our MPF Loans and we have elected to exclude accrued interest receivable from the amortized cost in the following tables. See Note 8 - Allowance for Credit Losses for further details on these amounts.


As of	As of	June 30, 2022		December 31, 2021		As of	March 31, 2023		December 31, 2022
Medium term (15 years or less)	Medium term (15 years or less)	$	1,591	$	1,653	Medium term (15 years or less)	$	1,490	$	1,521
Long term (greater than 15 years)	Long term (greater than 15 years)	8,218		8,031		Long term (greater than 15 years)	8,549		8,502
Unpaid principal balance	Unpaid principal balance	9,809		9,684		Unpaid principal balance	10,039		10,023
Net premiums, credit enhancement, and/or deferred loan fees	Net premiums, credit enhancement, and/or deferred loan fees	166		174		Net premiums, credit enhancement, and/or deferred loan fees	160		163
Fair value hedging and delivery commitment basis adjustments	Fair value hedging and delivery commitment basis adjustments	(17)		(10)		Fair value hedging and delivery commitment basis adjustments	(20)		(21)
MPF Loans held in portfolio, before allowance for credit losses	MPF Loans held in portfolio, before allowance for credit losses	9,958		9,848		MPF Loans held in portfolio, before allowance for credit losses	10,179		10,165
Allowance for credit losses on MPF Loans	Allowance for credit losses on MPF Loans	(5)		(5)		Allowance for credit losses on MPF Loans	(5)		(5)
MPF Loans held in portfolio, net	MPF Loans held in portfolio, net	$	9,953	$	9,843	MPF Loans held in portfolio, net	$	10,174	$	10,160

Conventional mortgage loans	Conventional mortgage loans	$	8,996	$	8,845	Conventional mortgage loans	$	9,254	$	9,221
Government Loans	Government Loans	813		839		Government Loans	785		802
Unpaid principal balance	Unpaid principal balance	$	9,809	$	9,684	Unpaid principal balance	$	10,039	$	10,023

The above table excludes MPF Loans acquired under the MPF Xtra® and MPF Government MBS products. See Note 2 - Summary of Significant Accounting Policies in our ~~2021~~2022 Form 10-K for information related to the accounting treatment of these off-balance sheet MPF Loan products.

~~Coronavirus Disease 2019 (COVID-19) Forbearance~~

Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provided temporary relief from the accounting and reporting requirements for troubled debt restructurings (TDRs) for certain loan modifications related to COVID-19. Specifically, the CARES Act provided that a qualifying financial institution may elect to suspend (1) the requirements under U.S. GAAP for certain loan modifications that would otherwise be categorized as a TDR, and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. Section 4013 of the CARES Act applied to any modification related to an economic hardship as a result of the COVID-19 pandemic, including a forbearance arrangement, an interest rate modification, a repayment plan, or any similar arrangement that defers or delays payment of principal or interest, that occurred during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020 or the date that is 60 days after the declaration of the national emergency related to the COVID-19 pandemic ends for a loan that was not more than 30 days past due as of December 31, 2019. On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law, which extended the applicable end period to the earlier of January 1, 2022, or 60 days following the termination of the national emergency related to the COVID-19 pandemic. We elected to suspend TDR accounting for eligible modifications under Section 4013 of the CARES Act. We resumed TDR accounting when this section of the CARES Act expired on January 1, 2022.

1716

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 8 – Allowance for Credit Losses

See Note 2 - Summary of Significant Accounting Policies to the financial statements in our ~~2021~~2022 Form 10-K for further details regarding our accounting policies pertaining to allowances for credit losses.

Our allowances for credit losses are immaterial due to the nature of our credit enhancements, collateral support, and/or credit worthiness of our counterparties. See Note 8 - Allowance for Credit Losses to the financial statements in our ~~2021~~2022 Form 10-K for more information.

Allowance for Credit Losses on MPF Loans

The following table presents the activity in our allowance for credit losses for MPF Loans.


		Three months ended June 30,				Six months ended June 30,						Three months ended March 31,
For the periods ending	For the periods ending	2022		2021		2022		2021		For the periods ending			2023			2022

Allowance for MPF credit losses beginning balance	Allowance for MPF credit losses beginning balance	$	5	$	3	$	5	$	3		Allowance for MPF credit losses beginning balance			$	5		$	5
MPF credit losses charged-off	MPF credit losses charged-off	—		(2)		(1)		(2)			MPF credit losses charged-off			—			(1)

Provision for (reversal of) MPF for credit losses	Provision for (reversal of) MPF for credit losses	—		1		1		1			Provision for (reversal of) MPF for credit losses			—			1
Allowance for MPF credit losses ending balance	Allowance for MPF credit losses ending balance	$	5	$	3	$	5	$	3		Allowance for MPF credit losses ending balance			$	5		$	5

Allowance for Credit Losses on Community ~~First~~®First® Fund (the Fund)

As of ~~June 30,~~March 31, 2023 and at December 31, 2022, we had $47 million in Fund loans outstanding, ~~compared to $45 million at December 31, 2021,~~ recorded in Other assets in our Condensed Statements of Condition.

As of ~~June 30, 2022,~~March 31, 2023, all Fund loans were current.

The following table details our allowance for credit losses on Fund loans.


		Three months ended June 30,				Six months ended June 30,						Three months ended March 31,
For the periods ending	For the periods ending	2022		2021		2022		2021		For the periods ending			2023			2022
Allowance for Fund loan credit losses beginning balance	Allowance for Fund loan credit losses beginning balance	$	7	$	7	$	7	$	7		Allowance for Fund loan credit losses beginning balance			$	7		$	7

Allowance for Fund loan credit losses ending balance	Allowance for Fund loan credit losses ending balance	$	7	$	7	$	7	$	7		Allowance for Fund loan credit losses ending balance			$	7		$	7

1817

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

The following tables summarize our conventional MPF Loans by our key credit quality indicators.


As of	As of	June 30, 2022						December 31, 2021						As of	March 31, 2023						December 31, 2022
		Conventional MPF Amortized Cost by Origination Year						Conventional MPF Amortized Cost by Origination Year							Conventional MPF Amortized Cost by Origination Year						Conventional MPF Amortized Cost by Origination Year
		2018 to 2022		Prior to 2018		Total		2017 to 2021		Prior to 2017		Total			2019 to 2023		Prior to 2019		Total		2018 to 2022		Prior to 2018		Total
Past due 30-59 days	Past due 30-59 days	$	28	$	17	$	45	$	23	$	18	$	41	Past due 30-59 days	$	43	$	29	$	72	$	34	$	21	$	55
Past due 60-89 days	Past due 60-89 days	5		5		10		8		6		14		Past due 60-89 days	5		7		12		7		6		13
Past due 90 days or more	Past due 90 days or more	21		27		48		43		30		73		Past due 90 days or more	8		25		33		17		18		35
Past due	Past due	54		49		103		74		54		128		Past due	56		61		117		58		45		103
Current	Current	7,938		1,093		9,031		7,883		987		8,870		Current	7,941		1,326		9,267		8,246		1,003		9,249
Total outstanding	Total outstanding	$	7,992	$	1,142	$	9,134	$	7,957	$	1,041	$	8,998	Total outstanding	$	7,997	$	1,387	$	9,384	$	8,304	$	1,048	$	9,352

As of June 30, 2022 December 31, 2021
Amortized Cost Amortized Cost
Conventional Government Total Conventional Government Total
In process of foreclosure $ 23 $ 7 $ 30 $ 6 $ 3 $ 9
Serious delinquency rate 0.55 % 2.00 % 0.67 % 0.82 % 2.33 % 0.95 %
Past due 90 days or more and still accruing interest $ 3 $ 14 $ 17 $ 30 $ 19 $ 49
Loans on nonaccrual status 50 — 50 47 — 47
Loans on nonaccrual status with no allowance for credit losses 15 — 15 11 — 11


As of	March 31, 2023									December 31, 2022
	Amortized Cost									Amortized Cost
	Conventional			Government			Total			Conventional			Government			Total
In process of foreclosure	$	16		$	6		$	22		$	19		$	5		$	24
Serious delinquency rate	0.38		%	1.70		%	0.49		%	0.42		%	1.90		%	0.54		%
Past due 90 days or more and still accruing interest	$	4		$	12		$	16		$	3		$	15		$	18
Loans on nonaccrual status	35			—			35			39			—			39
Loans on nonaccrual status with no allowance for credit losses	13			—			13			15			—			15

Accrued interest receivable

We present accrued interest receivable separately for loans and AFS/HTM debt securities. We do not measure an allowance for credit losses on loan related accrued interest receivables as we reverse accrued interest on a monthly basis when the loan is placed on nonaccrual status.

The following table summarizes our accrued interest receivable by portfolio segment.

Financial instrument type June 30, 2022 December 31, 2021
MPF Loans held in portfolio $ 44 $ 45
HTM securities 5 4
AFS securities 59 —
Interest bearing deposits 1 —
Securities purchased under agreements to resell 1 —
Advances 61 34
Accrued interest receivable $ 171 $ 83

~~The above table excludes accrued interest of $54 million on AFS securities at December 31, 2021. Prior to 2022, we included accrued interest in the carrying value of our AFS securities. See~~ ~~Note 5 - Investment Debt Securities~~ ~~for 2021 AFS carrying values.~~


Financial instrument type	March 31, 2023		December 31, 2022
MPF Loans held in portfolio	$	50	$	51
HTM securities	3		9
AFS securities	84		81
Interest-bearing deposits	9		7
Federal funds sold	1		2
Securities purchased under agreements to resell	2		4
Advances	257		197

Accrued interest receivable	$	406	$	351

1918

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 9 – Derivatives and Hedging Activities

Refer to Note 2 - Summary of Significant Accounting Policies in our ~~2021~~2022 Form 10-K for our accounting policies for derivatives.

We transact most of our derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. We are not a derivatives dealer and do not trade derivatives for speculative purposes. We enter into derivative transactions through either of the following:

•A bilateral agreement with an individual counterparty for over-the-counter derivative transactions.

•Clearinghouses classified as Derivatives Clearing Organizations (DCOs) through Futures Commission Merchants (FCMs), which are clearing members of the DCOs, for cleared derivative transactions.

Managing Interest Rate Risk

We use fair value hedges to manage our exposure to changes in the fair value of (1) a recognized asset or liability or (2) an unrecognized firm commitment, attributable to changes in a benchmark interest rate, such as ~~SOFR. Our~~the Secured Overnight Financing Rate (SOFR). We use cash flow ~~hedge strategy is~~hedges to hedge the variability in the total proceeds received from rolling forecasted zero-coupon discount note issuance, attributable to changes in the benchmark interest rate, by entering into pay-fixed interest rate swaps. We are not using the cash flow hedge strategy for new transactions at this time, as we used ~~LIBOR~~the London Interbank Offered Rate (LIBOR) as the benchmark interest rate for cash flow hedges and we are not entering into new LIBOR-linked transactions.

We may elect the fair value option for financial instruments, such as advances, MPF Loans held for sale, and consolidated obligation discount notes and bonds, in cases where hedge accounting treatment may not be achieved due to the inability to meet the hedge effectiveness testing criteria, or in certain cases where we wish to mitigate the risk associated with selecting the fair value option for other instruments. We may also use economic hedges when hedge accounting is not permitted or hedge effectiveness is not achievable.

Managing Credit Risk on Derivative Agreements

Over-the-counter (bilateral) Derivative Transactions: We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. For bilateral derivative agreements, the degree of counterparty risk depends on the extent to which master netting arrangements, collateral requirements and other credit enhancements are included in such contracts to mitigate the risk. We manage counterparty credit risk through credit analysis, collateral requirements and adherence to the requirements set forth in our policies and FHFA regulations. We require collateral agreements on all over-the-counter derivatives. Additionally, collateral related to over-the-counter derivatives with member institutions includes collateral assigned to us, as evidenced by a written security agreement, and which may be held by the member institution for our benefit.

As of ~~June 30, 2022,~~March 31, 2023, based on credit analyses and collateral requirements, we have not recorded a credit loss on our over-the-counter derivative agreements. See Note 15 - Fair Value to the financial statements in our ~~2021~~2022 Form 10-K for discussion regarding our fair value methodology for over-the-counter derivative assets and liabilities, including an evaluation of the potential for the fair value of these instruments to be affected by counterparty credit risk.

For nearly all of our bilateral derivative transactions executed prior to March 1, 2017, and for all transactions entered into on or after March 1, 2017, our bilateral derivative agreements are fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the Commodity Futures Trading Commission (CFTC). We pledged no investment securities on our bilateral derivative transactions (that can be sold or repledged by our counterparty) as of ~~June 30, 2022.~~March 31, 2023.

For certain transactions executed prior to March 1, 2017, we may be required to post net additional collateral with our counterparties if there is deterioration in our credit rating. If our credit rating had been lowered from its current rating to the next lower rating by a major credit rating agency, such as Standard and Poor's or Moody’s, the amount of collateral we would have been required to deliver would have been immaterial at ~~June 30, 2022.~~March 31, 2023.

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Bilateral derivative transactions executed on or after September 1, 2022, are subject to two-way initial margin requirements if our aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to a third-party custodian will have a security interest in the amount of initial margin required to be posted and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of March 31, 2023, we exchanged initial margin with our bilateral derivative counterparties.

Cleared Derivative Transactions: Cleared derivative transactions are subject to variation and initial margin requirements established by the DCO and its clearing members. Variation margin payments are characterized as settlement of a derivative’s mark-to-market exposure and not as collateral against the derivative’s mark-to-market exposure. See Note 1 - Background and Basis of Presentation and Note 2 - Summary of Significant Accounting Policies to the financial statements in our ~~2021~~2022 Form 10-K for further discussion. We post our initial margin collateral payments and make variation margin settlement payments

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~Notes to Condensed Financial Statements - (Unaudited)~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

through our FCMs, on behalf of the DCO, which could expose us to institutional credit risk in the event that the FCMs or the DCO fail to meet their obligations. Clearing derivatives through a DCO mitigates counterparty credit risk exposure because the DCO is substituted for individual counterparties and variation margin settlement payments are made daily through the FCMs for changes in the value of cleared derivatives. The DCO determines initial margin requirements for cleared derivatives. We pledged ~~$616~~$804 million of investment securities (that can be sold or repledged) as part of our initial margin related to cleared derivative transactions at ~~June 30, 2022.~~March 31, 2023. Additionally, an FCM may require additional initial margin to be posted based on credit considerations, including but not limited to, if our credit rating downgrades. We had no requirement to post additional initial margin by our FCMs at ~~June 30, 2022.~~March 31, 2023.

The following table presents details on the notional amounts, and cleared and bilateral derivative assets and liabilities on our Condensed Statements of Condition. The netting adjustment amount includes cash collateral (either received or paid by us) and related accrued interest in cases where we have a legal right, by contract (e.g., master netting agreement) or otherwise, to offset cash flow obligations between us and our counterparty into a single net payable or receivable.


As of	As of	June 30, 2022						December 31, 2021						As of	March 31, 2023						December 31, 2022
		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives in hedge accounting relationships-	Derivatives in hedge accounting relationships-													Derivatives in hedge accounting relationships-
Interest rate contracts	Interest rate contracts	$	79,172	$	677	$	2,030	$	70,321	$	58	$	466	Interest rate contracts	$	106,914	$	878	$	2,490	$	90,805	$	1,092	$	2,825
Derivatives not in hedge accounting relationships-	Derivatives not in hedge accounting relationships-													Derivatives not in hedge accounting relationships-
Interest rate contracts	Interest rate contracts	4,711		12		31		2,772		10		59		Interest rate contracts	6,974		13		22		2,420		17		47
Mortgage delivery commitments	Mortgage delivery commitments	390		1		1		625		2		2		Mortgage delivery commitments	297		2		1		142		—		—
Other	Other	128		1		—		148		—		—		Other	64		—		1		119		2		—
Derivatives not in hedge accounting relationships	Derivatives not in hedge accounting relationships	5,229		14		32		3,545		12		61		Derivatives not in hedge accounting relationships	7,335		15		24		2,681		19		47
Gross derivative amount before netting adjustments and cash collateral	Gross derivative amount before netting adjustments and cash collateral	$	84,401	691		2,062		$	73,866	70		527		Gross derivative amount before netting adjustments and cash collateral	$	114,249	893		2,514		$	93,486	1,111		2,872
Netting adjustments and cash collateral	Netting adjustments and cash collateral			(564)		(1,910)				(56)		(495)		Netting adjustments and cash collateral			(854)		(2,413)				(1,086)		(2,862)
Derivatives on Condensed Statements of Condition	Derivatives on Condensed Statements of Condition			$	127	$	152			$	14	$	32	Derivatives on Condensed Statements of Condition			$	39	$	101			$	25	$	10
		Cash Collateral						Cash Collateral							Cash Collateral						Cash Collateral
Cash collateral posted and related accrued interest	Cash collateral posted and related accrued interest	$	1,601					$	447					Cash collateral posted and related accrued interest	$	1,854					$	2,124
Cash collateral received and related accrued interest	Cash collateral received and related accrued interest	256						8						Cash collateral received and related accrued interest	295						348

~~The following table presents the noninterest income - derivatives and economic hedging activities as presented in the~~ ~~Condensed Statements of Income~~.

Three months ended June 30, Six months ended June 30,
For the periods ending 2022 2021 2022 2021
Economic hedges -
Interest rate contracts $ 15 $ (11) $ 42 $ 16
Mortgage delivery commitments (3) 1 (8) (12)
Other 6 (3) 13 3
Economic hedges 18 (13) 47 7
Variation margin on daily settled cleared derivatives (1) — (1) —
Noninterest income - Derivatives and hedging activities $ 17 $ (13) $ 46 $ 7

2120

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

The following table presents the noninterest income - derivatives and economic hedging activities as presented in the Condensed Statements of Income.


