February 10, 2022
To Our Members:
We have remained steadfast in our mission through the ongoing challenges of COVID-19 and an ever-changing economic landscape and I sincerely thank you, our members, for making 2021 a success. As we continued to demonstrate our unwavering commitment to being a reliable and competitive source of funding to our members, we advanced our products to help you invest in your communities. I also want to acknowledge the many of you who helped us better understand where you are in your diversity, equity and inclusion (DEI) journey. Your feedback, through open and candid dialogues with our sales directors and responses from our DEI surveys, provided direction for how we can tailor our products to better meet your needs and the diverse communities you serve. We remain committed to offering a range of community investment products that support diverse and underserved communities throughout Illinois and Wisconsin and the year ahead brings even more opportunity to expand program offerings to you and your partners. I wholeheartedly believe that a positive DEI platform has helped strengthen both our culture and our cooperative, all while helping you achieve your financial and community investment goals. With that, I am pleased to share some of our accomplishments over the last year.
We expect to report net income of $275 million for 2021 when we file our 2021 Annual Report on Form 10-K with the Securities and Exchange Commission (SEC) next month. Our preliminary and unaudited 2021 financial results and details on our 2021 financial performance are provided at the end of this letter. Based on our preliminary fourth quarter 2021 results, the Board of Directors of FHLBank Chicago declared our Q4 dividend on January 28, 2022 – 5.00% (annualized) for Class B1 activity stock and 2.00% (annualized) for Class B2 membership stock. Dividends will be paid February 15, 2022. A reminder that the net benefit of the higher dividend received on Class B1 activity stock has the effect of lowering your borrowing costs from us, currently estimated at 21.1 bps* interest rate reduction.
Resilient Member Engagement
In 2021, 90% of our members and associate members used at least one of our core product offerings—advances, letters of credit, or Mortgage Partnership Finance® (MPF®) Program products—or participated in our competitive Affordable Housing Program (AHP) or Downpayment Plus® (DPP®) Programs. We also welcomed 13 new members last year.
- Advance products: At year-end 2021, 576 members had advances of $48 billion, up 3% from year-end 2020. Although many of our depository members experienced increased liquidity, our advance numbers remained strong. Approximately, one third of member institutions who have not borrowed with us in the recent past successfully tested their line with FHLBank Chicago this year.
- MPF Program: During 2021, 189 Participating Financial Institutions (PFIs) funded our MPF on balance sheet products. At year-end 2021, MPF loans outstanding on our balance sheet were $9.8 billion, mostly unchanged from 2020 as new acquisition volume, driven by historically low mortgage rates, kept pace with paydowns and prepayment activity.
- AHP and DPP: Last quarter, we awarded $29.2 million in AHP funds to help finance 49 affordable housing projects located primarily in Illinois and Wisconsin. These funds will support the acquisition, rehabilitation and new construction of over 2,315 housing units. By year-end 2021, 175 members disbursed over $19 million in DPP grants on behalf of nearly 3,400 homebuyers in your communities. We recently announced our 2022 Affordable Housing Program and opened our 2022 DPP programs.
- Events: Our Member Meetings are coming to a city near you March 24-31, 2022. We look forward to seeing many of you at one of our five locations across Illinois and Wisconsin. Engage with your peers, discover the latest trends and strategies for navigating your balance sheet, and learn more about our products and solutions – customized for you. Visit our Events webpage for a list of 2022 events and to register for an upcoming Member Meeting or workshop.
Investing in Your Communities
Our community investment products and programs are central to our mission and help you meet your homeownership, affordable housing, economic development and community lending goals. Here is a recap of some of those efforts in 2021.
- Community Advances: To lower your borrowing cost when lending to small businesses, our Community Small Business Advance provides 0% financing. We also increased the member limits for Community Housing Advance and Community Development Advance projects last year. In 2021, 11 members submitted a total of 35 Community Advance applications, 28 of which were ultimately drawn representing $157 million in lending to members for projects supporting your communities.
- Community First® Capacity-Building Grant Program: Last quarter, we awarded $300,000 in Capacity-Building Grant Program funds to six nonprofit lenders in partnership with five members. Recipients will use the grants to increase their program reach via investments in technology, marketing, staff training and more – while supporting diversity, equity and inclusion-oriented objectives.
- Community First Disaster Relief Program: We allocated $450,000 to support Illinois communities impacted by the severe storms that struck December 10, 2021. Through March 31, 2022, FHLBank Chicago member institutions can apply for $5,000 grants on behalf of eligible homeowners and small businesses located in the qualifying disaster area. Since the program’s inception in 2013, we have awarded over $1.6 million in disaster relief funding.
We remain committed to using our financial strength to support you and your communities and look forward to continuing to deliver value to you in 2022. Thank you for your membership in the Federal Home Loan Bank of Chicago.
Michael Ericson President and CEO
2021 Financial Highlights
Throughout 2021, we maintained our most important commitment to be a reliable source of liquidity by providing products, services, and solutions to meet your evolving business needs. Selected financial data is below. For more details, please refer to the Condensed Statements of Income and Statements of Condition. The financial results discussed are preliminary and unaudited. We expect to file our 2021 Annual Report on Form 10-K with the Securities and Exchange Commission (SEC) next month. After it is filed, you will be able to access it on fhlbc.com or through the SEC’s reporting website.
- Net income for 2021 was $275 million, compared to $374 million in 2020, with the year over year decline mainly attributable to a gain of $109 million from the sale of our private label mortgage-backed securities (MBS) portfolio in the fourth quarter of 2020.
- Net interest income for 2021 was $543 million, compared to $595 million in 2020, primarily driven by the lower interest rate environment.
- Noninterest income decreased by $116 million to ($12) million in 2021 compared to $104 million in 2020, primarily attributable to a $109 million gain from the sale of our private label MBS portfolio in the fourth quarter of 2020.
- Noninterest expense was $222 million for 2021 compared to $275 million in 2020, with the change primarily driven by decreases in compensation and benefits expense, and expenses related to our COVID-19 relief program.
- Total assets were $97.0 billion at year-end 2021 compared to $100.4 billion at year-end 2020, with the change driven by a decrease in our liquidity portfolio that more than offset a slight increase in advances and investment securities.
- Total investment securities increased 4% to $25.5 billion at year-end 2021 compared to $24.5 billion at year-end 2020, as we invested in primarily GSE MBS and US Treasuries during the latter half of 2021.
- Retained earnings were $4.3 billion at year-end 2021, up from $4.1 billion at year-end 2020, and we remained in compliance with all of our regulatory capital requirements as of year-end 2021.
- Letters of credit commitments decreased to $11.3 billion at year-end 2021, down from $16.4 billion at year-end 2020, primarily due to one of our former captive insurance company members reducing its letters of credit usage in connection with its membership termination in the first quarter of 2021.