Results

Federal Home Loan Bank of Chicago

11/05/2026 | Press release | Distributed by Public on 11/05/2026 12:50

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
Please refer to the Glossary of Terms starting on page 55 for the definitions of certain terms used herein.
Below are selected financial data for the last five quarters.
September 30, 2026 June 30, 2026 March 31, 2026 December 31, 2025 September 30, 2025
Other selected data at period end
Member standby letters of credit outstanding $ 14,423 $ 14,426 $ 12,181 $ 12,874 $ 13,416
MPF Loans par value outstanding - FHLB System a
79,105 78,031 77,233 76,794 75,840
MPF Loans par value outstanding - FHLB Chicago PFIs a
21,439 21,108 21,197 21,155 20,909
Number of members 625 629 631 637 634
Total employees (full and part time) 458 456 466 475 476
Other selected MPF data a
MPF Loans par value amounts funded - FHLB System $ 3,465 $ 3,726 $ 2,907 $ 3,312 $ 3,481
Quarterly number of PFIs funding MPF products - FHLB System 610 621 583 594 634
MPF Loans par value amounts funded - FHLB Chicago PFIs $ 1,021 $ 939 $ 815 $ 974 $ 914
Quarterly number of PFIs funding MPF products - FHLB Chicago 160 163 158 159 160
Selected ratios (rates annualized)
Total regulatory capital to assets ratio 6.71 % 6.14 % 6.79 % 6.56 % 6.55 %
Market value of equity to book value of equity 99 % 101 % 101 % 102 % 102 %
Dividend rate class B1 activity stock-period paid 9.50 % 9.25 % 9.25 % 9.25 % 9.25 %
Dividend rate class B2 membership stock-period paid 3.75 % 3.65 % 3.90 % 4.30 % 4.35 %
Return on average assets 0.37 % 0.46 % 0.45 % 0.47 % 0.52 %
Return on average equity 5.66 % 7.02 % 6.78 % 7.18 % 8.00 %
Average equity to average assets 6.54 % 6.55 % 6.64 % 6.55 % 6.50 %
Net yield on average interest-earning assets
0.65 % 0.66 % 0.64 % 0.70 % 0.68 %
Cash dividends $ 92 $ 82 $ 79 $ 79 $ 79
Dividend payout ratio 63.45 % 45.56 % 47.88 % 46.02 % 42.70 %
a Includes all MPF products, whether on or off our balance sheet. See Mortgage Partnership Finance Program beginning on page 8 in our 2025 Form 10-K for details on our various MPF products.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Forward-Looking Information
Unless otherwise specified, references to we, us, our, and the Bank are to the Federal Home Loan Bank of Chicago.
Statements contained in this report, including statements describing the plans, objectives, projections, estimates, strategies, or future predictions or commitments of the Bank, statements of belief, any projections or guidance on dividends or other financial items, or any statements of assumptions underlying the foregoing, may be "forward-looking statements." These statements may use forward-looking terminology, such as "anticipates," "believes," "expects," "could," "plans," "estimates," "may," "should," "will," their negatives, or other variations of these terms. We caution that, by their nature, forward-looking statements involve risks and uncertainties related to our operations and business and regulatory environment, all of which are difficult to predict and many of which are beyond our control. These risks and uncertainties could cause actual results to differ materially from those expressed or implied in these forward-looking statements and could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, undue reliance should not be placed on such statements.