	Three months ended March 31,
For the periods ending		2023		2022
Economic hedges -
Interest rate contracts		$	10	$	27
Mortgage delivery commitments		2		(5)
Other		(1)		7
Economic hedges		11		29
Variation margin on daily settled cleared derivatives		(17)		—
Noninterest income - Derivatives and hedging activities		$	(6)	$	29

The following tables present details regarding the offsetting of our cleared and bilateral derivatives on our Condensed Statements of Condition. The netting adjustment amount includes cash collateral (either received or paid by us) and related accrued interest in cases where we have a legal right, by contract (e.g., master netting agreement) or otherwise, to offset cash flow obligations between us and our counterparty into a single net payable or receivable.


		Derivative Assets													Derivative Assets
		As of June 30, 2022						As of December 31, 2021							As of March 31, 2023						As of December 31, 2022
		Bilateral		Cleared		Total		Bilateral		Cleared		Total			Bilateral		Cleared		Total		Bilateral		Cleared		Total
Derivatives with legal right of offset -	Derivatives with legal right of offset -													Derivatives with legal right of offset -
Gross recognized amount	Gross recognized amount	$	632	$	58	$	690	$	61	$	7	$	68	Gross recognized amount	$	816	$	75	$	891	$	1,004	$	107	$	1,111

Netting adjustments and cash collateral	Netting adjustments and cash collateral	(506)		(58)		(564)		(49)		(7)		(56)		Netting adjustments and cash collateral	(779)		(75)		(854)		(999)		(87)		(1,086)
Derivatives with legal right of offset - net	Derivatives with legal right of offset - net	126		—		126		12		—		12		Derivatives with legal right of offset - net	37		—		37		5		20		25
Derivatives without legal right of offset	Derivatives without legal right of offset	1		—		1		2		—		2		Derivatives without legal right of offset	2		—		2		—		—		—
Derivatives on Condensed Statements of Condition	Derivatives on Condensed Statements of Condition	127		—		127		14		—		14		Derivatives on Condensed Statements of Condition	39		—		39		5		20		25

Net amount	Net amount	$	127	$	—	$	127	$	14	$	—	$	14	Net amount	$	39	$	—	$	39	$	5	$	20	$	25


		Derivative Liabilities													Derivative Liabilities
		As of June 30, 2022						As of December 31, 2021							As of March 31, 2023						As of December 31, 2022
		Bilateral		Cleared		Total		Bilateral		Cleared		Total			Bilateral		Cleared		Total		Bilateral		Cleared		Total
Derivatives with legal right of offset -	Derivatives with legal right of offset -													Derivatives with legal right of offset -
Gross recognized amount	Gross recognized amount	$	1,876	$	185	$	2,061	$	495	$	30	$	525	Gross recognized amount	$	2,352	$	161	$	2,513	$	2,785	$	87	$	2,872

Netting adjustments and cash collateral	Netting adjustments and cash collateral	(1,852)		(58)		(1,910)		(487)		(8)		(495)		Netting adjustments and cash collateral	(2,338)		(75)		(2,413)		(2,775)		(87)		(2,862)
Derivatives with legal right of offset - net	Derivatives with legal right of offset - net	24		127		151		8		22		30		Derivatives with legal right of offset - net	14		86		100		10		—		10
Derivatives without legal right of offset	Derivatives without legal right of offset	1		—		1		2		—		2		Derivatives without legal right of offset	1		—		1		—		—		—
Derivatives on Condensed Statements of Condition	Derivatives on Condensed Statements of Condition	25		127		152		10		22		32		Derivatives on Condensed Statements of Condition	15		86		101		10		—		10
Less:	Less:													Less:

Noncash collateral received or pledged and cannot be sold or repledged	Noncash collateral received or pledged and cannot be sold or repledged	—		127		127		—		22		22		Noncash collateral received or pledged and cannot be sold or repledged	—		86		86		—		—		—
Net amount	Net amount	$	25	$	—	$	25	$	10	$	—	$	10	Net amount	$	15	$	—	$	15	$	10	$	—	$	10

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$489~~$728 million and ~~$622~~$692 million of additional credit exposure due to pledging of noncash collateral to our counterparties, which exceeded our net derivative position for combined cleared and bilateral derivatives.

2221

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Fair Value Hedges

The following table presents our fair value hedging results by the type of hedged item. We had no net gain or loss on hedged firm commitments that no longer qualified as a fair value hedge. Changes in fair value of the derivative and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. Gains (losses) on derivatives include unrealized changes in fair value, as well as net interest settlements. The line for Other relates to discontinued closed fair value hedges on MPF Loans held for portfolio that are being amortized over the remaining life of the loans. As of ~~June 30, 2022~~March 31, 2023 we did not have any active fair value hedges on our MPF Loans.

Three months ended June 30, 2022 Three months ended June 30, 2021
Gain (Loss) on Derivative Gain (Loss) on Hedged Item Amount Recorded in Net Interest Income Gain (Loss) on Derivative Gain (Loss) on Hedged Item Amount Recorded in Net Interest Income
Available-for-sale debt securities $ 597 $ (644) $ (47) $ (354) $ 310 $ (44)
Advances 325 (316) 9 (124) 77 (47)
Consolidated obligation bonds (543) 595 52 135 (76) 59
Total $ 379 $ (365) $ 14 $ (343) $ 311 $ (32)
Six months ended June 30, 2022 Six months ended June 30, 2021
Gain (Loss) on Derivative Gain (Loss) on Hedged Item Amount Recorded in Net Interest Income Gain (Loss) on Derivative Gain (Loss) on Hedged Item Amount Recorded in Net Interest Income
Available-for-sale debt securities $ 1,472 $ (1,611) $ (139) $ 381 $ (521) $ (140)
Advances 978 (990) (12) 212 (298) (86)
Consolidated obligation bonds (1,818) 1,967 149 (70) 176 106
Other — — — — (1) (1)
Total $ 632 $ (634) $ (2) $ 523 $ (644) $ (121)










	Three months ended March 31, 2023						Three months ended March 31, 2022
	Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income		Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income
Available-for-sale debt securities	$	(374)	$	476	$	102	$	875	$	(967)	$	(92)
Advances	(167)		306		139		653		(674)		(21)
Consolidated obligation bonds	280		(614)		(334)		(1,275)		1,372		97

Total	$	(261)	$	168	$	(93)	$	253	$	(269)	$	(16)

The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items.


As of June 30, 2022		Amortized cost of hedged asset/liability		Basis adjustments active hedges included in amortized cost		Basis adjustments discontinued hedges included in amortized cost		Total amount of fair value hedging basis adjustments
As of March 31, 2023										As of March 31, 2023	Amortized cost of hedged asset/liability		Basis adjustments active hedges included in amortized cost		Basis adjustments discontinued hedges included in amortized cost		Total amount of fair value hedging basis adjustments
Available-for-sale securities	Available-for-sale securities	$	14,270	$	(1,247)	$	392	$	(855)	Available-for-sale securities	$	19,032	$	(1,428)	$	233	$	(1,195)
Advances	Advances	15,847		(765)		2		(763)		Advances	23,278		(885)		—		(885)
Consolidated obligation bonds	Consolidated obligation bonds	44,446		(2,162)		(14)		(2,176)		Consolidated obligation bonds	57,479		(2,488)		(12)		(2,500)
Other	Other	233		—		5		5		Other	203		—		4		4

As of December 31, 2021
As of December 31, 2022										As of December 31, 2022
Available-for-sale securities	Available-for-sale securities	$	14,412	$	335	$	421	$	756	Available-for-sale securities	$	16,918	$	(2,016)	$	345	$	(1,671)
Advances	Advances	19,720		225		2		227		Advances	19,790		(1,192)		2		(1,190)
Consolidated obligation bonds	Consolidated obligation bonds	36,335		(192)		(16)		(208)		Consolidated obligation bonds	47,416		(3,102)		(12)		(3,114)
Other	Other	265		—		6		6		Other	211		—		4		4

2322

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Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Cash Flow Hedges

For cash flow hedges, the entire change in the fair value of the hedging instrument is recorded in ~~AOCI~~accumulated other comprehensive income (AOCI) and reclassified into earnings (net interest income) as the hedged item affects earnings. Hedge effectiveness testing is performed to determine whether hedge accounting is qualified.

We are exposed to the variability in the total net proceeds received from forecasted zero-coupon discount note issuances, which is attributable to changes in the benchmark interest rate. As a result, we enter into cash flow hedge relationships utilizing derivative agreements to hedge the total net proceeds received from our "rolling" forecasted zero-coupon discount note issuances attributable to changes in the benchmark interest rate. The maximum length of time over which we are hedging this exposure is 87 years. We reclassify amounts in AOCI into our Condensed Statements of Income in the same periods during which the hedged forecasted transaction affects our earnings. We had no discontinued cash flow hedges for the periods presented. ~~The~~There were no deferred net gains (losses) on derivative instruments in AOCI that are expected to be reclassified to earnings during the next twelve months ~~were immaterial~~ as of ~~June 30, 2022.~~March 31, 2023. We are not using the cash flow hedge strategy for new transactions at this time, as we used LIBOR as the benchmark interest rate for cash flow hedges and we are not entering into new LIBOR-linked transactions.

The following table presents our cash flow hedging results by type of hedged item. Additionally, the table indicates where cash flow hedging results are classified in our Condensed Statements of Income. In this regard, the Amount Reclassified from AOCI into Net Interest Income column below includes the following:

•The amortization of closed cash flow hedging adjustments, which are reclassified from AOCI into the interest income/expense line item of the respective hedged item type.

•The effect of net interest settlements attributable to open derivative hedging instruments, which are initially recorded in AOCI and are reclassified to the interest income/expense line item of the respective hedged item type.

Three months ended June 30, 2022 Three months ended June 30, 2021
Gross Amount Initially Recognized in AOCI Amount Reclassified from AOCI into Net Interest Income Gross Amount Initially Recognized in AOCI Amount Reclassified from AOCI into Net Interest Income
Discount notes $ 22 $ (2) $ (14) $ (4)
Bonds — (1) — (1)
Total $ 22 $ (3) $ (14) $ (5)
Six months ended June 30, 2022 Six months ended June 30, 2021
Gross Amount Initially Recognized in AOCI Amount Reclassified from AOCI into Net Interest Income Gross Amount Initially Recognized in AOCI Amount Reclassified from AOCI into Net Interest Income
Discount notes $ 74 $ (6) $ 23 $ (8)
Bonds — (1) — (1)
Total $ 74 $ (7) $ 23 $ (9)









	Three months ended March 31, 2023				Three months ended March 31, 2022
	Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income		Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income

Discount notes	$	(8)	$	9	$	52	$	(4)

2423

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 10 – Consolidated Obligations

The FHLBs issue consolidated obligations through the Office of Finance as their agent. Consolidated obligations consist of discount notes and consolidated obligation bonds. Consolidated obligation discount notes are issued to raise short-term funds, are issued at less than their face amount and redeemed at par value when they mature. The maturity of consolidated obligation bonds may range from less than one year to over 20 years, but they are not subject to any statutory or regulatory limits on maturity.

The following table presents our consolidated obligation discount notes for which we are the primary obligor. All are due in one year or less.


As of	As of	June 30, 2022			December 31, 2021			As of	March 31, 2023			December 31, 2022
Consolidated obligation discount notes - carrying amount	Consolidated obligation discount notes - carrying amount	$	31,525		$	24,563		Consolidated obligation discount notes - carrying amount	$	50,970		$	59,531
Consolidated obligation discount notes - principal amount	Consolidated obligation discount notes - principal amount	31,602			24,565			Consolidated obligation discount notes - principal amount	51,388			59,814
Weighted Average Interest Rate	Weighted Average Interest Rate	1.32		%	0.05		%	Weighted Average Interest Rate	4.72		%	4.15		%

The following table presents the remaining life of our consolidated obligation bonds by contractual maturity and the related weighted average interest rate, for which we are the primary obligor, including callable bonds that are redeemable in whole, or in part, at our discretion on predetermined call dates.


As of June 30, 2022		Contractual Maturity		Weighted Average Interest Rate		By Maturity or Next Call Date
As of March 31, 2023								As of March 31, 2023	Contractual Maturity		Weighted Average Interest Rate		By Maturity or Next Call Date
Due in one year or less	Due in one year or less	$	19,209	1.52	%	$	57,243	Due in one year or less	$	21,608	2.08	%	$	64,655
One to two years	One to two years	8,267		1.13	%	4,382		One to two years	18,108		1.38	%	5,272
Two to three years	Two to three years	10,868		1.25	%	2,554		Two to three years	11,770		1.56	%	2,799
Three to four years	Three to four years	8,474		1.03	%	617		Three to four years	11,154		1.67	%	2,515
Four to five years	Four to five years	9,570		1.51	%	1,177		Four to five years	4,462		2.41	%	1,009
Thereafter	Thereafter	10,347		1.83	%	762		Thereafter	9,908		2.27	%	760
Total par value	Total par value	$	66,735	1.41	%	$	66,735	Total par value	$	77,010	1.82	%	$	77,010

The following table presents consolidated obligation bonds outstanding by call feature.


As of	As of	June 30, 2022		December 31, 2021		As of	March 31, 2023		December 31, 2022
Noncallable	Noncallable	$	17,420	$	24,516	Noncallable	$	27,147	$	16,775
Callable	Callable	49,315		39,087		Callable	49,863		44,499
Par value	Par value	66,735		63,603		Par value	77,010		61,274
Fair value hedging adjustments	Fair value hedging adjustments	(2,175)		(208)		Fair value hedging adjustments	(2,500)		(3,114)
Other adjustments	Other adjustments	(41)		(22)		Other adjustments	(36)		(44)
Consolidated obligation bonds	Consolidated obligation bonds	$	64,519	$	63,373	Consolidated obligation bonds	$	74,474	$	58,116

The following table summarizes the consolidated obligations of the FHLBs and those for which we are the primary obligor. We did not accrue a liability for our joint and several liability related to the other FHLBs’ share of the consolidated obligations as of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021.~~2022. See Note 16 - Commitments and Contingencies in our ~~2021~~2022 Form 10-K for further details.


Par value as of																				Par value as of	March 31, 2023									December 31, 2022
		June 30, 2022									December 31, 2021										Bonds			Discount Notes			Total			Bonds			Discount Notes			Total
Par values as of		Bonds			Discount Notes			Total			Bonds			Discount Notes			Total
FHLB System total consolidated obligations	FHLB System total consolidated obligations	$	468,699		$	413,782		$	882,481		$	441,936		$	210,926		$	652,862		FHLB System total consolidated obligations	$	957,391		$	521,277		$	1,478,668		$	712,178		$	469,565		$	1,181,743
FHLB Chicago as primary obligor	FHLB Chicago as primary obligor	66,735			31,602			98,337			63,603			24,565			88,168			FHLB Chicago as primary obligor	77,010			51,388			128,398			61,274			59,814			121,088
As a percent of the FHLB System	As a percent of the FHLB System	14		%	8		%	11		%	14		%	12		%	14		%	As a percent of the FHLB System	8		%	10		%	9		%	9		%	13		%	10		%

2524

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 11 – Capital and Mandatorily Redeemable Capital Stock (MRCS)

Under our Capital Plan our stock consists of two sub-classes of stock, Class B1 activity stock and Class B2 membership stock (together, Class B stock), both with a par value of $100 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. See Note 12 – Capital and Mandatorily Redeemable Capital Stock (MRCS) to the financial statements in our ~~2021~~2022 Form 10-K for further information on our capital stock and MRCS.

Minimum Capital Requirements

For details on our minimum capital requirements, including how the ratios below were calculated, see Minimum Capital Requirements in Note 12 – Capital and Mandatorily Redeemable Capital Stock (MRCS) to the financial statements in our ~~2021~~2022 Form 10-K. We complied with our minimum regulatory capital requirements as shown below.


As of	As of	June 30, 2022						December 31, 2021						As of	March 31, 2023						December 31, 2022
		Requirement			Actual			Requirement			Actual				Requirement			Actual			Requirement			Actual
Total regulatory capital	Total regulatory capital	$	4,206		$	7,119		$	3,878		$	6,656		Total regulatory capital	$	5,442		$	8,451		$	5,074		$	7,801
Total regulatory capital ratio	Total regulatory capital ratio	4.00		%	6.77		%	4.00		%	6.87		%	Total regulatory capital ratio	4.00		%	6.21		%	4.00		%	6.15		%
Leverage capital	Leverage capital	$	5,258		$	10,678		$	4,848		$	9,984		Leverage capital	$	6,803		$	12,676		$	6,343		$	11,701
Leverage capital ratio	Leverage capital ratio	5.00		%	10.16		%	5.00		%	10.30		%	Leverage capital ratio	5.00		%	9.32		%	5.00		%	9.22		%
Risk-based capital	Risk-based capital	$	1,436		$	7,119		$	1,297		$	6,656		Risk-based capital	$	2,005		$	8,451		$	1,786		$	7,801

Total regulatory capital and leverage capital includes mandatorily redeemable capital stock (MRCS) but does not include AOCI. Under the FHFA regulation on capital classifications and critical capital levels for the FHLBs, we are adequately capitalized.

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.

~~None of our~~The following members (including any successor) had regulatory capital stock exceeding 10% of our total regulatory capital stock outstanding (which includes MRCS) as of ~~June 30, 2022.~~

~~Dividends~~March 31, 2023.

Our ability to pay dividends is subject to the FHLB Act and FHFA regulations. On July 28, 2022 our Board of Directors declared a 5.750% dividend (annualized) for Class B1 activity stock and a 2.375% dividend (annualized) for Class B2 membership stock based on our preliminary financial results for the second quarter of 2022. This dividend totaled $33 million (recorded as $29 million dividends on capital stock and $4 million interest expense on mandatorily redeemable capital stock) and is scheduled for payment on August 15, 2022. Any future dividend payment remains subject to declaration by the Board and will depend on future operating results, our Retained Earnings and Dividend Policy and any other factors the Board determines to be relevant.



