To Our Members:

I am pleased to announce that the Board of Directors of the Federal Home Loan Bank of Chicago (FHLBC) has increased the dividend declared per share on both sub-classes of capital stock. Based on our preliminary financial results for the first quarter of 2017, the Board of Directors declared a dividend of 3.15% (annualized) for Class B1 activity capital stock (an increase of 15 basis points) and a dividend of 1.05% (annualized) for Class B2 membership capital stock (an increase of 20 basis points). The higher dividends enhance the value of your membership and reduce the cost of borrowing from the Bank.

In addition, we expect to report net income of $73 million for the first quarter of 2017 when we file our Form 10-Q with the Securities and Exchange Commission next month. Our preliminary and unaudited financial results and details on the dividend payments are included at the end of this letter.

Increasing Your Return on Activity
In 2015 and 2016 we made changes to our capital plan with the goals of increasing the value of your membership and rewarding members that support the cooperative through borrowing by reducing the cost of your advances—all while maintaining your access to rock-solid reliable liquidity and long term funding. In the first quarter of 2017 we began to automatically repurchase members’ excess Class B2 stock on a weekly basis, which permits us to more effectively invest our capital to provide a reasonable return on your investment in our stock. As a result, capital stock decreased 25%, from $1.7 billion at December 31, 2016, to $1.3 billion at March 31, 2017. Total capital, however, only decreased 6% to
$4.4 billion.  

Meeting with You in Person
We had record attendance in March at our five member meetings across Illinois and Wisconsin. It was terrific to visit with so many of you around our district. At some of the events, we announced this year’s four Community First^® Award winners, each of whom were nominated by a member and received $10,000 to donate to a nonprofit of their choice. At all of the events we enjoyed visiting with you and truly appreciated your feedback on our products and services. In fact, in the interest of identifying ways to further enhance our products and services, we are planning to conduct focus groups and to survey members regarding our member value proposition. We will, of course, share the results with you. We look forward to following up later in the year.

 We hope to see you again this summer at our annual management conference on August 3-4; look for an invitation this spring. Be sure to save the date to hear this year’s outstanding lineup of thought-provoking leaders discuss current events and opportunities for the future:

• Condoleezza Rice, Secretary of State, 2005-2009
• John Brennan, CIA Director, 2013-2017
• Austan Goolsbee, Professor of Economics, University of Chicago
• Joi Ito, Director, MIT Media Lab

As always, thank you for your membership in—and for using—the Federal Home Loan Bank of Chicago.

Best regards,

Matt Feldman
President and CEO

First Quarter 2017 Dividend
On April 25, 2017, the Board of Directors of the Federal Home Loan Bank of Chicago (FHLBC) increased the dividend declared per share on both sub-classes of capital stock. Based on the FHLBC’s preliminary financial results for the first quarter of 2017, the Board of Directors declared a dividend of 3.15% (annualized) for Class B1 activity capital stock (an increase of 15 basis points) and a dividend of 1.05% (annualized) for Class B2 membership capital stock (an increase of 20 basis points). The dividend will be paid by crediting members’ accounts on May 15, 2017. The actual effective combined dividend rate on the total stock held by each member will depend on each member’s level of activity with the FHLBC during the first quarter and the relative number of shares of B2 membership and B1 activity stock. The higher dividend paid on Class B1 stock, in effect, lowers the cost of doing business with us.

First Quarter 2017 Financial Highlights
The results discussed here are preliminary and unaudited. Please refer to the Condensed Statements of Income and Statements of Condition on the next page. We expect to file our first quarter 2017 Form 10-Q with the Securities and Exchange Commission next month. You will be able to access it on our website, www.fhlbc.com, or through the SEC’s reporting website.

• We recorded net income of $73 million in the first quarter of 2017, up from $69 million in the first quarter of 2016.
• Net interest income for the first quarter of 2017 was $113 million, down from $120 million for the first quarter of 2016 as our higher-earning investment portfolio continued to pay down, while our cost of funding increased.
• Total investment securities decreased 10% to $19.0 billion at March 31, 2017, down from
  $21.0 billion at December 31, 2016 as our investment portfolio continued to pay down.
• Advances outstanding decreased $2.7 billion to $42.3 billion at March 31, 2017, down from $45.1 billion at December 31, 2016.
• Total assets declined to $76.1 billion as of March 31, 2017, compared to $78.7 billion as of December 31, 2016.
• We reached nearly $3.1 billion in retained earnings at March 31, 2017.
• We remained in compliance with all of our regulatory capital requirements as of March 31, 2017.

This publication contains forward-looking statements which are based upon our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as “anticipates,” “believes,” “expects,” “could,” “plans,” “estimates,” “may,” “should,” “will,” or their negatives or other variations on these terms. We caution that, by their nature, forward-looking statements involve risk or uncertainty, that actual results could differ materially from those expressed or implied in these forward-looking statements, and that actual events could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, instability in the credit and debt markets, economic conditions (including effects on, among other things, mortgage-backed securities), changes in mortgage interest rates and prepayment speeds on mortgage assets, our ability to successfully execute our business model and to pay future dividends (including enhanced dividends on activity stock), our ability to meet required conditions to repurchase or redeem excess capital stock from our members, including maintaining compliance with our minimum regulatory capital requirements and determining our financial condition is sound enough to support such repurchases and redemptions, our ability to continue to offer the Reduced Capitalization Advance Program, our ability to implement new or enhanced products or programs, the impacts to us from the Federal Housing Finance Agency’s final membership rule, and the risk factors set forth in our periodic filings with the Securities and Exchange Commission, which are available on our website at www.fhlbc.com. We assume no obligation to update any forward-looking statements made in this publication. The financial results discussed in this publication are preliminary and unaudited. “Community First,” “Mortgage Partnership Finance,” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.

• Q12017CondensedFinancials