These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
•political events, including legislative, regulatory, judicial, or other developments that affect us, our members, our counterparties and/or investors in consolidated obligations, including, among other things, changes in perception, guidance, regulation, and/or legislation relating to housing finance, the Federal Home Loan Banks (FHLBs), or government-sponsored enterprise (GSE) reform; changes in the federal executive administration and the Congress; changes in our regulator or changes affecting our regulator and changes in the Federal Home Loan Bank Act of 1932, as amended (FHLB Act) or applicable regulations or changes in their application; the impact of government shutdowns; and the potential designation of us as a nonbank financial company for supervision by the Federal Reserve;
•general economic and market conditions, including the timing and volume of market activity, recession, prolonged inflation, unemployment rates, housing prices, the condition of the mortgage and housing markets, increased delinquencies and/or loss rates on mortgages, prolonged or delayed foreclosure processes, and the effects on, among other things, mortgage-backed securities; disruptions in the credit and debt markets and their effect on our members, future funding costs, and sources and availability of funds; volatility resulting from the effects of, and changes in, various monetary or fiscal policies and regulations or programs, such as those determined by the Federal Reserve Board and Federal Deposit Insurance Corporation; impacts from various measures to stimulate the economy and help borrowers refinance home mortgages; the impact of the occurrence of a major natural or other disaster, a pandemic or other disruptive event; the impact of weather-related events; and the impact of trade wars, tariffs, or geopolitical uncertainties or conflicts;
•the loss of or changes in business activities with significant members; changes in the demand by our members for advances, the impact of pricing increases, and the availability of other sources of funding for our members, such as deposits;
•regulatory limits on our investments;
•the impact of new business strategies; our ability to successfully maintain our balance sheet and cost infrastructure at an appropriate composition and size scaled to member demand; our ability to execute our business model, implement business process improvements and scale our size to our members' borrowing needs; the extent to which our members use our advances as part of their core financing rather than just as a back-up source of liquidity; and our ability to implement product enhancements and new products and generate enough volume in new products to cover our costs related to developing such products;
•the extent to which changes in our current capital stock requirements and/or our ability to continue to offer the Reduced Capitalization Advance Program (RCAP) for certain future advance borrowings, our ability to continue to pay enhanced dividends on our activity stock, our ability to maintain current levels of dividends, our ability to meet dividend guidance, and any amendments to our capital plan, impact Bank product usage and activity with members;
•our ability to meet required conditions to repurchase and redeem capital stock from our members (including maintaining compliance with our minimum regulatory capital requirements and determining that our financial condition is sound enough to support such repurchases), the amount and timing of such repurchases or redemptions, any changes in our repurchase processes, and our ability to maintain compliance with regulatory and statutory requirements relating to our dividend payments;
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in 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;
•changes in our ability or intent to hold mortgage-backed securities to maturity;
•changes in mortgage interest rates and prepayment speeds on mortgage assets;
•membership changes, including the loss of members through mergers and consolidations or as a consequence of regulatory requirements or otherwise; changes in the financial health of our members, including the resolution of some members; risks related to expanding our membership to include more institutions with regulators and resolution processes with which we have less experience;
•increased reliance on short-term funding and changes in investor demand and capacity for consolidated obligations and/or the terms of interest rate derivatives and similar agreements, including changes in the relative attractiveness of consolidated obligations as compared to other investment opportunities; changes in our cost of funds due to concerns over U.S. fiscal policy, and any related rating agency actions impacting FHLB consolidated obligations;
•regulatory changes to FHLB membership requirements, capital requirements, Mortgage Partnership Finance (MPF) Program requirements, and liquidity requirements by the Federal Housing Finance Agency (FHFA), and increased guidance from the FHFA impacting our balance sheet management, product structures, and collateral practices;
•the ability of each of the other FHLBs to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which we have joint and several liability;
•the pace of technological change and our ability to develop and support technology and information systems, including our ability to protect the security of our information systems and manage any failures, interruptions or breaches in our information systems or operations or technology services, including those provided to us through third party vendors;
•our ability to recruit and retain qualified personnel;
•the impact of new material accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;
•the volatility of reported results due to changes in the fair value of certain assets and liabilities;
•our ability to identify, manage, mitigate, and/or remedy internal control weaknesses and other operational risks; and
•the reliability of our projections, assumptions, and models on our future financial performance and condition, including dividend projections.
For a more detailed discussion of the risk factors applicable to us, see Risk Factors starting on page 16 in our 2025 Form 10-K.