As of March 31, 2023	Regulatory Capital Stock Outstanding		% of Total Outstanding		Amount of Which is Classified as a Liability (MRCS)
BMO Harris Bank NA	$	420	11.1	%	$	—
The Northern Trust Company	399		10.5	%	—

Repurchase of Excess Capital Stock

Members may request ~~repurchase~~repurchases of excess stock on any business day. Additionally, on a monthly basis, the Bank repurchases excess capital stock held by each member or former member that exceeds certain limits 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.

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Dividends

Our ability to pay dividends is subject to the FHLB Act and FHFA regulations. On April 26, 2023 our Board of Directors declared a 7.38% dividend (annualized) for Class B1 activity stock and a 3.19% dividend (annualized) for Class B2 membership stock based on our preliminary financial results for the first quarter of 2023. This dividend totaled $59 million (recorded as $55 million dividends on capital stock and $4 million interest expense on mandatorily redeemable capital stock) and is scheduled for payment on May 15, 2023. Any future dividend payment remains subject to declaration by the Board and will depend on future operating results, our Retained Earnings and Dividend Policy and any other factors the Board determines to be relevant.

Note 12 - Accumulated Other Comprehensive Income (Loss)

The following table summarizes the gains (losses) in AOCI for the reporting periods indicated.


	Net Unrealized -Available-for-sale Debt Securities		Net Unrealized - Cash Flow Hedges		Post - Retirement Plans		Total in AOCI

















Three months ended March 31, 2023
Beginning balance	$	(179)	$	102	$	(11)	$	(88)




Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	(162)		(8)		22		(148)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	—		(9)				(9)

Noninterest expense					(1)		(1)

Ending balance	$	(341)	$	85	$	10	$	(246)
Three months ended March 31, 2022
Beginning balance	$	366	$	(11)	$	(13)	$	342
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	(218)		52		(4)		(170)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	—		4				4

Noninterest expense					1		1
Ending balance	$	148	$	45	$	(16)	$	177

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

~~Note 12 - Accumulated Other Comprehensive Income (Loss)~~

~~The following table summarizes the gains (losses) in AOCI for the reporting periods indicated.~~

Net Unrealized - Net Unrealized - Cash Flow Hedges
Available-for-sale Debt Securities Post - Retirement Plans Total in AOCI
Three months ended June 30, 2022
Beginning balance $ 148 $ 45 $ (16) $ 177
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition (162) 22 — (140)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income — 3 3
Ending balance $ (14) $ 70 $ (16) $ 40
Three months ended June 30, 2021
Beginning balance $ 490 $ (24) $ (25) $ 441
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition 55 (14) — 41
Amounts reclassified in period to Condensed Statements of Income:
Net interest income (1) 5 4
Noninterest expense 1 1
Ending balance $ 544 $ (33) $ (24) $ 487
Six months ended June 30, 2022
Beginning balance $ 366 $ (11) $ (13) $ 342
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition (380) 74 (4) (310)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income — 7 7
Noninterest expense 1 1
Ending balance $ (14) $ 70 $ (16) $ 40
Six months ended June 30, 2021
Beginning balance $ 292 $ (65) $ (20) $ 207
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition 253 23 (10) 266
Amounts reclassified in period to Condensed Statements of Income:
Net interest income (1) 9 8
Noninterest expense 6 6
Ending balance $ 544 $ (33) $ (24) $ 487

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~Notes to Condensed Financial Statements - (Unaudited)~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

Note 13 - Fair Value

The following table is a summary of the fair value estimates and related levels in the hierarchy. The carrying amounts are per the Condensed Statements of Condition. Fair value estimates represent the exit prices that we would receive to sell assets or pay to transfer liabilities in an orderly transaction with market participants at the measurement date. They do not represent an estimate of our overall market value as a going concern, as they do not take into account future business opportunities or profitability of assets and liabilities. We measure instrument-specific credit risk attributable to our consolidated obligations based on our nonperformance risk, which includes the credit risk associated with the joint and several liability of other FHLBs (see Note 16 - Commitments and Contingencies in our ~~2021~~2022 Form 10-K). As a result, we did not recognize any instrument-specific credit risk attributable to our consolidated obligations that are carried at fair value. See Note 2 - Summary of Significant Accounting Policies in our ~~2021~~2022 Form 10-K for our fair value policies and Note 15 - Fair Value in our ~~2021~~2022 Form 10-K for our valuation techniques and significant inputs. See Note 9 - Derivatives and Hedging Activities for more information on the Netting and Cash Collateral amounts. The net carrying amount in the below table is net of any allowance for credit losses.


		Net Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Netting & Cash Collateral			Net Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Netting & Cash Collateral
June 30, 2022
March 31, 2023														March 31, 2023
Carried at amortized cost	Carried at amortized cost													Carried at amortized cost

Cash and due from banks and interest bearing deposits		$	904	$	904	$	904
Cash and due from banks and interest-bearing deposits														Cash and due from banks and interest-bearing deposits	$	2,609	$	2,609	$	2,609

Federal funds sold and securities purchased under agreements to resell	Federal funds sold and securities purchased under agreements to resell	20,080		20,080				$	20,080					Federal funds sold and securities purchased under agreements to resell	19,920		19,920				$	19,920
Held-to-maturity debt securities	Held-to-maturity debt securities	1,206		1,206				1,197		$	9			Held-to-maturity debt securities	642		636				629		$	7

Advances	Advances	51,214		51,253				51,253						Advances	78,938		78,880				78,880

MPF Loans held in portfolio, net	MPF Loans held in portfolio, net	9,946		9,190				9,180		10				MPF Loans held in portfolio, net	10,171		9,191				9,180		11
Other assets	Other assets	171		171				171						Other assets	406		406				406

Carried at fair value on a recurring basis	Carried at fair value on a recurring basis													Carried at fair value on a recurring basis
Trading debt securities	Trading debt securities	951		951				951						Trading debt securities	3		3				3
Available-for-sale debt securities	Available-for-sale debt securities	18,625		18,625				18,625						Available-for-sale debt securities	22,377		22,377				22,377
Advances	Advances	1,597		1,597				1,597						Advances	646		646				646

Derivative assets	Derivative assets	127		127				691				$	(564)	Derivative assets	39		39				893				$	(854)
Other assets	Other assets	86		86				86						Other assets	64		64				64

Carried at fair value on a nonrecurring basis	Carried at fair value on a nonrecurring basis													Carried at fair value on a nonrecurring basis
MPF Loans held in portfolio, net	MPF Loans held in portfolio, net	7		7						7				MPF Loans held in portfolio, net	3		3						3

Financial assets	Financial assets	104,914		$	104,197	$	904	$	103,831	$	26	$	(564)	Financial assets	135,818		$	134,774	$	2,609	$	132,998	$	21	$	(854)
Other non financial assets		240
Other nonfinancial assets														Other nonfinancial assets	236
Assets	Assets	$	105,154											Assets	$	136,054

Carried at amortized cost	Carried at amortized cost													Carried at amortized cost
Deposits	Deposits	$	(655)	$	(655)			$	(655)					Deposits	$	(846)	$	(846)			$	(846)

Consolidated obligation discount notes	Consolidated obligation discount notes	(30,660)		(30,654)				(30,654)						Consolidated obligation discount notes	(45,933)		(45,928)				(45,928)

Consolidated obligation bonds	Consolidated obligation bonds	(63,858)		(62,486)				(62,486)						Consolidated obligation bonds	(73,763)		(72,162)				(72,162)
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	(273)		(273)		$	(273)							Mandatorily redeemable capital stock	(247)		(247)		$	(247)
Other liabilities	Other liabilities	(177)		(177)				(177)						Other liabilities	(307)		(307)				(307)

Carried at fair value on a recurring basis	Carried at fair value on a recurring basis													Carried at fair value on a recurring basis
Consolidated obligation discount notes	Consolidated obligation discount notes	(865)		(865)				(865)						Consolidated obligation discount notes	(5,037)		(5,037)				(5,037)
Consolidated obligation bonds	Consolidated obligation bonds	(661)		(661)				(661)						Consolidated obligation bonds	(711)		(711)				(711)

Derivative liabilities	Derivative liabilities	(152)		(152)				(2,062)				$	1,910	Derivative liabilities	(101)		(101)				(2,514)				$	2,413

Financial liabilities	Financial liabilities	(97,301)		$	(95,923)	$	(273)	$	(97,560)	$	—	$	1,910	Financial liabilities	(126,945)		$	(125,339)	$	(247)	$	(127,505)	$	—	$	2,413
Other non financial liabilities		(967)
Other nonfinancial liabilities														Other nonfinancial liabilities	(1,151)
Liabilities	Liabilities	$	(98,268)											Liabilities	$	(128,096)

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)


	Net Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Netting & Cash Collateral

December 31, 2022
Carried at amortized cost
Cash and due from banks and interest-bearing deposits	$	2,605	$	2,605	$	2,605
Federal funds sold and securities purchased under agreements to resell	24,943		24,943				$	24,943
Held-to-maturity debt securities	1,431		1,419				1,412		$	7
Advances	65,627		65,581				65,581
MPF Loans held in portfolio, net	10,154		8,973				8,962		11
Other assets	351		351				351
Carried at fair value on a recurring basis
Trading debt securities	3		3				3
Available-for-sale debt securities	20,700		20,700				20,700
Advances	661		661				661
Derivative assets	25		25				1,111				$	(1,086)
Other assets	109		109				109
Carried at fair value on a nonrecurring basis
MPF Loans held in portfolio, net	6		6						6

Financial assets	126,615		$	125,376	$	2,605	$	123,833	$	24	$	(1,086)
Other nonfinancial assets	238
Assets	$	126,853
Carried at amortized cost
Deposits	$	(571)	$	(571)			$	(571)
Consolidated obligation discount notes	(59,278)		(59,264)				(59,264)
Consolidated obligation bonds	(57,398)		(55,766)				(55,766)
Mandatorily redeemable capital stock	(248)		(248)		$	(248)
Other liabilities	(240)		(240)				(240)
Carried at fair value on a recurring basis
Consolidated obligation discount notes	(253)		(253)				(253)
Consolidated obligation bonds	(718)		(718)				(718)
Derivative liabilities	(10)		(10)				(2,872)				$	2,862
Financial liabilities	(118,716)		$	(117,070)	$	(248)	$	(119,684)	$	—	$	2,862
Other nonfinancial liabilities	(672)
Liabilities	$	(119,388)

We had no transfers between levels for the periods shown.

Table of Contents

Federal Home Loan Bank of Chicago

Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Net Carrying Amount Fair Value Level 1 Level 2 Level 3 Netting & Cash Collateral
December 31, 2021
Carried at amortized cost
Cash and due from banks and interest bearing deposits $ 900 $ 900 $ 900
Federal funds sold and securities purchased under agreements to resell 12,267 12,267 $ 12,267
Held-to-maturity debt securities 1,801 1,832 1,822 $ 10
Advances 46,876 47,108 47,108
MPF Loans held in portfolio, net 9,839 9,908 9,900 8
Other assets 83 83 83
Carried at fair value on a recurring basis
Trading debt securities 954 954 954
Available-for-sale debt securities 22,706 22,706 22,706
Advances 1,173 1,173 1,173
Derivative assets 14 14 70 $ (56)
Other assets 104 104 104
Carried at fair value on a nonrecurring basis
MPF Loans held in portfolio, net 4 4 4
Financial assets 96,721 $ 97,053 $ 900 $ 96,187 $ 22 $ (56)
Other non financial assets 233
Assets $ 96,954
Carried at amortized cost
Deposits $ (1,034) $ (1,034) $ (1,034)
Consolidated obligation discount notes (24,563) (24,563) (24,563)
Consolidated obligation bonds (62,708) (62,585) (62,585)
Mandatorily redeemable capital stock (247) (247) $ (247)
Other liabilities (116) (116) (116)
Carried at fair value on a recurring basis
Consolidated obligation bonds (665) (665) (665)
Derivative liabilities (32) (32) (527) $ 495
Financial liabilities (89,365) $ (89,242) $ (247) $ (89,490) $ — $ 495
Other non financial liabilities (837)
Liabilities $ (90,202)

~~We had no transfers between levels for the periods shown.~~

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~Notes to Condensed Financial Statements - (Unaudited)~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

Fair Value Option

We may elect the fair value option for financial instruments, such as advances, MPF Loans held for sale, and consolidated obligation discount notes and bonds, in cases where hedge accounting treatment may not be achieved due to the inability to meet the hedge effectiveness testing criteria, or in certain cases where we wish to mitigate the risk associated with selecting the fair value option for other instruments. Financial instruments for which we elected the fair value option along with their related fair value are shown on our Condensed Statements of Condition. Refer to ~~our~~ Note 2 – Summary of Significant Accounting Policies to the financial statements in our ~~2021~~2022 Form 10-K for further details.

The following table presents the gains (losses) in fair values of financial assets and liabilities carried at fair value under the fair value option, which are recognized in noninterest income - instruments held under the fair value option in our Condensed Statements of Income.


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021				2023			2022
Advances	Advances	$	(24)	$	2	$	(63)	$	(26)	Advances			$	7		$	(39)
Discount notes	Discount notes	4		—		4		—		Discount notes			(9)			—
Bonds	Bonds	6		1		20		2		Bonds			(7)			14
Other	Other	(4)		—		(7)		(2)		Other			—			(3)
Noninterest income - Instruments held under the fair value option	Noninterest income - Instruments held under the fair value option	$	(18)	$	3	$	(46)	$	(26)	Noninterest income - Instruments held under the fair value option			$	(9)		$	(28)

The following table reflects the difference between the aggregate unpaid principal balance (UPB) outstanding and the aggregate fair value for our long term financial instruments for which the fair value option has been elected. None of the advances were 90 days or more past due and none were on nonaccrual status.


As of	As of	June 30, 2022				December 31, 2021				As of	March 31, 2023				December 31, 2022
		Advances		Consolidated Obligation Bonds		Advances		Consolidated Obligation Bonds			Advances		Consolidated Obligation Bonds		Advances		Consolidated Obligation Bonds
Unpaid principal balance	Unpaid principal balance	$	1,603	$	681	$	1,117	$	666	Unpaid principal balance	$	658	$	727	$	680	$	741
Fair value over (under) UPB	Fair value over (under) UPB	(6)		(20)		56		(1)		Fair value over (under) UPB	(12)		(16)		(19)		(23)
Fair value	Fair value	$	1,597	$	661	$	1,173	$	665	Fair value	$	646	$	711	$	661	$	718

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Notes to Condensed Financial Statements - (Unaudited)

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Note 14 – Commitments and Contingencies

The following table shows our commitments outstanding, which represent off-balance sheet obligations.

As of June 30, 2022 December 31, 2021
Expire within one year Expire after one year Total Expire within one year Expire after one year Total
Member standby letters of credit $ 4,032 $ 9,048 a $ 13,080 $ 4,285 $ 7,032 a $ 11,317
MPF delivery commitments 265 — 265 366 — 366
Advance commitments 697 2 699 43 2 45
Housing authority standby bond purchase agreements 15 498 513 25 477 502
Unsettled consolidated obligation discount notes 602 — 602 — — —
Unsettled consolidated obligation bonds 405 — 405 378 — 378
Other 2 — 2 3 — 3
Commitments $ 6,018 $ 9,548 $ 15,566 $ 5,100 $ 7,511 $ 12,611


As of	March 31, 2023							December 31, 2022
	Expire within one year		Expire after one year			Total		Expire within one year		Expire after one year			Total
Member standby letters of credit	$	4,771	$	5,694	a	$	10,465	$	4,485	$	6,265	a	$	10,750
MPF delivery commitments	215		—			215		93		—			93
Advance commitments	74		5			79		76		5			81
Housing authority standby bond purchase agreements	119		415			534		56		485			541


Unsettled consolidated obligation bonds	1,471		—			1,471		65		—			65
Other	2		—			2		2		—			2
Commitments	$	6,652	$	6,114		$	12,766	$	4,777	$	6,755		$	11,532

a Contains ~~$7.9~~$5.1 billion and ~~$6.1~~$5.8 billion of member standby letters of credit as of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, which were renewable annually.

For a description of defined terms see Note 16 - Commitments and Contingencies to the financial statements in our ~~2021~~2022 Form 10-K.

Note 15 – Transactions with Related Parties and Other FHLBs

We define related parties as either members whose officers or directors serve on our Board of Directors, or members that control more than 10% of our total voting interests. We did not have any members that controlled more than 10% of our total voting interests for the periods presented in these condensed financial statements.

In the normal course of business, we may extend credit to or enter into other transactions with a related party. These transactions are done at market terms that are no more favorable than the terms of comparable transactions with other members who are not considered related parties.

Members

The following table summarizes material balances we had with our members who are related parties as defined above (including their affiliates) as of the dates presented. The related net income impacts to our Condensed Statements of Income were not material.


As of	As of	June 30, 2022		December 31, 2021		As of	March 31, 2023		December 31, 2022
Assets - Advances	Assets - Advances	$	133	$	235	Assets - Advances	$	568	$	386
Liabilities - Deposits	Liabilities - Deposits	10		15		Liabilities - Deposits	5		3
Equity - Capital Stock	Equity - Capital Stock	17		18		Equity - Capital Stock	25		18

Other FHLBs

From time to time, we may loan to, or borrow from, other FHLBs. These transactions are done at market terms that are no more favorable than the terms of comparable transactions with other counterparties. These transactions are overnight, maturing the following business day.

In addition, we provide programmatic and operational support in our role as the administrator of the MPF Program on behalf of the other MPF Banks for which we receive a membership and volume-based administration fee.

Material transactions with other FHLBs are identified on the face of our condensed financial statements~~Condensed Financial Statements.~~.

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Below are selected financial data for the last five quarters.