These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events, changed circumstances, or any other reason.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Executive Summary
Third Quarter 2026 Financial Highlights
•Advances outstanding increased to $72.4 billion from $61.1 billion at December 31, 2025, driven mainly by increased borrowing by depository institution members and, to a lesser extent, insurance company members.
•MPF Loans held in portfolio increased to $15.6 billion from $14.7 billion at December 31, 2025, as acquisition volume outpaced principal paydowns.
•Total investment debt securities increased to $35.2 billion from $34.2 billion at December 31, 2025, primarily attributable to an increase in investment in Ginnie Mae reverse mortgage-backed securities and GSE mortgage-backed securities.
•Total liquid assets decreased to $27.7 billion from $30.4 billion at December 31, 2025. We intend to maintain a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
•Total assets increased to $151.6 billion from $141.2 billion at December 31, 2025, predominately reflecting growth in advances.
•Letters of credit commitments increased to $14.4 billion from $12.9 billion at December 31, 2025, attributable to increased usage from members for public unit deposits.
•We recorded net income of $145 million in the third quarter of 2026, down $40 million from the third quarter of 2025, primarily driven by higher noninterest expense, as described below.
•In the third quarter of 2026, noninterest income (loss) was $18 million, down $18 million from the third quarter of 2025, largely due to losses on trading securities. The decrease was mostly offset by gains on derivatives and hedging activities.
•In the third quarter of 2026, noninterest expense was $110 million, up $39 million from the third quarter of 2025, largely due to increased Community Advance subsidies and additional funding for the Downpayment Plus® (DPP®) Programs and Affordable Housing Program (AHP) General Fund.
•As of September 30, 2026, we remained in compliance with all our regulatory capital requirements.
Summary and Outlook
Third Quarter 2026 Dividends and Dividend Guidance
On October 28, 2026, the Board of Directors declared a dividend of 9.75% (annualized) for Class B1 activity stock and a dividend of 3.75% (annualized) for Class B2 membership stock based on preliminary financial results for the third quarter of 2026. The dividend for the third quarter of 2026 will be paid by crediting members' accounts on November 13, 2026. The Bank pays a higher dividend per share on activity stock compared to membership stock to recognize members' support of the cooperative through the use of our products. We expect to maintain at least a 9.50% (annualized) dividend for Class B1 activity stock for the fourth quarter of 2026 and first quarter of 2027, based on current projections and assumptions regarding our financial condition. We are providing this information to assist members in planning their activity with us. Any future dividend payment remains subject to determination and declaration by our Board of Directors and may be impacted by further changes in financial or economic conditions, regulatory and statutory limitations, and any other relevant factors.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Housing and Community Development
Statutory Affordable Housing Program (AHP) Assessments: The Bank is required by statute to contribute 10% of its income before assessments to support affordable housing and community development in the communities served by its members. Through the first nine months of 2026, the Bank recognized an AHP assessment of $55 million for its funding pool for 2027. For a discussion of the Bank's total AHP assessment to fund its AHP programs in 2026, see Community Investment Activities starting on page 10 of the 2025 Form 10-K.
Additional Housing and Community Development Support: In addition to its statutory AHP assessments, the Bank provides grants and subsidies to respond to the housing and community development needs of members and their communities. During the third quarter of 2026, we:
•Enhanced the Community Advance product by increasing the annual interest rate subsidy available to members and deepening the discount for eligible advances supporting certain affordable housing and economic development activities.
•Provided additional discretionary funding for the DPP Programs and the AHP General Fund to expand support for affordable homeownership and housing development.
•Increased funding and member capacity for the MPF Habitat for Humanity® Program, expanding opportunities for participating members to provide below-market mortgage financing to eligible homebuyers.
Through the first nine months of 2026, the Bank recognized $49 million in community investment grants and Community Advance subsidies in Voluntary Community Investment contributions in its financial statements.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Critical Accounting Estimates
For a detailed description of our Critical Accounting Estimates see page 33 in our 2025 Form 10-K.
There have been no significant changes to our critical accounting estimates subsequent to December 31, 2025.