June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Other selected data at period end
Member standby letters of credit outstanding $ 13,080 $ 11,157 $ 11,317 $ 13,116 $ 12,773
MPF Loans par value outstanding - FHLB System a
65,889 65,867 66,297 67,217 67,673
MPF Loans par value outstanding - FHLB Chicago PFIs a
18,455 18,434 18,600 18,716 18,718
Number of members 669 670 676 674 678
Total employees (full and part time) 479 476 466 466 451
Other selected MPF data a
MPF Loans par value amounts funded - FHLB System $ 2,358 $ 2,462 $ 3,152 $ 4,027 $ 4,535
Quarterly number of PFIs funding MPF products - FHLB System 576 612 654 678 687
MPF Loans par value amounts funded - FHLB Chicago PFIs $ 636 $ 602 $ 938 $ 1,150 $ 1,379
Quarterly number of PFIs funding MPF products - FHLB Chicago 167 172 179 178 177
Selected ratios (rates annualized)
Total regulatory capital to assets ratio 6.77 % 6.95 % 6.87 % 6.50 % 6.56 %
Market value of equity to book value of equity 109 % 106 % 107 % 106 % 106 %
Primary mission asset ratio b
73.1 % 73.2 % 70.3 % 70.7 % 70.5 %
Dividend rate class B1 activity stock-period paid 5.13 % 5.00 % 5.00 % 5.00 % 5.00 %
Dividend rate class B2 membership stock-period paid 2.13 % 2.00 % 2.00 % 2.00 % 2.00 %
Return on average assets 0.36 % 0.37 % 0.35 % 0.31 % 0.32 %
Return on average equity 5.33 % 5.61 % 5.31 % 4.54 % 4.59 %
Average equity to average assets 6.75 % 6.60 % 6.59 % 6.83 % 6.97 %
Net yield on average interest-earning assets 0.61 % 0.62 % 0.58 % 0.58 % 0.64 %
Cash dividends $ 24 $ 22 $ 21 $ 22 $ 21
Dividend payout ratio 26.37 %

23.16 % 23.86 % 28.57 % 26.92 %


	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022

Other selected data at period end
Member standby letters of credit outstanding	$	10,465		$	10,750		$	12,999		$	13,080		$	11,157
MPF Loans par value outstanding - FHLB System a	65,420			65,562			65,853			65,889			65,867
MPF Loans par value outstanding - FHLB Chicago PFIs a	18,232			18,331			18,404			18,455			18,434
Number of members	660			671			668			669			670
Total employees (full and part time)	499			495			493			479			476

Other selected MPF data a
MPF Loans par value amounts funded - FHLB System	$	1,152		$	1,321		$	1,985		$	2,358		$	2,462
Quarterly number of PFIs funding MPF products - FHLB System	479			485			554			576			612
MPF Loans par value amounts funded - FHLB Chicago PFIs	$	266		$	387		$	497		$	636		$	602
Quarterly number of PFIs funding MPF products - FHLB Chicago	148			154			171			167			172
Selected ratios (rates annualized)
Total regulatory capital to assets ratio	6.21		%	6.15		%	6.77		%	6.77		%	6.95		%
Market value of equity to book value of equity	107		%	105		%	105		%	109		%	106		%
Primary mission asset ratio b	71.5		%	72.0		%	72.9		%	73.1		%	73.2		%
Dividend rate class B1 activity stock-period paid	7.13		%	6.50		%	5.75		%	5.13		%	5.00		%
Dividend rate class B2 membership stock-period paid	3.06		%	2.75		%	2.38		%	2.13		%	2.00		%
Return on average assets	0.42		%	0.43		%	0.34		%	0.36		%	0.37		%
Return on average equity	7.31		%	7.33		%	5.39		%	5.33		%	5.61		%
Average equity to average assets	5.75		%	5.87		%	6.31		%	6.75		%	6.60		%
Net yield on average interest-earning assets	0.67		%	0.71		%	0.52		%	0.61		%	0.62		%
Cash dividends	$	48		$	37		$	29		$	24		$	22

Dividend payout ratio	33.57		%	27.61		%	30.53		%	26.37		%	23.16		%

a Includes all MPF products, whether on or off our balance sheet. See Mortgage Partnership Finance Program beginning on page 8 in our ~~2021~~2022 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 Ratio on page 5 in our ~~2021~~2022 Form 10-K for more information.

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(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 of management, 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 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:

•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 the effect on future funding costs, sources, and availability; 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 ~~coronavirus disease 2019 (COVID-19)~~occurrence of a major natural or other disaster, a pandemic such as the COVID-19 pandemic or other disruptive event; the impact of climate change; the impact of geopolitical uncertainties or conflicts, such as the conflict in Ukraine;

•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 the guidance, regulation, and legislation related to the FHLB System at 100: Focusing on the ~~global~~Future initiative, housing finance and ~~national economies~~GSE reform; changes in the Presidential Administration and onthe Congress; changes in our regulator or changes affecting our regulator and changes in the FHLB Act or applicable regulations as a result of the Housing and Economic Recovery Act of 2008 (Housing Act) or as may otherwise be issued by our ~~members’ businesses;~~regulator; the potential designation of us as a nonbank financial company subject to supervision by the Federal Reserve; any government failure to raise the U.S. Treasury debt ceiling;

•the loss or changes in business activities with significant members; changes in the demand by our members for advances, including as a result of the Federal Reserve’s emergency actions to increase liquidity along with market conditions resulting from the COVID-19 pandemic (or changes to, or the cessation of such actions), 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, including our ability to develop and implement business strategies focused on maintaining net interest income; 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 for certain future advance borrowings, our ability to continue to pay enhanced dividends on our activity stock, or 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;

•Table of Contents

~~general economic and market conditions, including the timing and volume~~Federal Home Loan Bank of market activity, 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; volatility resulting from the effects of, and changesChicago

(U.S. Dollars in various monetary or fiscal policies and regulations, 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; disruptionstables in ~~the credit and debt markets and the effect on future funding costs, sources, and availability;~~ the impact of the occurrence of a major natural or other disaster, a pandemic such as the COVID-19 pandemic or other disruptive event; the impact of climate change; the impact of geopolitical uncertainties or conflicts, such as the conflict in Ukraine;millions except per share amounts unless otherwise indicated)

•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;

•changes in the value of and risks associated with our investments in mortgage loans, mortgage backed securities and the related credit enhancement protections;

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~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

•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;~~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;

•uncertainties relating to the scheduled phase-out of ~~the London Interbank Offered Rate (LIBOR);~~

•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 the proposals and legislation related to housing finance and GSE reform; changes in the Presidential Administration and the Congress; changes in our regulator or changes affecting our regulator and changes in the FHLB Act or applicable regulations as a result of the Housing and Economic Recovery Act of 2008 or as may otherwise be issued by our regulator; the potential designation of us as a nonbank financial company for supervision by the Federal Reserve;LIBOR;

•regulatory changes to FHLB membership requirements, capital requirements, MPF ~~program~~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 technology services 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 Factors starting on page 2220 in our ~~2021~~2022 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.

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Executive Summary

~~Second~~First Quarter ~~2022~~2023 Financial Highlights

•Advances outstanding increased to ~~$52.8~~$79.6 billion at ~~June 30, 2022,~~March 31, 2023, compared to ~~$48.0~~$66.3 billion at December 31, ~~2021,~~2022, attributable to increased borrowings ~~from~~by our depository ~~members.~~institutions, including in connection with the banking industry volatility that occurred in early March 2023.

•MPF Loans held in portfolio continued to remain steady at ~~$10.0~~$10.2 billion at ~~June 30, 2022,~~March 31, 2023, compared to ~~$9.8~~$10.2 billion at December 31, ~~2021.~~2022.

•Total investment securities ~~decreased 18%~~increased to ~~$20.8~~$23.0 billion at ~~June 30, 2022,~~March 31, 2023, compared to ~~$25.5~~$22.1 billion at December 31, ~~2021,~~2022, primarily attributable to ~~a reduction~~an increase in investment in ~~U.S. Treasuries and a decline in the fair value of our available-for-sale (AFS) portfolio driven by rising market interest rates.~~GSE mortgage-backed securities.

•Total liquid assets ~~increased~~decreased to ~~$21.0~~$22.5 billion at ~~June 30, 2022,~~March 31, 2023, compared to ~~$13.2~~$27.5 billion at December 31, ~~2021.~~2022. We ~~strive~~intend to maintain a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.

•Total assets increased to ~~$105.2~~$136.1 billion as of ~~June 30, 2022,~~March 31, 2023, compared to ~~$97.0~~$126.9 billion as of December 31, ~~2021.~~2022.

•Letters of credit commitments ~~increased to $13.1~~remained steady at $10.5 billion at ~~June 30, 2022,~~March 31, 2023, compared to ~~$11.3~~$10.8 billion at December 31, ~~2021.~~2022.

•We recorded net income of ~~$91~~$143 million in the ~~second~~first quarter of ~~2022,~~2023, up ~~$13~~$48 million compared to the ~~second~~first quarter of ~~2021, with the~~2022. The increase was primarily ~~driven by~~due to increased returns on our liquid assets as interest rates rose during the period.

•In the ~~second~~first quarter of ~~2022,~~2023, noninterest income was $5$(4) million, ~~an increase~~a decrease of ~~$15~~$14 million when compared to a ~~$(10)~~$10 million ~~(loss)~~gain for the ~~second~~first quarter of ~~2021. Gains~~2022. Losses from instruments held under the fair value option and derivatives used to hedge our market risk exposure ~~was~~were the primary driver of this increase. There was also a significant decline in the average balance of our trading securities outstanding for the period resulting from a decline in investment in U.S. Treasuries, which in turn reduced the amount of losses incurred on our trading portfolio.

•~~We remained in compliance with all of our regulatory capital requirements as of June 30, 2022.~~decrease.

Summary and Outlook

~~Second~~First Quarter ~~2022~~2023 Dividends and Dividend Guidance

On ~~July 28, 2022,~~April 26, 2023, the Board of Directors declared a dividend of ~~5.75%~~7.38% (annualized) for Class B1 activity stock and a dividend of ~~2.375%~~3.19% (annualized) for Class B2 membership stock, based on preliminary financial results for the ~~second quarter of 2022,~~ ~~an increase on the levels declared in the~~ first quarter of ~~2022~~.2023. The dividend for the ~~second~~first quarter of ~~2022~~2023 will be paid by crediting members’ DID accounts on ~~August~~May 15, ~~2022.~~2023. The Bank pays a higher dividend per share on ~~Class B1~~ activity stock compared to membership stock to recognize ~~members that~~members’ support of the ~~entire~~ cooperative through the use of ~~Bank~~our products. WeThe Bank expect to maintain a dividend of at least ~~5.75%~~7.38% (annualized) for Class B1 activity stock ~~through~~for the ~~third~~second and ~~fourth~~third quarters of ~~2022, reviewed quarterly and~~2023, 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 payments remain 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.

~~A Source of Stability for 90 Years and Counting~~On-Going Support Through Market Volatility

AsIn March 2023, financial institutions across the ~~month of July marks~~country faced significant headwinds with volatility in the 90th ~~anniversary~~banking sector that had not been seen in more than a decade – compounded by the higher interest rate environment that started last year. Treasury market volatility also surged, as demonstrated by the 2-year Treasury yield moving more than 20 basis points (bps) for seven consecutive days, an event that has not occurred since 1985. In our District, many members bolstered collateral and tested access to their liquidity with the Bank as we worked diligently with member institutions to meet their funding needs and help them manage their balance sheets through customized solutions. Across the country, the mission and importance of the ~~Federal Home Loan Bank System, as well~~FHLBs was on full display as the 25th ~~anniversary~~FHLB System stepped-in to meet member demands. During the week of ~~our MPF Program, we proudly express our appreciation~~March 13, 2023, the FHLB System issued a combined $304 billion in consolidated obligations (excluding overnight discount notes). The Bank is committed to using its financial strength to support members and their communities through all economic cycles as it has done for the last 90 years.

Meeting Member Needs in 2023

Over the past quarter, the Bank has remained focused on finding new ways to better serve our members and ~~reflect on the critical role the FHLBs play in supporting the U.S. economy with liquidity in all economic cycles.~~ ~~Uncertainty in the market brings challenges~~their communities, through product development and ~~opportunities – and we strive to remain steadfast in our commitment to being a trusted advisor in helping members achieve their goals.~~engagement initiatives.

•We ~~ended the second quarter of 2022 with $52.8 billion in advances outstanding,~~are pleased to announce our ~~highest quarter-end~~Savings Amidst Volatile Environment (S.A.V.E.) Advance – a new advance ~~balance since the first quarter of 2020.~~

◦~~During the second quarter of 2022, we saw increased liquidity and funding needs from our~~opportunity to support members as ~~loan growth increased~~they navigate the rapid rise in interest rates, volatile market, and ~~deposit growth slowed. We are supporting these needs~~its impact on their institutions. This opportunity provides all members and housing associates with ~~attractively priced advances~~a one-time discounted advance and ~~discounts on certain advances.~~flexibility when selecting the interest rate type, advance term, and transaction date to best meet their balance sheet needs. The S.A.V.E. Advance is available from May 1, 2023 through October 31, 2023.

•~~On June 29, 2022, the Bank and Ginnie Mae announced that the total issuance under the MPF Program surpassed $3 billion in mortgage-backed securities (MBS).~~ The MPF Government MBS product resulted from a relationship forged by the Bank and Ginnie Mae to issue securities guaranteed by Ginnie Mae and backed by mortgages originated by FHLB member financial institutions. ~~The MPF Government MBS product provides participating members, particularly smaller institutions, direct access to the secondary mortgage market.~~

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Many teams within the Bank are hard at work to enhance member experience with our products and services. During the first quarter of 2023, we worked with members on an easy-to-use and more secure single sign-on system for eBanking and Affordable Housing Program (AHP) Online. For the future, we are working on expanding online self-service product execution, intuitive user interface and dashboards, centralized reporting and scheduling, as well as subscriptions and notifications for communications. We continue to accept eNotes (Electronic Promissory Notes) for residential collateral and plan to accept loans with eNotes into the MPF Program in the near future. We believe these changes will create a more consistent and streamlined experience for our members while also enhancing security.

At the end of March 2023, the FHFA wrapped-up their FHLB System at 100: Focusing on the Future initiative, as they reviewed the mission, membership eligibility requirements, products and services, among other facets of the FHLBs. For a discussion of this initiative, see Legislative and Regulatory Developments, starting on page 18 of our 2022 Form 10-K.

Investing in Member Communities

We continue to seek conversation with our members to drive innovation and meet the critical needs of their communities while also to providing vital support for affordable housing, down payment assistance, and economic development in our district. The Bank offers a wide array of community investment programs to our members and will share program updates throughout this year:

•~~Recently, inflationary pressures, along~~The 2023 Downpayment Plus (DPP®) and Downpayment Plus Advantage® (DPP Advantage®) programs opened January 17, 2023. Participating members in DPP may reserve up to $700,000 in the general pool on a first-come, first-served basis to help their income-eligible borrowers with down payment and closing costs of up to $10,000, an increase from $6,000 in previous years. Participating members may also reserve up to $700,000 in the Federal Reserve’s quantitative tightening actions, have resulted in substantially increased home prices and mortgage rates in a short time frame, impacting home affordability for many buyers. To help alleviate someDPP Advantage pool, which allows members to access down payment assistance on behalf of the overall market pressures, the Bank is offering summer pricing specials for our MPF Traditional product to enhance member profitability while potentially offering lower mortgage rates to members’ customers.income eligible homebuyers obtaining their first mortgages from nonprofit lenders.

•The 2023 AHP General Fund application round opened May 1, 2023 and closes on June 9, 2023. We ~~offer SOFR-linked products~~plan to ~~support~~make award announcements in October 2023.

We recognize that additional funding would be beneficial in meeting community needs in affordable housing, as well as business and community development. In connection with that, our ~~members’ LIBOR transition efforts. In addition~~Board of Directors has allocated up to ~~our popular Discount Note Floater Advance (A382), we now offer a Callable Floating Rate Advance (A380), which supports~~$30 million in additional discretionary funds for the ~~flexible liquidity needs of our members.~~following programs for 2023:

•In May 2022, we offered our 2022 COVID-19 Recovery Advance to support our members as they recovered from the pandemic. We are pleased to share that 119 members took advantage of the opportunity, executing a total of $528 million in significantly-below-market rate advances.

~~Providing Support for Members’ Communities~~

We remain focused on how we can create and promote equitable opportunities across our district through our product offerings and have some updates to share on both our longstanding and newly created community investment programs:

•~~Our new~~ Community First® Accelerate Grants for Small ~~Business, a pivot from our previous Community FirstCapacity-Building Grant Program, provide flexible grant funds to strengthen small businesses in Illinois and Wisconsin~~. ~~We continue to offer our Community Small Business Advance with an initial rate of 0% to support local economies and community revitalization across our district.~~

Business;

•~~Our inaugural~~ Community FirstDiverse Developer Initiative received 32 applications, requesting over $5 million. This competitive grant program provides nonprofit and for-profit organizations, in collaboration with our members, with funding for career and talent development initiatives supporting diverse developers of affordable housing across Illinois and Wisconsin.

Housing Counseling Resource Program;

•~~Our Downpayment Plus~~®~~(DPP~~®~~) Programs continue to provide our members easy-to-access downpayment~~Community First Diverse Developer Initiative; and closing cost assistance to help their income-eligible customers achieve homeownership. In honor of National Homeownership Month in June, we hosted a special DPP webinar on June 16. We anticipate providing $18 million in downpayment assistance throughout 2022.

•Our 2022 Affordable Housing Program (AHP) General Fund closed on June 10, 2022. Forty members and 48 sponsors jointly submitted 67 applications for approximately $41.9 million in subsidy to support the construction, acquisition, and/or rehabilitation of more than 3,500 housing units. We expect to award approximately $20.7 million this year.DPP.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Critical Accounting Policies and Estimates

For a detailed description of our Critical Accounting Policies and Estimates see page 4239 in our ~~2021~~2022 Form 10-K.

There have been no significant changes to our critical accounting estimates subsequent to December 31, ~~2021.~~2022.

There have been no recently issued but not yet effective accounting standards updates that we expect to have a material impact on our financial statements.

Results of Operations

Net Interest Income

Net interest income is the difference between the amount we recognize into interest income on our ~~interest earning~~interest-earning assets and the amount we recognize into interest expense on our ~~interest bearing~~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~~interest-earning assets and ~~interest bearing~~interest-bearing liabilities as well as the following items:

•Amortization of premiums;

•Accretion of discounts;

•Hedge ineffectiveness, which represents the difference between changes in fair value of the derivative hedging instrument and the related change in fair value of the hedged item, 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. 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 fees.

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~~interest-earning assets and ~~interest bearing~~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.

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(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


																					March 31, 2023						March 31, 2022						Increase (decrease) due to
																					Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Volume		Rate		Net Change

		June 30, 2022						June 30, 2021						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	For the three months ended																			For the three months ended
Investment debt securities		$	21,686	$	93	1.72	%	$	21,106	$	94	1.78	%	$	2	$	(3)	$	(1)
Advances		56,854		169		1.19	%	52,237		67		0.51	%	13		89		102
MPF Loans held in portfolio		9,872		69		2.80	%	9,792		60		2.45	%	—		9		9
Federal funds sold		7,615		15		0.79	%	7,480		1		0.05	%	—		14		14
Securities purchased under agreements to resell		3,235		6		0.74	%	4,041		—		—	%	(1)		7		6
Interest earning deposits		2,185		4		0.73	%	1,177		1		0.34	%	2		1		3
Other interest earning assets		90		1		4.44	%	130		2		6.15	%	—		(1)		(1)
Interest earning assets		101,537		357		1.41	%	95,963		225		0.94	%	19		113		132
Noninterest earning assets		602						2,499
Total assets		102,139						98,462

Consolidated obligation discount notes		28,580		51		0.71	%	48,477		10		0.08	%	(35)		76		41
Consolidated obligation bonds		62,952		147		0.93	%	40,600		59		0.58	%	52		36		88
Other interest bearing liabilities		1,255		5		1.59	%	1,172		3		1.02	%	—		2		2
Interest bearing liabilities		92,787		203		0.88	%	90,249		72		0.32	%	5		126		131
Noninterest bearing liabilities		2,505						1,376
Total liabilities		95,292						91,625

Net yield interest earning assets		$	101,537	$	154	0.61	%	$	95,963	$	153	0.64	%	$	8	$	(7)	$	1

For the six months ended

Investment debt securities	Investment debt securities	$	22,947	$	164	1.43	%	$	21,867	$	144	1.32	%	$	8	$	12	$	20	Investment debt securities	$	22,656	$	317	5.60	%	$	24,208	$	71	1.17	%	$	(5)	$	251	$	246
Advances	Advances	55,978		256		0.91	%	51,645		143		0.55	%	20		93		113		Advances	78,573		939		4.78	%	55,101		87		0.63	%	37		815		852
MPF Loans held in portfolio	MPF Loans held in portfolio	9,837		134		2.72	%	9,837		123		2.50	%	—		11		11		MPF Loans held in portfolio	10,158		80		3.15	%	9,801		65		2.65	%	2		13		15
Federal funds sold	Federal funds sold	6,268		17		0.54	%	6,934		2		0.06	%	(2)		17		15		Federal funds sold	11,315		127		4.49	%	4,921		2		0.16	%	3		122		125
Securities purchased under agreements to resell	Securities purchased under agreements to resell	3,633		7		0.39	%	4,525		1		0.04	%	(2)		8		6		Securities purchased under agreements to resell	6,035		67		4.44	%	4,031		1		0.10	%	1		65		66
Interest earning deposits		1,852		5		0.54	%	1,048		1		0.19	%	2		2		4
Other interest earning assets		86		1		2.33	%	133		3		4.51	%	(1)		(1)		(2)
Interest earning assets		100,601		584		1.16	%	95,989		417		0.87	%	28		139		167
Noninterest earning assets		1,174						2,401
Interest-bearing deposits																				Interest-bearing deposits	4,461		52		4.66	%	1,518		1		0.26	%	2		49		51
Other interest-earning assets																				Other interest-earning assets	136		—		—	%	83		—		—	%	—		—		—
Interest-earning assets																				Interest-earning assets	133,334		1,582		4.75	%	99,663		227		0.91	%	$	75	$	1,280	$	1,355
Noninterest-earning assets																				Noninterest-earning assets	1,468						1,748
Total assets	Total assets	$	101,775					$	98,390											Total assets	$	134,802					$	101,411

Consolidated obligation discount notes	Consolidated obligation discount notes	$	27,907	63		0.45	%	$	48,105	25		0.10	%	(46)		84		38		Consolidated obligation discount notes	$	60,742	673		4.43	%	$	27,235	12		0.18	%	$	16	$	645	$	661
Consolidated obligation bonds	Consolidated obligation bonds	63,518		203		0.64	%	40,909		123		0.60	%	72		8		80		Consolidated obligation bonds	61,755		672		4.35	%	64,084		56		0.35	%	(2)		618		616
Other interest bearing liabilities		1,295		9		1.39	%	1,211		6		0.99	%	1		2		3
Interest bearing liabilities		92,720		275		0.59	%	90,225		154		0.34	%	8		113		121
Noninterest bearing liabilities		2,244						1,527
Other interest-bearing liabilities																				Other interest-bearing liabilities	1,123		15		5.34	%	1,335		4		1.20	%	(1)		12		11
Interest-bearing liabilities																				Interest-bearing liabilities	123,620		1,360		4.40	%	92,654		72		0.31	%	$	24	$	1,264	$	1,288
Noninterest-bearing liabilities																				Noninterest-bearing liabilities	3,353						1,982
Total liabilities	Total liabilities	$	94,964					$	91,752											Total liabilities	$	126,973					$	94,636

Net yield on interest earning assets		$	100,601	$	309	0.61	%	$	95,989	$	263	0.55	%	$	17	$	29	$	46
Net yield on interest-earning assets																				Net yield on interest-earning assets	$	133,334	$	222	0.67	%	$	99,663	$	155	0.62	%	$	50	$	17	$	67

The following analysis and comparisons apply to the periods presented in the above table unless otherwise indicated.

•Interest income from investment debt securities increased due to higher market interest rates in 2023 compared to the same period in 2022.

•Interest income from advances increased primarily due to higher market interest rates in 2023 compared to the same period in 2022. In addition, increased borrowing from our depository members contributed to the increase in interest income.

•Interest income from MPF Loans held in portfolio increased primarily due to the higher mortgage rate environment increasing the yield earned on new loan originations in 2023 compared to the same period in 2022. In addition, interest income from MPF Loans increased due to a reduction in premium amortization expense in 2023 compared to 2022 as loan prepayments slowed in 2023.

•Interest income from federal funds sold, securities purchased under agreements to resell, and interest-bearing deposits increased primarily due to higher market interest rates in 2023 compared to the same period in 2022.

•Interest expense on our shorter-termed consolidated obligation discount notes increased primarily due to higher market interest rates in 2023 compared to the same period in 2022. To a lesser extent, increased volume also contributed to this increase in interest expense.

•Interest expense on our longer-termed consolidated obligation bonds increased due to higher market interest rates in 2023 compared to the same period in 2022.

•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 Activities table on page 38.

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(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 for the three months ended June 30, 2022 was comparable to the same period in 2021 due to increased interest income from our AFS portfolio, despite a significant decline in the average balance of our trading securities outstanding for the period reducing the amount of interest income earned on our trading portfolio. Interest income from investment debt securities for the six months ended June 30, 2022 increased primarily due to prepayment fee income of $41 million compared to no such income during the same period in 2021, despite a significant decline in the average balance of our trading securities outstanding for the period reducing the amount of interest income earned on our trading portfolio. To a lesser extent, hedge ineffectiveness gains, rising market interest rates, and an increase in volume also contributed to the increase in interest income.

•Interest income from advances increased primarily due to higher market interest rates in 2022 compared to the same period in 2021. In addition, increased borrowing from our depository members contributed to the increase in interest income.

•~~Interest income from MPF Loans held in portfolio slightly increased primarily due to a reduction in premium amortization expense in 2022 compared to 2021 as loan prepayments slowed in 2022.~~

•Interest income from overnight federal funds sold, securities purchased under agreements to resell, and interest earning deposits increased due to higher market interest rates in 2022 compared to the same period in 2021.

•~~Interest expense on our shorter-termed consolidated obligation discount notes increased due to higher market interest rates in 2022 compared to the same period in 2021, despite a decline in volume.~~

•Interest expense on our longer-termed consolidated obligation bonds primarily increased due to increased volume. Higher market interest rates in 2022 compared to the same period in 2021 also contributed to the increase in interest expense.

•~~For details of the effect our fair value and cash flow hedge activities had on our net interest income see~~ ~~Total Net Effect Gain (Loss) of Hedging Activities~~ ~~table on page 40.~~Noninterest Income


	Three months ended March 31,
		2023		2022
Trading securities		$	—	$	(3)
Derivatives		(6)		29
Instruments held under the fair value option		(9)		(28)

MPF fees, $6 and $6 from other FHLBs		8		10

Other, net		3		2
Noninterest income (loss)		$	(4)	$	10

~~Noninterest Income~~

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Trading securities $ 1 $ (13) $ (2) $ (31)
Derivatives 17 (13) 46 7
Instruments held under the fair value option (18) 3 (46) (26)
MPF fees, 6 6 12 and 13 from other FHLBs 9 13 19 25
Other, net (4) — (2) 2
Noninterest income (loss) $ 5 $ (10) $ 15 $ (23)

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

~~A decrease in losses experienced on~~Losses from instruments held under the fair value option and derivatives used to hedge our ~~trading securities was~~market risk exposure were the primary driver of our ~~increase~~decrease in noninterest ~~income for 2022, attributable to a significant decline~~income. The losses in the average balance of our trading securities outstanding for the periods presented, which in turn reduced the amount of losses incurred on our trading portfolio. The corresponding gains and losses for derivatives and instruments held under fair value option were primarily attributable to ~~different positions and~~ the movement in market interest rates in ~~2022~~2023 compared to ~~2021.~~2022.

~~Table of Contents~~

~~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 June 30, 2022
Recorded in net interest income $ 9 $ (47) $ — $ (2) $ 51 $ 1 $ 12
Recorded in derivatives 17 1 7 (1) (6) (1) 17
Recorded in trading securities — 1 — — — — 1
Recorded on instruments held under the fair value option (24) — (4) 4 6 — (18)
Total net effect gain (loss) of hedging activities $ 2 $ (45) $ 3 $ 1 $ 51 $ — $ 12
Three months ended June 30, 2021
Recorded in net interest income $ (47) $ (44) $ — $ (4) $ 58 $ (1) $ (38)
Recorded in derivatives (8) — (5) — — — (13)
Recorded in trading securities — (13) — — — — (13)
Recorded on instruments held under the fair value option 2 — — — 1 — 3
Total net effect gain (loss) of hedging activities $ (53) $ (57) $ (5) $ (4) $ 59 $ (1) $ (61)
Six months ended June 30, 2022
Recorded in net interest income $ (12) $ (139) $ — $ (6) $ 148 $ 1 $ (8)
Recorded in derivatives 49 3 14 (1) (18) (1) 46
Recorded in trading securities — (2) — — — — (2)
Recorded on instruments held under the fair value option (63) — (7) 4 20 — (46)
Total net effect gain (loss) of hedging activities $ (26) $ (138) $ 7 $ (3) $ 150 $ — $ (10)
Six months ended June 30, 2021
Recorded in net interest income $ (86) $ (140) $ (1) $ (8) $ 105 $ (1) $ (131)
Recorded in derivatives 21 — (14) — — — 7
Recorded in trading securities — (28) — — — — (28)
Recorded on instruments held under the fair value option (26) — (2) — 2 — (26)
Total net effect gain (loss) of hedging activities $ (91) $ (168) $ (17) $ (8) $ 107 $ (1) $ (178)


	Advances		Investments		MPF Loans		Discount Notes		Bonds		Other		Total














Three months ended March 31, 2023


Recorded in net interest income	$	139	$	102	$	—	$	9	$	(334)	$	—	$	(84)
Recorded in derivatives	(2)		—		(1)		14		—		(17)		(6)

Recorded on instruments held under the fair value option	7		—		—		(9)		(7)		—		(9)
Total net effect gain (loss) of hedging activities	$	144	$	102	$	(1)	$	14	$	(341)	$	(17)	$	(99)

Three months ended March 31, 2022
Recorded in net interest income	$	(21)	$	(92)	$	—	$	(4)	$	97	$	—	$	(20)
Recorded in derivatives	32		2		7		—		(12)		—		29
Recorded in trading securities	—		(3)		—		—		—		—		(3)
Recorded on instruments held under the fair value option	(39)		—		(3)		—		14		—		(28)
Total net effect gain (loss) of hedging activities	$	(28)	$	(93)	$	4	$	(4)	$	99	$	—	$	(22)

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 ~~transaction~~administration fees. These administration and membership fees are designed to compensate us for the expenses we incur to administer the program. Decreases in our ~~2022~~2023 MPF fees were primarily driven by a decrease in volume in off-balance sheet MPF Loan products resulting in a decline in fee income.

Other, net

Other, net includes fee income we earn from member standby letters of credit products.

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Noninterest Expense


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021				2023		2022
Compensation and benefits	Compensation and benefits	$	28	$	25	$	57	$	53	Compensation and benefits		$	32	$	29
Nonpayroll operating expenses	Nonpayroll operating expenses	24		20		45		40		Nonpayroll operating expenses		21		21

Federal Housing Finance Agency and Office of Finance	Federal Housing Finance Agency and Office of Finance	4		3		10		8		Federal Housing Finance Agency and Office of Finance		5		6
Other, net	Other, net	2		7		4		15		Other, net		1		2
Noninterest expense	Noninterest expense	$	58	$	55	$	116	$	116	Noninterest expense		$	59	$	58

The following analysis and comparisons apply to the periods presented in the above table.

Compensation and benefits increased primarily due to increased employee headcount. We had ~~479~~499 employees as of ~~June 30, 2022,~~March 31, 2023, compared to ~~451~~476 employees as of ~~June 30, 2021.~~March 31, 2022.

Nonpayroll operating expenses ~~increased primarily due to~~remained steady as we continued our planned investment in information technology, specifically applications, infrastructure, and resiliency.

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.

~~Other, net expenses primarily decreased due to reduced non-qualified defined benefit plan expenses.~~

As noted in Noninterest Income on page ~~39,~~38, 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 June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021				2023		2022
MPF fees earned	MPF fees earned	$	9	$	13	$	19	$	25	MPF fees earned		$	8	$	10
Expenses related to MPF fees earned	Expenses related to MPF fees earned	9		11		18		20		Expenses related to MPF fees earned		8		9

Assessments

We record the AHP assessment expense at a rate of 10% of income before assessments, excluding interest expense on MRCS. See Note 11 - Affordable Housing Program to the financial statements in our ~~2021~~2022 Form 10-K for further details.

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Other Comprehensive Income (Loss)


		Three months ended June 30,				Six months ended June 30,				Balance remaining in AOCI as of			Three months ended March 31,			Balance remaining in AOCI as of
		2022		2021		2022		2021		June 30, 2022				2023		2022		March 31, 2023
Net unrealized gain (loss) available-for-sale debt securities	Net unrealized gain (loss) available-for-sale debt securities	$	(162)	$	54	$	(380)	$	252	$	(14)	Net unrealized gain (loss) available-for-sale debt securities		$	(162)	$	(218)	$	(341)
Net unrealized gain (loss) cash flow hedges	Net unrealized gain (loss) cash flow hedges	25		(9)		81		32		70		Net unrealized gain (loss) cash flow hedges		(17)		56		85
Postretirement plans	Postretirement plans	—		1		(3)		(4)		(16)		Postretirement plans		21		(3)		10
Other comprehensive income (loss)	Other comprehensive income (loss)	$	(137)	$	46	$	(302)	$	280	$	40	Other comprehensive income (loss)		$	(158)	$	(165)	$	(246)

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 loss on our AFS portfolio for ~~2022~~2023 was primarily due to ~~an increase~~spreads to swaps. Spreads on our swaps widened due to continued tightening of monetary policy, exacerbated by financial market turbulence experienced in ~~market interest rates in 2022.~~March of 2023. As these securities approach maturity, we expect the net unrealized losses in our AOCI as of ~~June 30, 2022~~March 31, 2023 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 ~~gain~~loss on cash flow hedges for ~~2022~~2023 was primarily driven by an ~~increase~~decrease in long term market interest rates in ~~2022.~~2023.

Postretirement plans

The gain recorded in 2023 was primarily due to an actuarial adjustment resulting from an increase in the discount rate used to calculate postretirement benefits.

We did not recognize any instrument-specific credit risk in our Condensed Statements of Comprehensive Income as of ~~June 30, 2022~~March 31, 2023 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.

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

~~Statement~~Statements of Condition

June 30,
2022 December 31, 2021
Cash and due from banks, interest bearing deposits, federal funds sold, and securities purchased under agreements to resell $ 20,984 $ 13,167
Investment debt securities 20,782 25,461
Advances 52,811 48,049
MPF Loans held in portfolio, net of allowance for credit losses 9,953 9,843
Other, net of allowance for credit losses 624 434
Assets $ 105,154 $ 96,954
Consolidated obligation discount notes $ 31,525 $ 24,563
Consolidated obligation bonds 64,519 63,373
Other 2,224 2,266
Liabilities 98,268 90,202
Capital stock 2,445 2,149
Retained earnings 4,401 4,261
Accumulated other comprehensive income (loss) 40 342
Capital 6,886 6,752
Total liabilities and capital $ 105,154 $ 96,954


	March 31, 2023		December 31, 2022




Cash and due from banks, interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell	$	22,529	$	27,548
Investment debt securities	23,022		22,134
Advances	79,584		66,288
MPF Loans held in portfolio, net of allowance for credit losses	10,174		10,160
Other, net of allowance for credit losses	745		723
Assets	$	136,054	$	126,853

Consolidated obligation discount notes	$	50,970	$	59,531
Consolidated obligation bonds	74,474		58,116
Other	2,652		1,741
Liabilities	128,096		119,388
Capital stock	3,545		2,989
Retained earnings	4,659		4,564
Accumulated other comprehensive income (loss)	(246)		(88)
Capital	7,958		7,465
Total liabilities and capital	$	136,054	$	126,853

The following is an analysis of the above table and comparisons apply to ~~June 30, 2022~~March 31, 2023 compared to December 31, ~~2021.~~2022.

Cash and due from banks, ~~interest bearing~~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 ~~second~~first quarter of ~~2022,~~2023, we maintained a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.

Investment Debt Securities

Investment debt securities ~~decreased~~increased at the end of ~~second~~first quarter ~~2022~~2023 compared to year end ~~2021~~2022 with the change primarily attributable to ~~a reduction~~an increase in investment in ~~U.S. Treasuries and a decline in the fair value of our AFS portfolio due to rising market interest rates.~~GSE mortgage-backed securities.

Advances

Advance balances increased at the end of ~~second~~first quarter ~~2022~~2023 compared to year end ~~2021~~2022 attributable to increased borrowings from our depository ~~members.~~members, including in connection with the banking industry volatility that occurred in early March 2023. 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. In addition, as our advances with our former captive insurance company members mature, our total advance levels may decrease. For a discussion of risks relating to our former captive insurance company members see Risk Factors starting on page ~~22 of~~20 in our ~~2021~~2022 Form 10-K. For details on our advances with our former captive insurance company members, see Note 6 - Advances.

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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 slightly as new-acquisition volume outpaced paydown and maturity activity.~~remained steady at the end of first quarter 2023 compared to year end 2022. 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 ~~other third party investors or~~ pool and securitize them into Ginnie Mae MBS.

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(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Liquidity, Funding, & Capital Resources

Liquidity

For the period ending ~~June 30, 2022,~~March 31, 2023, we maintained a liquidity position in accordance with FHFA regulations and guidance, 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. See Liquidity, Funding, & Capital Resources on page 5451 in our ~~2021~~2022 Form 10-K for a detailed description of our current liquidity requirements. We use different measures of liquidity as follows:

OvernightLiquidity – Our policy requires us to maintain overnight liquid assets at least equal to 3.5% or ~~$3.7~~$4.8 billion of total assets. As of ~~June 30, 2022,~~March 31, 2023, our overnight liquidity was ~~$24.0~~$30.2 billion or ~~23%~~22% of total assets, giving us an excess overnight liquidity of ~~$20.3~~$25.4 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 ~~June 30, 2022,~~March 31, 2023, we had excess liquidity of ~~$46.3~~$73.6 billion to support member deposits.

Liquidity Reserves – As discussed on page 5451 in the Liquidity, Funding, & Capital Resources section ofin our ~~2021~~2022 Form 10-K, the FHFA ~~guidance~~advisory bulletin on FHLB liquidity (the ~~“Liquidity AB”~~"Liquidity AB") requires ~~that~~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 ~~the~~ renewal of all maturing ~~advances. The Liquidity AB also requires the Bank to~~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. 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 Factors ~~section starting~~ on page ~~22 of~~20 in our ~~2021~~2022 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~~.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.

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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 balances 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 ~~flow~~flows of our assets, including prepayments made in advance of maturity.


		MPF Loans Held in Portfolio			Investment Debt Securities							MPF Loans		Investment Debt Securities
As of June 30, 2022				Available-for Sale			Held-to-Maturity
As of March 31, 2023										As of March 31, 2023		Held in Portfolio		Available-for-Sale		Held-to-Maturity
Year of Expected Principal Cash Flows	Year of Expected Principal Cash Flows										Year of Expected Principal Cash Flows
One year or less	One year or less	$	1,162		$	862		$	859	One year or less		$	1,126	$	13	$	4
After one year through five years	After one year through five years	3,939			2,655			234		After one year through five years		3,622		3,775		503
After five years through ten years	After five years through ten years	2,528			12,842			104		After five years through ten years		2,775		12,849		120
After ten years	After ten years	2,180			3,053			8		After ten years		2,516		7,407		13
Total	Total	$	9,809		$	19,412		$	1,205	Total		$	10,039	$	24,044	$	640

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 ~~the~~ Risk Factors ~~section starting~~ on page 2220 in our ~~2021~~2022 Form 10-K.

Funding

Conditions in Financial Markets

Despite some positive economic indicators, concerns about inflation and market pressures continued in the first quarter of 2023. The ~~dominant themes~~failures of Silicon Valley Bank and Signature Bank and the ensuing stress on the banking industry and the financial markets were significant events during March 2023. In response to prevailing concerns about the ability of banks to meet the needs of all their depositors, the Federal Reserve Board (Federal Reserve) eased access to its short-term lending to depository institutions (the discount window) and implemented a Bank Term Funding Program, which offers banks emergency loans to provide additional funding (as further discussed in Legislative and Regulatory Developments starting on page 53). The FHLBs experienced a substantial increase in debt issuance in March 2023 to meet member advance demand in the wake of the ~~second~~market turbulence. During this time, the FHLBs executed their mission by serving as a reliable source of liquidity and funding for their members.

During the first quarter of 2023, FHLB consolidated obligations outstanding rose by $297.7 billion from year end as FHLB funding needs increased in part due to accelerated member demand for advances in response to the stress on the banking industry and financial markets in March 2023. This compares to an increase in consolidated obligations of $149.4 billion during the fourth quarter of 2022. To the extent that market disruptions and stress in the banking industry in the aftermath of the bank failures discussed above re-emerges and/or proliferates, we and our members may be more likely to experience disruptions to our business and certain economic, liquidity, and regulatory impacts as discussed in Risk Factors starting on page 20 of our 2022 ~~were~~Form 10-K.

Following a 50 basis point rate hike in December 2022, the Federal Reserve slowed its pace of rate hikes further at its first meeting in 2023, as anticipated, announcing a rate hike of 25 basis points. Against the backdrop of market volatility, ~~concerns about rising inflation and recession risks, and interest rate hikes by the Federal Reserve. At its May 2022 meeting,~~ the Federal Open Market Committee (FOMC) ~~raised the federal funds~~announced another 25 basis point rate ~~target range by 50 basis points~~hike to a target ~~range between 0.75%-1.00%, noting factors such as rising inflation, the conflict in Ukraine, and supply and demand pressures related to the COVID-19 pandemic.~~

Atof 4.75%-5.00% at its March 2023 meeting, in ~~June 2022,~~line with market expectations. The FOMC’s statement indicated that despite some improvements in economic indicators, concerns about inflation persist. In May 2023, the FOMC ~~raised the target federal funds~~announced another rate ~~by 75 basis points~~hike to a target ~~range between 1.50%-1.75%—~~of 5.00%-5.25%. Interest rates were mixed quarter-over-quarter. Yields for U.S. Treasuries were higher for points in the ~~largest increase since 1994, noting in its statement concerns about inflation, higher energy prices,~~short end of the conflict in Ukraine, and supply chain pressures related to the COVID-19 pandemic. In addition, the Federal Reserve began reducing its balance sheet. U.S. Treasury yields finished the second quarter of 2022 higher than prevailing yieldscurve at the end of the first quarter 2023 relative to the prevailing yields at year-end 2022, with lower yields for points 2-years and longer. U.S. real gross domestic product (GDP) increased at an annual rate of ~~2022. U.S. Gross Domestic Product fell~~1.1% in the first quarter of 2023, according to the advance estimate reported by the Bureau of Economic Analysis, compared to an annualized increase of 2.6% in the fourth quarter of 2022 and an annualized decrease of 1.6% in the first quarter of ~~2022.~~2022, as revised by the Bureau of Economic Analysis. The U.S. stock market ~~declined in~~was slightly higher at the ~~second quarter~~end of ~~2022, as~~the first quarter; the Dow Jones Industrial Average stood at ~~30,775 points on June 30, 2022 versus 34,678~~33,274 points on March 31, 2023 versus 33,147 points on December 30, 2022.

Additionally, as uncertainty regarding the U.S. Government’s debt ceiling that became a significant concern during the first quarter of 2023 continues, we are closely monitoring our liquidity position in preparation for the possibility of a disorderly market caused by potential government debt defaults. For a discussion of risks relating to the ~~Bank relating~~FHLBs' ability to ~~market and other economic conditions and related government policies, including risks related~~access the capital markets in order to ~~prolonged inflation,~~fund our business, see Risk Factors starting on page 2220 of our ~~2021~~2022 Form 10-K.

We maintained ready access to funding throughout the ~~second~~first quarter of ~~2022.~~

2023.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

LIBOR Transition

~~Following~~In accordance with the United Kingdom's ~~(U.K.)~~ Financial Conduct Authority (FCA)’s 2017 announcement of its intention to cease sustaining the LIBOR indices after 2021, the Alternative Reference Rates Committee (ARRC) identified the Secured Overnight Financing Rate (SOFR) as its recommended alternative rate. SOFR is based on a broad segment of the overnight Treasuries repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities. The FHLB System issued its first SOFR-linked debt in the market on November 13, 2018.

OnAuthority's March 5, 2021 ~~the FCA announced the cessation of the 1 week and 2 month USD LIBOR effective December 31, 2021, and the cessation of the remaining~~announcement, USD LIBOR tenors ~~effective~~are scheduled to no longer be supported or published immediately after June 30, 2023. The FCA announced that it would consult whether to require LIBOR’s administrator (the Intercontinental Exchange Benchmark Administration Limited) to publish certain frequently used USD LIBOR tenors on a non-representative, synthetic basis after June 30, 2023. FCA’s announcement constituted an index cessation event under the International Swaps and Derivatives Association's (ISDA) 2020 IBOR Fallbacks Protocol and IBOR Fallbacks Supplement, and as a result, the fallback spread adjustment for derivatives is fixed as of the date of the announcement. We do not have assets indexed to the 1 week and 2 month USD LIBOR, although many of our assets and liabilities are indexed to the remaining USD LIBOR tenors, which will no longer be provided after June 30, 2023.

Additionally, in accordance with a 2019 FHFA supervisory letter, we ceased entering into option embedded advance products that reference LIBOR and ceased purchasing investments that reference LIBOR and matured after December 31, 2021. We also suspended transactions in certain structured advances and advances with terms directly linked to LIBOR and we no longer enter into consolidated obligation bonds and derivatives with swaps, caps, or floors indexed to LIBOR. Further, on July 1, 2021, the FHFA issued an additional supervisory letter setting forth its expectations that the FHLBs should be prudent in their use of non-SOFR based alternative reference rates, and should avoid use of alternative reference rates that are not based on underlying transactions or that introduce further model risk. The letter also requires that an FHLB provide advance notice to its examiner-in-charge of its plans to use a non-SOFR alternative reference rate. For further discussion of the risks related to the replacement of LIBOR, see the ~~Risk Factors~~ ~~section starting on page 22 in our 2021 Form 10-K.~~

In keeping with ~~ARRC's recommendation~~our regulator's and the Alternative Reference Rates Committee's recommendations and industry developments, the Bank has selected SOFR as its preferred primary replacement rate for investments and advances. We have developed a LIBOR transition action plan and our Asset-Liability Management Committee (ALCO) is the management committee responsible for overseeing the transition from LIBOR. In assessing our current exposure to LIBOR, we developed an inventory of financial instruments impacted and identified contracts that would require adding or adjusting the "fallback" language which provides for contractual alternatives to the use of LIBOR when LIBOR cannot be determined based on the method provided in the agreement. We have amended the terms of certain advance products to include fallback language. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”) was signed into law. The LIBOR Act creates a uniform process to incorporate a replacement benchmark rate for LIBOR-indexed contracts that either do not contain a LIBOR fallback provision or contain an insufficient LIBOR fallback provision. On July 19, 2022, the Federal Reserve Board issued proposed implementing regulations under the LIBOR Act, as further discussed in ~~Legislative and Regulatory Developments~~ ~~starting on page 55.~~

For over-the-counter derivatives, we adhered to the ISDA 2020 IBOR Fallbacks Protocol. For cleared derivatives, as part of the transition from LIBOR to SOFR, our clearinghouses revised their discounting methodology used to calculate the present value of future cash flows and price alignment on variation margin for USD cleared swaps from the daily effective federal funds rate (EFFR) to SOFR. Both of our clearinghouses have implemented their own unique cash and basis swap compensation mechanisms for market participants to neutralize any value transfer discrepancies from the LIBOR to SOFR conversion. Further, each clearinghouse announced its own proposal for the conversion process of LIBOR-linked cleared derivatives to risk-free rates, which is expected to occur predominantly at or shortly before the effective date of LIBOR discontinuation for all LIBOR swaps for each clearinghouse with the exceptions of CME Clearing which proposes to convert zero coupon swaps and any remaining LIBOR swaps with non-representative fixings on July 3, 2023. We continue to monitor the market-wide efforts to address fallback language related to cleared derivatives and investment securities as well as fallback language for new activities and issuances of financial instruments. We continue to assess our operational readiness, including updating our processes and information technology systems to support the transition from LIBOR to SOFR. For further discussion on our transition away from LIBOR, see LIBOR Transition starting on page 53 in our 2022 Form 10-K.

Market activity in SOFR-indexed financial instruments continues to increase and we continue to participate in the issuance of SOFR-indexed consolidated bonds. We are using federal funds overnight index swaps (Fed Funds OIS) and ~~SOFR indexed~~SOFR-indexed swaps as an interest rate hedging strategy for financial instruments that do not have embedded options, as an alternative to using LIBOR when entering into new derivative transactions. We are offering SOFR-linked advances to our members, and for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, have issued ~~$9.3~~$23.2 billion in SOFR-linked advances. ~~For a discussion of risks relating to our use of SOFR-linked consolidated obligations and advances, see~~ ~~Risk Factors~~ ~~starting on page 22 of our 2021 Form 10-K.~~ We also offer Discount Note-index floater advances, which some members have used as alternatives to LIBOR-linked advance products. For a discussion of risks relating to the transition from LIBOR, including our use of SOFR-linked consolidated obligations and advances, see Risk Factors on page 20 in our 2022 Form 10-K.

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~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

Variable-Rate Financial Instruments by Interest-Rate Index and LIBOR-Indexed Financial Instruments

We have LIBOR exposure related to advances, investment securities, consolidated bonds, and derivatives with interest rates indexed to LIBOR. The following tables present our variable rate financial instruments by interest-rate index at ~~June 30, 2022~~March 31, 2023 and may not include instruments that indirectly incorporate LIBOR or another interest rate index. The tables also do not consider the impact of any fallback language contained in our financial products. ABS and MBS are presented by contractual maturity; however, their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

As of June 30, 2022 Advances Investments Consolidated Obligations
Principal amount of variable rate instruments outstanding a
LIBOR $ 372 $ 2,657 $ —
SOFR 3,765 507 10,810
Treasury — 95 —
Consolidated obligation yields 19,046 — —
Other 149 1 —
Total $ 23,332 $ 3,260 $ 10,810
Overnight, 1 month, 3 month, 6 month and 12-Month US Dollar LIBOR that cease or will no longer be representative immediately after June 30, 2023
Due in 2022 $ 42 $ — $ —
Due through June 30, 2023 36 — —
Due thereafter 294 2,657 —
Total $ 372 $ 2,657 $ —
Principal amount of SOFR-linked instruments issued YTD through
June 30, 2022 $ 9,306 $ — $ —


As of March 31, 2023	Advances		Investments		Consolidated Obligations

Principal amount of variable rate instruments outstanding a
LIBOR	$	164	$	2,232	$	—
SOFR	18,510		367		7,485

Treasury	—		71		—
Consolidated obligation yields	21,213		—		—
Other	158		—		—
Total	$	40,045	$	2,670	$	7,485

Overnight, 1 month, 3 month, 6 month and 12-Month US Dollar LIBOR that cease or will no longer be representative immediately after June 30, 2023
Due through June 30, 2023	$	29	$	—	$	—
Due thereafter	135		2,232		—
Total	$	164	$	2,232	$	—

Principal amount of SOFR-linked instruments issued YTD through
March 31, 2023	$	23,162	$	—	$	1,822

a With respect to advances, includes fixed rate advances that have cap/floor optionality linked to an interest rate index.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

The following table details our variable rate financial instruments by pay or receive leg and whether cleared or uncleared.


As of June 30, 2022						Derivative Notional Amount Outstanding
As of March 31, 2023										As of March 31, 2023					Derivative Notional Amount Outstanding
						Pay Leg		Receive Leg							Pay Leg		Receive Leg
Interest rate swaps outstanding	Interest rate swaps outstanding									Interest rate swaps outstanding
Fixed rate	Fixed rate					$	35,977	$	47,904	Fixed rate					$	46,742	$	67,145
LIBOR	LIBOR					1,958		12,504		LIBOR					449		9,230
SOFR	SOFR					25,047		10,556		SOFR					48,299		25,379
OIS	OIS					20,900		12,918		OIS					18,398		12,134

Total interest rate swaps	Total interest rate swaps					$	83,882	$	83,882	Total interest rate swaps					$	113,888	$	113,888

Breakdown of above LIBOR interest rate swaps by termination date and type	Breakdown of above LIBOR interest rate swaps by termination date and type	Pay Leg				Receive Leg				Breakdown of above LIBOR interest rate swaps by termination date and type	Pay Leg				Receive Leg
		Cleared		Uncleared		Cleared		Uncleared			Cleared		Uncleared		Cleared		Uncleared
Overnight, 1 month, 3 month, 6 month and 12 month US Dollar LIBOR that cease or will no longer be representative immediately after June 30, 2023	Overnight, 1 month, 3 month, 6 month and 12 month US Dollar LIBOR that cease or will no longer be representative immediately after June 30, 2023									Overnight, 1 month, 3 month, 6 month and 12 month US Dollar LIBOR that cease or will no longer be representative immediately after June 30, 2023
Terminates in 2022		$	899	$	15	$	226	$	211
Terminates through June 30, 2023	Terminates through June 30, 2023	767		35		274		65		Terminates through June 30, 2023	$	172	$	35	$	81	$	22
Terminates thereafter	Terminates thereafter	241		1		8,600		3,128		Terminates thereafter	241		1		7,360		1,767
Total	Total	$	1,907	$	51	$	9,100	$	3,404	Total	$	413	$	36	$	7,441	$	1,789

Condensed Statements of Cash Flows

Net cash flows from operating activities


Six months ended June 30,		2022		2021
Three months ended March 31,						Three months ended March 31,	2023		2022
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	1,065	$	296	Net cash provided by (used in) operating activities	$	109	$	467

In ~~both~~2023, the majority of our operating cash inflows were related to net income earned. In 2022, ~~and 2021,~~ the majority of our operating cash inflows were related to cash received from clearinghouses to settle ~~market-to market positions; these inflows reversed the $1.9 billion of cash outflows we experienced in the first quarter of 2020 due to market volatility as a result of the COVID-19 pandemic.~~

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~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~market-to-market positions.

Net cash flows from investing activities with significant activity


Six months ended June 30,		2022		2021
Three months ended March 31,						Three months ended March 31,	2023		2022

Liquid assets consisting of interest bearing deposits, federal funds sold, and securities purchased under agreements to resell		$	(7,813)	$	(2,275)
Liquid assets consisting of interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell						Liquid assets consisting of interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell	$	5,023	$	(3,909)

Investment debt securities	Investment debt securities	2,755		1,271		Investment debt securities	(59)		1,161

Advances	Advances	(5,824)		105		Advances	(12,986)		424

MPF Loans held in portfolio	MPF Loans held in portfolio	(136)		228		MPF Loans held in portfolio	(19)		29
Other	Other	(8)		(7)		Other	(2)		(4)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	$	(11,026)	$	(678)	Net cash provided by (used in) investing activities	$	(8,043)	$	(2,299)

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 ~~six~~three months ended ~~June 30,~~March 31, 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 2023 our net cash outflows from investment debt securities was primarily attributable to an increase in investment in GSE mortgage-backed securities. In 2022 ~~and 2021~~ our net cash inflows from investment debt securities was attributable to a reduction in investment in ~~U.S. Treasuries.~~Small Business Administration securities that matured and were not replaced.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

•In ~~2022~~2023 our net cash outflows for advances was attributable to increased borrowing from our depository ~~members.~~members, including in connection with the banking industry volatility that occurred in early March 2023. In ~~2021~~2022 our net cash ~~outflow~~inflows for advances resulted from ~~an increase~~a slight decrease in ~~advance borrowing by insurance company members that more than offset reduced depository member demand for funding.~~outstanding advances.

•In ~~2022~~2023 our net cash outflows for MPF Loans held in portfolio was due to new-acquisition volume that outpaced paydown and maturity activity. In ~~2021~~2022 our net cash inflows from MPF Loans held in portfolio was due to ~~new-acquisition~~new acquisition volume that was outpaced by paydown and maturity activity.

Net cash flows from financing activities with significant activity


Six months ended June 30,		2022		2021
Three months ended March 31,						Three months ended March 31,	2023		2022

Consolidated obligation discount notes	Consolidated obligation discount notes	$	6,935	$	(2,911)	Consolidated obligation discount notes	$	(8,581)	$	1,895

Consolidated obligation bonds	Consolidated obligation bonds	3,132		429		Consolidated obligation bonds	15,736		234
Other	Other	(102)		(237)		Other	783		(311)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	$	9,965	$	(2,719)	Net cash provided by (used in) financing activities	$	7,938	$	1,818

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 ~~six~~three months ended ~~June 30,~~March 31, unless otherwise stated.

•In 2023 we paid down our discount notes and increased our use of bonds to align with advantageous funding opportunities. The increased borrowing on our bonds reflects an increase in debt financing to match the overall increase in assets (primarily advances) outstanding as discussed in investing activities above. In 2022 our ~~net~~ cash inflows from both discount notes and bonds reflects an increase in debt financing to match the overall increase in assets outstanding as discussed in investing activities above. In 2021 we paid down our discount notes and increased our use of bonds to align with advantageous funding opportunities and a smaller balance sheet.outstanding.

•In 2023 our net cash inflows for Other was primarily due to proceeds from issuance of our capital stock. In 2022 ~~and 2021~~ our net cash outflows for Other was primarily due to members withdrawing from their deposit accounts.

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

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 the Reduced Capitalization Advance Program (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 beginning in May 2021.~~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%.

Table of Contents

Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

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 ~~2021,~~2022, see Capital Resources on page ~~62 of~~60 in our ~~2021~~2022 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 see Note 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 ofin our ~~2021~~2022 Form 10-K.

Reduced Capitalization Advance Program (RCAP)

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 ~~June 30, 2022,~~March 31, 2023, RCAP advances outstanding ~~total $20.3~~totaled 22.5 billion to ~~185~~173 members ~~compared to $20.6 billion to 351 members at December 31, 2021. The advances issued through our COVID-19 relief~~ and ~~recovery programs are all RCAP advances.~~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.

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

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 Stock on page ~~66 of~~64 in our ~~2021~~2022 Form 10-K.

Capital Amounts

The following table reconciles our capital reported in our Condensed Statements of Condition to 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.


	March 31, 2023		December 31, 2022
Capital stock	$	3,545	$	2,989
Mandatorily redeemable capital stock (MRCS) recorded as a liability	247		248
Regulatory capital stock	3,792		3,237
Retained earnings	4,659		4,564
Regulatory capital	$	8,451	$	7,801


Capital stock	$	3,545	$	2,989
Retained earnings	4,659		4,564
Accumulated other comprehensive income (loss)	(246)		(88)
GAAP capital	$	7,958	$	7,465

June 30, 2022 December 31, 2021
Capital Stock $ 2,445 $ 2,149
Mandatorily redeemable capital stock (MRCS) recorded as a liability 273 247
Regulatory capital stock 2,718 2,396
Retained earnings 4,401 4,261
Regulatory capital $ 7,119 $ 6,657
Capital stock $ 2,445 $ 2,149
Retained earnings 4,401 4,261
Accumulated other comprehensive income (loss) 40 342
GAAP capital $ 6,886 $ 6,752

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

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 liquidity requirements under the FHLB Act and FHFA regulations. On ~~July 28, 2022,~~April 26, 2023, our Board of Directors declared a ~~5.750%~~7.38% dividend (annualized) for Class B1 activity stock and a ~~2.375%~~3.19% dividend (annualized) for Class B2 membership stock based on our preliminary financial results for the ~~second~~first quarter of ~~2022.~~2023. This dividend totaled ~~$33~~$59 million (recorded as ~~$29~~$55 million dividends on capital stock and $4 million interest expense on mandatorily redeemable capital stock) and is scheduled for payment on ~~August~~May 15, ~~2022.~~2023.

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 64 in our 2022 Form ~~10-Q for the quarter ended March 31, 2022.~~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 ofin our ~~2021~~2022 Form ~~10-K~~.10-K.

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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 Management starting on page 6967 in our ~~2021~~2022 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, ~~$53.5~~$80.4 billion were advances (par value) and ~~$13.1~~$10.5 billion were letters of credit at ~~June 30, 2022,~~March 31, 2023, compared to ~~$47.7~~$67.5 billion and ~~$11.3~~$10.7 billion at December 31, ~~2021.~~2022.


		June 30, 2022					December 31, 2021						March 31, 2023					December 31, 2022
Rating	Rating	Borrowing Members	Credit Outstanding		Collateral Loan Value		Borrowing Members	Credit Outstanding		Collateral Loan Value		Rating	Borrowing Members	Credit Outstanding		Collateral Loan Value		Borrowing Members	Credit Outstanding		Collateral Loan Value
1-3	1-3	506	$	66,387	$	137,638	545	$	58,542	$	131,923	1-3	513	$	90,623	$	176,289	508	$	73,625	$	147,127
4	4	8	402		562		6	464		611		4	8	383		452		9	497		519
5	5	7	64		138		7	30		44		5	9	105		181		8	68		118
Total	Total	521	$	66,853	$	138,338	558	$	59,036	$	132,578	Total	530	$	91,111	$	176,922	525	$	74,190	$	147,764

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 Losses to 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 ~~PMI,~~primary mortgage insurance, Recoverable CE Fees, and the CE Amount which may include 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 Products on page 9 ofin our ~~2021~~2022 Form 10-K, and Credit Risk Exposure and Setting Credit Enhancement Levels starting on page ~~72 of~~70 in our ~~2021~~2022 Form 10-K.

Under our MPF Program for conventional loans held in our portfolio, the loan payment forbearance offered to borrowers impacted by the COVID-19 pandemic allows a borrower to defer loan payments for up to a total cumulative forbearance period of 24 months.

For Government Loans held in our portfolio, the forbearance plan requirements of the insuring or guarantying agency must be followed. For MPF Xtra loans that are serviced by PFIs or a servicing aggregator approved by the MPF Program, Fannie Mae’s forbearance plan requirements must be followed, which allows a borrower to defer loan payments for up to a total cumulative forbearance period of 18 months.

~~Borrowers who are in existing forbearance plans are evaluated for reinstatement, repayment, deferment, permanent loan modification, or liquidation options, as appropriate for their situation.~~

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)~~

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 ~~our most~~the more popular, and during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we purchased and concurrently delivered ~~$1.0~~$0.1 billion and ~~$4.5~~$0.6 billion ~~respectively,~~ 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 Risk on page 7472 in our ~~2021~~2022 Form 10-K.

Investment Debt Securities

We hold a variety of investment debt securities, mostly government backed or insured securities, and we believe these investments are currently low risk. Except for an immaterial amount, all are rated at least AA and there were no material changes in the credit ratings of these securities since December 31, ~~2021.~~2022. For further details see Investment Debt Securities on page 7774 in our ~~2021~~2022 Form 10-K.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Unsecured Short-Term Investments

See Unsecured Short-Term Investments on page 7976 in our ~~2021~~2022 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 ~~rating used was~~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 June 30, 2022		AA		A		Total
As of March 31, 2023								As of March 31, 2023	AA		A		Total
Domestic U.S.	Domestic U.S.							Domestic U.S.
Interest-Bearing Deposits	Interest-Bearing Deposits	$	—	$	855	$	855	Interest-Bearing Deposits	$	—	$	2,570	$	2,570
Fed Funds Sold		—		1,100		1,100
Total Domestic U.S.		—		1,955		1,955

Foreign commercial banks - federal funds sold:	Foreign commercial banks - federal funds sold:							Foreign commercial banks - federal funds sold:
Australia	Australia	—		1,000		1,000		Australia	—		1,100		1,100

Canada	Canada	—		2,325		2,325		Canada	—		2,950		2,950
Finland	Finland	560		—		560		Finland	755		—		755

France								France	—		1,100		1,100

Netherlands	Netherlands	—		350		350		Netherlands	—		1,070		1,070

Norway								Norway	200		—		200

Total U.S. branches and agency offices of foreign commercial banks	Total U.S. branches and agency offices of foreign commercial banks	560		3,675		4,235		Total U.S. branches and agency offices of foreign commercial banks	955		6,220		7,175
Total unsecured credit exposure	Total unsecured credit exposure	$	560	$	5,630	$	6,190	Total unsecured credit exposure	$	955	$	8,790	$	9,745

All ~~$6.190~~$9.745 billion of the unsecured credit exposure shown in the above table were overnight investments.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Managing Our Credit Risk Exposure Related to Derivative Agreements

See Note 9 - Derivatives and Hedging Activities to 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.

The following table presents our derivative positions where we have such credit exposures. The ~~rating used was~~ratings shown in the following table reflect the lowest long-term debt rating reported among the three largest NRSROs. ~~Non-cash~~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 derivative positions with credit exposure. Noncash collateral pledged also consists of net initial margin exchanged on our bilateral derivatives. We had no material concentration of credit risk with any one bilateral derivative counterparty.


		Net Derivative Fair Value Before Collateral		Cash Collateral Pledged		Noncash Collateral Pledged		Net Credit Exposure to Counterparties		a		Net Derivative Fair Value Before Collateral		Cash Collateral Pledged		Noncash Collateral Pledged		Net Credit Exposure to Counterparties		a
As of June 30, 2022
As of March 31, 2023											As of March 31, 2023
Nonmember counterparties -	Nonmember counterparties -										Nonmember counterparties -

Overcollateralized liability positions -	Overcollateralized liability positions -										Overcollateralized liability positions -
Bilateral derivatives -	Bilateral derivatives -										Bilateral derivatives -

AA											AA	$	(150)	$	152	$	—	$	2
A	A	$	(681)	$	746	$	—	$	65		A	(841)		857		—		16
BBB	BBB	(796)		844		—		48			BBB	(825)		844		10		29

Cleared derivatives	Cleared derivatives	(127)		—		616		489			Cleared derivatives	(86)		—		804		718
Nonmember counterparties	Nonmember counterparties	(1,604)		1,590		616		602			Nonmember counterparties	(1,902)		1,853		814		765
CO bond firm commitments		1		12		—		13

Member counterparties	Member counterparties	1		—		—		1			Member counterparties	2		—		—		2
Total	Total	$	(1,602)	$	1,602	$	616	$	616		Total	$	(1,900)	$	1,853	$	814	$	767

a Less than $1 million is shown as zero.

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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.

Consumer Financial Protection Bureau (CFPB) Final Rule on Small Business Lending Data

~~FHFA Director’s Testimony~~

On March 30, 2023, the CFPB issued a final rule requiring certain covered financial institutions to collect and report small business lending data. For purposes of this rule, small businesses are businesses with $5 million or less in gross annual revenue in the ~~House Financial Services Committee on on~~preceding fiscal year. An FHLB will be subject to data collection and reporting obligations if the FHLB has originated a ~~Planned Review~~minimum of 100 “covered credit transactions” to small businesses in each of the ~~FHLB System.~~ ~~On July 20, 2022, FHFA Director Sandra L. Thompson gave testimony~~two preceding calendar years. The final rule implements phased-in compliance dates, beginning on October 1, 2024, based on the number of originations the covered financial institution makes to small businesses within a specified timeframe. The Bank is assessing whether obligations will be triggered for the ~~House Financial Services Committee indicating that~~Bank and what operational changes will be necessary for compliance. While the ~~FHFA intends to review~~Bank is still analyzing the ~~FHLB System. Director Thompson’s testimony indicated that the FHFA plans to engage a variety of stakeholders in addition to holding public listening sessions throughout the country as part~~impact of the ~~review. Director Thompson's testimony also indicated~~final rule, we do not believe these changes will have a material effect on the Bank’s financial condition or results of operations.

Federal Reserve Bank Term Funding Program

On March 12, 2023, in response to prevailing concerns about the ability of banks to meet the needs of all their depositors, the Federal Reserve Board (Federal Reserve) announced the implementation of a Bank Term Funding Program (BTFP) as an additional source of liquidity for eligible borrowers, including any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit with the ~~analysis would examine matters ranging~~Federal Reserve. The BTFP offers up to one-year term loans to be secured by eligible collateral owned by eligible borrowers as of March 12, 2023. Such loans can be requested until at least March 11, 2024. The BTFP is subject to $25 billion in credit protection by the U.S. Department of Treasury. The BTFP is an alternative funding source with favorable terms available for the Bank’s depository institution members, which could reduce demand for advances from the ~~FHLBs’ membership base, operational efficiency,~~Bank by some members during the term of the BTFP. While the Bank is still analyzing the impact of this new program and ~~effectiveness to more foundational questions about our mission, purpose,~~cannot predict its effect on the Bank’s business, financial condition and ~~organization. At this time, it is~~results of operations, we do not ~~possible to determine when these events~~believe the program will ~~occur, whether any actions will result from these events, and how these events will ultimately impact the FHLBs.~~have a material impact.

FHFA Proposed Rule ~~Implementing~~on Fair Lending, Fair Housing, and Equitable Housing Finance Plans

On April 26, 2023, the ~~Adjustable Interest Rate (LIBOR) Act.~~ ~~On July 28, 2022, the Board of Governors of the Federal Reserve System (the Board)~~FHFA published a proposed rule that specifies requirements related to FHLB compliance with ~~a comment deadline of~~ ~~August 29, 2022~~ ~~that would implement~~fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws include the ~~Adjustable Interest Rate (LIBOR) Act. The~~Fair Housing Act, the Equal Credit Opportunity Act, and those acts’ implementing regulations. Further, the proposed rule would ~~provide default rules~~outline the FHFA's enforcement authority. The proposal is open for ~~certain contracts (covered contracts) that reference LIBOR,~~public comment through June 26, 2023, and we are ~~governed by U.S. law, do not mature on or before~~evaluating the LIBOR replacement date, and lack adequate provisions to identify a replacement rate for LIBOR. The LIBOR replacement date is currently July 3, 2023. The proposed rule identifies separate Board-selected replacement rates for derivatives transactions, covered GSE contracts, and all other covered contracts. The proposed rule defines covered GSE contracts to include FHLB advances. We are reviewingpotential impact of the proposed rule ~~however it is not yet possible to determine~~on the ~~extent to which the rule will be adopted as proposed~~Bank and ~~as a result, the impact the final rule may have on us.~~its operations.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our Asset/Liability Management Committee and its subcommittees provide oversight of our risk management practices and policies. This includes routine reporting to senior Bank management and the Board of Directors, as well as maintaining the Income and Market Value Risk Policy, which defines our interest rate risk limits. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk on page 78 in our 2022 Form 10-K for further discussion on market risk.

The table below reflects the expected change in market value of equity for the stated increase or decrease in interest rates based on our models and related loss limit for each scenario established in the policy. For our down scenario shock analysis, the down shocks are constrained by scenarios provided by our regulator, which currently are limited so that shocked rates will not go negative but are subject to change. As a result, where applicable, we ~~floored~~apply a floor to the down shock scenario at 10 bps. ~~Due to~~In the ~~low~~current rate environment, this floor setting was not triggered for ~~some down~~any of the shock scenarios presented below.

June 30, 2022 December 31, 2021
Scenario as of Change in Market Value of Equity Loss Limit Change in Market Value of Equity Loss Limit
-200 bp $ (226) $ (450) $ 487 $ (450)
-100 bp (61) (200) (44) (200)
-50 bp (20) (90) (19) (90)
-25 bp (8) (45) (11) (45)
+25 bp 4 (45) (11) (45)
+50 bp 5 (90) (28) (90)
+100 bp — (200) (75) (200)
+200 bp (30) (450) (181) (450)


	March 31, 2023				December 31, 2022
Scenario as of	Change in Market Value of Equity		Loss Limit		Change in Market Value of Equity		Loss Limit
-200 bp	$	(292)	$	(450)	$	(172)	$	(450)
-100 bp	(119)		(200)		(60)		(200)
-50 bp	(53)		(90)		(24)		(90)
-25 bp	(24)		(45)		(11)		(45)
+25 bp	20		(45)		9		(45)
+50 bp	37		(90)		15		(90)
+100 bp	62		(200)		26		(200)
+200 bp	79		(450)		33		(450)

Measurement of Market Risk Exposure

To measure our exposure, we discount the cash flows generated from modeling the terms and conditions of all interest rate-sensitive securities using current interest rates to determine their fair values or spreads to the swap curve for securities where third party prices are used. This includes considering explicit and embedded options using a lattice model or Monte Carlo simulation. We estimate yield curve, option, and basis risk exposures by calculating the fair value change in relation to various parallel changes in interest rates, implied volatility, prepayment speeds, spreads to the swap curve and mortgage rates.

The table below summarizes our sensitivity to various interest rate risk exposures in terms of changes in market value.


		As of June 30, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
Yield Curve Risk	Yield Curve Risk	$	4	$	4	Yield Curve Risk	$	9	$	7
Option Risk	Option Risk					Option Risk
Implied Volatility	Implied Volatility	2		5		Implied Volatility	1		4

Prepayment Speeds						Prepayment Speeds	—		—
Basis Risk	Basis Risk					Basis Risk
Spread to Swap Curve	Spread to Swap Curve	(4)		(12)		Spread to Swap Curve	3		4

Mortgage Spread						Mortgage Spread	—		—

Yield curve risk – Change in market value for a one basis point parallel increase in the swap curve.

Option risk (implied volatility) – Change in market value for a one percent parallel increase in the swaption volatility.

Option risk (prepayment speeds) – Change in market value for a one percent increase in prepayment speeds.

Basis risk (spread to swap curve) – Change in market value for a one basis point parallel increase in the spread to the swap curve.

Basis risk (mortgage spread) – Change in market value for a one basis point increase in mortgage rates.

As of ~~June 30, 2022,~~March 31, 2023, our sensitivity to changes in implied volatility using a lattice model and Monte Carlo simulation was $2$1 million, ~~unchanged from $5~~compared to $4 million at December 31, ~~2021.~~2022. These sensitivities are limited in that they do not incorporate other risks, including but not limited to non-parallel changes in yield curves, prepayment speeds, and basis risk related to differences between the swap and the other curves. Option positions embedded in our mortgage assets and callable debt impact our yield curve risk profile, such that swap curve changes significantly greater than one basis point cannot be linearly interpolated from the table above.

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Federal Home Loan Bank of Chicago

(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)

Duration of equity is another measure to express interest rate sensitivity. We report the results of our duration of equity calculations to the FHFA each quarter. We measure duration of equity in a base case using the actual yield curve as of a specified date and then shock it with an instantaneous shift of the entire curve.

The following table presents the duration of equity reported by us to the FHFA in accordance with the FHFA's guidance, which prescribes that down and up interest-rate shocks equal 200 basis points. The results are shown by duration of equity in years. ~~We continue to monitor impacts of the COVID-19 pandemic and inflation trends on the markets and the economy which may impact our mortgage prepayment speed projections and duration of equity~~The Bank engages in ~~2022.~~ongoing performance monitoring for its market risk-related models.


		Duration of equity in years			Duration of equity in years
Scenario as of	Scenario as of	June 30, 2022	December 31, 2021	Scenario as of	March 31, 2023	December 31, 2022
Down 200 bps	Down 200 bps	-2.7	1.1	Down 200 bps	-2.4	-1.8
Base	Base	-0.3	0.4	Base	-1.0	-0.5
Up 200 bps	Up 200 bps	0.5	1.5	Up 200 bps	-0.1	-0.0

As of ~~June 30, 2022,~~March 31, 2023, on a U.S. GAAP basis, our fair value surplus (relative to book value) was ~~$679~~$564 million, and our market value of equity to book value of equity ratio was ~~109%~~107%, compared to ~~$458~~$407 million and ~~107%~~105% at December 31, ~~2021. Our~~2022. The increase in the market value of equity to book value of ~~total capital for regulatory risk-based capital purposes differs from this GAAP calculation,as discussed~~equity was largely a result of wider debt spreads in ~~Note 11 - Capital and Mandatorily Redeemable Capital Stock (MRCS)~~ to the ~~condensed financial statements.~~markets.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the Evaluation Date). Based on this evaluation, the principal executive officer and principal financial officer concluded as of the Evaluation Date that the disclosure controls and procedures were effective such that information relating to us that is required to be disclosed in reports filed with the ~~SEC~~SEC: (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control ~~Over~~over Financial Reporting

For the most recent quarter presented in this Form 10-Q, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Consolidated Obligations

Our disclosure controls and procedures include controls and procedures for accumulating and communicating information relating to our joint and several liability for the consolidated obligations of other FHLBs. For further information, see Item 9A. Controls and Procedures on page ~~88 of~~86 in our ~~2021~~2022 Form 10-K.

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Federal Home Loan Bank of Chicago

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Bank may be subject to various legal proceedings arising in the normal course of business. After consultation with legal counsel, management is not aware of any proceedings that might have a material effect on the Bank's financial condition or results of operations.

Item 1A. Risk Factors.

In addition to the information presented in this report, readers should carefully consider the factors set forth in the Risk Factors section starting on page 2220 in our ~~2021~~2022 Form 10-K, which could materially affect our business, financial condition, or future results. These risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also severely affect us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.




31.1			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Executive Officer a

31.2			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Financial Officer a

32.1			Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Principal Executive Officer a

32.2			Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Principal Financial Officer a

101.INS			Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. a

101.SCH			Inline XBRL Taxonomy Extension Schema Document a

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document a

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document a

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document a

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document a

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) a

a Filed herewith.

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Federal Home Loan Bank of Chicago

Glossary of Terms

Advances: Secured loans to members.

ABS: ~~Asset backed securities.~~Asset-backed-securities.

AFS: Available-for-sale debt securities.

AHP: Affordable Housing Program.

AOCI: Accumulated Other Comprehensive Income.

Capital Plan: Capital Plan of the Federal Home Loan Bank of Chicago, effective as of May 3, 2021.

~~CARES Act:~~ ~~The Coronavirus, Aid, Relief, and Economic Security Act, enacted March 27, 2020.~~

CE Amount: A PFI's assumption of credit risk, beyond any Recoverable CE Fees in the FLA, on conventional MPF Loan products held in an MPF Bank's portfolio that are funded by, or sold to, an MPF Bank by providing credit enhancement either through a direct liability to pay credit losses up to a specified amount or through a contractual obligation to provide SMI. Does not apply to the MPF Government, MPF Xtra, ~~MPF Direct~~ or MPF Government MBS product.

CE Fee: Credit enhancement fee. PFIs are paid a credit enhancement fee for managing credit risk and in some instances, all or a portion of the CE Fee may be performance based.

~~CFTC:~~ ~~Commodity Futures Trading Commission.~~

Consolidated Obligations (CO): FHLB debt instruments (bonds and discount notes) which are the joint and several liability of all FHLBs; issued by the Office of Finance.

Consolidated obligation bonds: Consolidated obligations that make periodic interest payments with a term generally over one year, although we have issued for terms of less than one year.

DCO: Derivatives Clearing Organization. A clearinghouse, clearing association, clearing corporation, or similar entity that enables each party to an agreement, contract, or transaction to substitute, through novation or otherwise, the credit of the DCO for the credit of the parties; arranges or provides, on a multilateral basis, for the settlement or netting of obligations; or otherwise provides clearing services or arrangements that mutualize or transfer credit risk among participants.

Discount notes: Consolidated obligations with a term of one year or less, which sell at less than their face amount and are redeemed at par value when they mature.

DPP: Downpayment Plus.

Excess capital stock: Capital stock held by members in excess of their minimum investment requirement.

Fannie Mae: Federal National Mortgage Association.

FASB: Financial Accounting Standards Board.

FCM: Futures Commission Merchant.

FFELP: Federal Family Education Loan Program.

FHFA: Federal Housing Finance Agency - ~~The~~the Housing ~~and Economic Recovery~~ Act ~~of 2008 enacted on July 30, 2008~~ created the Federal Housing Finance Agency which became the regulator of the FHLBs.

FHLB Act: The Federal Home Loan Bank Act of 1932, as amended.

FHLBs: The 11 Federal Home Loan Banks or subset thereof.

FHLB System: The 11 FHLBs and the Office of Finance.

FHLB Chicago: The Federal Home Loan Bank of Chicago.

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Federal Home Loan Bank of Chicago

FLA: First loss account is a memo account used to track the MPF Bank's exposure to losses until the CE Amount is available to cover losses.

Freddie Mac: Federal Home Loan Mortgage Corporation.

GAAP: Generally Accepted Accounting Principles in the United States of America.

Ginnie Mae: Government National Mortgage Association.

Ginnie Mae MBS: ~~Mortgage backed~~Mortgage-backed securities guaranteed by Ginnie Mae.

Government Loans: Mortgage loans insured or guaranteed by the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), the Department of Veteran Affairs (VA) or Department of Agriculture Rural Housing Service (RHS).

GSE: Government sponsored enterprise.

~~HFS:~~Housing Act: ~~Held for sale.~~Housing and Economic Recovery Act of 2008, enacted July 30, 2008.

HTM: Held-to-maturity debt securities.

LIBOR: London Interbank Offered Rate.

Liquidity AB: Advisory Bulletin 2018-07 Liquidity Guidance, issued by the FHFA on August 23, 2018.

Master Commitment (MC): Pool of MPF Loans purchased or funded by an MPF Bank.

MBS: ~~Mortgage backed~~Mortgage-backed securities.

Moody's: Moody's Investors Service.

MPF®: Mortgage Partnership Finance.

MPF Banks: FHLBs that participate in the MPF ~~program.~~

~~MPF Direct product:~~ ~~The MPF Program product under which we acquire non-conforming (jumbo) MPF Loans from PFIs without any CE Amount and concurrently resell them to a third party investor.~~Program.

MPF Government MBS product: The MPF Program product under which we aggregate Government Loans acquired from PFIs in order to issue securities guaranteed by the Ginnie Mae that are backed by such Government ~~Loans~~.Loans.

MPF Loans: Conventional and government mortgage loans secured by one-to-four family residential properties with maturities from five to 30 ~~years or participations in such mortgage loans that are acquired under the MPF Program.~~years.

MPF Program: A secondary mortgage market structure that provides liquidity to FHLB members that are PFIs through the purchase or funding by an FHLB of MPF Loans.

MPF Xtra® product: The MPF Program product under which we acquire MPF Loans from PFIs without any CE Amount and concurrently resell them to Fannie Mae.

MRCS: Mandatorily redeemable capital stock.

NRSRO: Nationally Recognized Statistical Rating Organization.

Office of Finance: A joint office of the FHLBs established by the Finance Board to facilitate issuing and servicing of consolidated obligations.

OIS: Fed Funds Effective Swap Rate (or Overnight Index ~~Swap.~~

~~Table of Contents~~

~~Federal Home Loan Bank of Chicago~~

~~OTTI:~~ ~~Other-than-temporary impairment.~~Swap Rate).

PFI: Participating Financial Institution. A PFI is a member (or eligible housing associate) of an MPF Bank that has applied to and been accepted to do business with its MPF Bank under the MPF Program.

~~PLMBS: Private label mortgage backed securities.~~Table of Contents

~~PMI:~~ ~~Primary Mortgage Insurance.~~Federal Home Loan Bank of Chicago

~~PPP:~~ ~~Paycheck Protection Program.~~

RCAP: Reduced Capitalization Advance Program.

~~Recorded Investment:~~ Recorded investment in a loan is its amortized cost plus related accrued interest receivable, if any. Recorded investment is not net of an allowance for credit losses but is net of any direct charge-off on a loan. Amortized cost is defined as either the amount funded or the cost to purchase MPF Loans. Specifically, the amortized cost includes the initial fair value amount of the delivery commitment as of the purchase or settlement date, agent fees (i.e., market risk premiums or discounts paid to or received from PFIs), if any, subsequently adjusted, if applicable, for accretion, amortization, collection of cash, charge-offs, and cumulative basis adjustments related to fair value hedges.

Recoverable CE Fee: Under the MPF Program, the PFI may receive a contingent performance based credit enhancement fee whereby such fees are reduced up to the amount of the FLA by losses arising under the Master Commitment.

Regulatory capital: Regulatory capital stock plus retained earnings.

Regulatory capital stock: The sum of the paid-in value of capital stock and mandatorily redeemable capital stock.

~~REO:~~SBA: ~~Real estate owned.~~Small Business Administration.

SEC: Securities and Exchange Commission.

SMI: Supplemental mortgage insurance.

SOFR: Secured Overnight Financing Rate.

~~SOFR SARM MBS:~~ ~~SOFR Structured Adjustable Rate Mortgage MBS.~~

~~SMI:~~ ~~Supplemental mortgage insurance.~~

System or FHLB System: The Federal Home Loan Bank System consisting of the 11 Federal Home Loan Banks and the Office of Finance.

UPB: Unpaid Principal Balance.

U.S.: United States.

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Federal Home Loan Bank of Chicago

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FEDERAL HOME LOAN BANK OF CHICAGO

/s/ Michael A. Ericson

Name:

Michael A. Ericson

Title:

President and Chief Executive Officer

Date:

~~August~~May 9, ~~2022~~2023

(Principal Executive Officer)

/s/ ~~Roger D. Lundstrom~~Virxhini Gjonzeneli

Name:

~~Roger D. Lundstrom~~Virxhini Gjonzeneli

Title:

Executive Vice President and Chief Financial Officer

Date:

~~August~~May 9, ~~2022~~2023

(Principal Financial Officer and Principal Accounting Officer)

6361


	Three months ended June 30, 2022						Three months ended June 30, 2021
	Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income		Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income
Available-for-sale debt securities	$	597	$	(644)	$	(47)	$	(354)	$	310	$	(44)
Advances	325		(316)		9		(124)		77		(47)
Consolidated obligation bonds	(543)		595		52		135		(76)		59

Total	$	379	$	(365)	$	14	$	(343)	$	311	$	(32)

	Six months ended June 30, 2022						Six months ended June 30, 2021
	Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income		Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income
Available-for-sale debt securities	$	1,472	$	(1,611)	$	(139)	$	381	$	(521)	$	(140)
Advances	978		(990)		(12)		212		(298)		(86)
Consolidated obligation bonds	(1,818)		1,967		149		(70)		176		106
Other	—		—		—		—		(1)		(1)
Total	$	632	$	(634)	$	(2)	$	523	$	(644)	$	(121)


	Net Unrealized -		Net Unrealized - Cash Flow Hedges
	Available-for-sale Debt Securities				Post - Retirement Plans		Total in AOCI
Three months ended June 30, 2022
Beginning balance	$	148	$	45	$	(16)	$	177
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	(162)		22		—		(140)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	—		3				3


Ending balance	$	(14)	$	70	$	(16)	$	40
Three months ended June 30, 2021
Beginning balance	$	490	$	(24)	$	(25)	$	441
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	55		(14)		—		41
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	(1)		5				4

Noninterest expense					1		1
Ending balance	$	544	$	(33)	$	(24)	$	487

Six months ended June 30, 2022
Beginning balance	$	366	$	(11)	$	(13)	$	342




Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	(380)		74		(4)		(310)
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	—		7				7

Noninterest expense					1		1

Ending balance	$	(14)	$	70	$	(16)	$	40
Six months ended June 30, 2021
Beginning balance	$	292	$	(65)	$	(20)	$	207
Other comprehensive income before reclassification - recorded to the Condensed Statements of Condition	253		23		(10)		266
Amounts reclassified in period to Condensed Statements of Income:
Net interest income	(1)		9				8

Noninterest expense					6		6
Ending balance	$	544	$	(33)	$	(24)	$	487


	June 30, 2022		December 31, 2021




Cash and due from banks, interest bearing deposits, federal funds sold, and securities purchased under agreements to resell	$	20,984	$	13,167
Investment debt securities	20,782		25,461
Advances	52,811		48,049
MPF Loans held in portfolio, net of allowance for credit losses	9,953		9,843
Other, net of allowance for credit losses	624		434
Assets	$	105,154	$	96,954

Consolidated obligation discount notes	$	31,525	$	24,563
Consolidated obligation bonds	64,519		63,373
Other	2,224		2,266
Liabilities	98,268		90,202
Capital stock	2,445		2,149
Retained earnings	4,401		4,261
Accumulated other comprehensive income (loss)	40		342
Capital	6,886		6,752
Total liabilities and capital	$	105,154	$	96,954