Results of Operations
Net Interest Income
Net interest income is the difference between the amount we recognize into interest income on our interest-earning assets and the amount we recognize into interest expense on our interest-bearing liabilities. These amounts were determined in accordance with GAAP and were based on the underlying contractual interest rate terms of our interest-earning assets and interest-bearing liabilities as well as the following items:
•Amortization of premiums;
•Accretion of discounts;
•Hedge ineffectiveness, which represents the difference between changes in the fair value of the derivative and the hedged item attributable to the hedged risk, is recognized into either interest income or interest expense, whichever is appropriate. For cash flow hedges, recognition occurs only when amounts are reclassified out of accumulated other comprehensive income (loss). Such recognition occurs when earnings are affected by the hedged item;
•Net interest paid or received on interest rate swaps that are accounted for as fair value or cash flow hedges;
•Amortization of fair value and cash flow closed hedge adjustments;
•Advance and investment prepayment fees; and
•MPF CE Income payments.
The following table presents the increase or decrease in interest income and expense due to volume or rate variances. The calculation of these components includes the following considerations:
•Average Balance: Average balances are calculated using daily balances. Amortized cost is used to compute the average balances for most of our financial instruments, including MPF Loans held in portfolio (including those that are on nonaccrual status) and available-for-sale debt securities. Fair value is used to compute average balances for our trading debt securities and financial instruments carried at fair value under the fair value option.
•Total Interest: Total interest includes the net interest income components, as discussed above, applicable to our interest-earning assets and interest-bearing liabilities.
•Yield/Rate: Effective yields/rates are based on total interest and average balances as defined above. Yields/rates are calculated on an annualized basis. The calculation of the yield on our available-for-sale securities does not give effect to changes in fair value that are reflected as a component of AOCI.
•The change in volume is calculated as the change in average balance multiplied by the current year yield. The change in rate is calculated as the change in yield multiplied by the prior year average balance. Any changes due to the combined volume/rate variance have been allocated to volume.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Increase or decrease in interest income and expense due to volume or rate variance
September 30, 2026 September 30, 2025 Increase (decrease) due to
Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Volume Rate Net Change
For the three months ended
Investment debt securities $ 35,885 $ 404 4.50 % $ 32,909 $ 419 5.09 % $ 38 $ (53) $ (15)
Advances 82,637 853 4.13 % 75,099 881 4.69 % 88 (116) (28)
MPF Loans held in portfolio 15,407 171 4.44 % 14,165 151 4.26 % 13 7 20
Federal funds sold 8,884 83 3.74 % 8,634 96 4.45 % 3 (16) (13)
Securities purchased under agreements to resell 9,549 89 3.73 % 7,446 82 4.41 % 23 (16) 7
Interest-bearing deposits 3,702 35 3.78 % 3,114 34 4.37 % 6 (5) 1
Other interest-earning assets 55 1 7.27 % 77 - - % - 1 1
Interest-earning assets 156,119 1,636 4.19 % 141,444 1,663 4.70 % 171 (198) (27)
Noninterest-earning assets 1,847 1,699
Total assets $ 157,966 $ 143,143
Consolidated obligation discount notes 51,307 480 3.74 % 58,801 631 4.29 % (80) (71) (151)
Consolidated obligation bonds 92,938 889 3.83 % 71,469 778 4.35 % 232 (121) 111
Deposits and other interest-bearing liabilities
1,274 13 4.08 % 1,212 13 4.29 % 1 (1) -
Interest-bearing liabilities 145,519 1,382 3.80 % 131,482 1,422 4.33 % 153 (193) (40)
Noninterest-bearing liabilities 2,189 2,440
Total liabilities $ 147,708 $ 133,922
Net yield on interest earning assets $ 156,119 $ 254 0.65 % $ 141,444 $ 241 0.68 % $ 25 $ (12) $ 13
For the nine months ended
Investment debt securities $ 35,075 $ 1,188 4.52 % $ 31,314 $ 1,207 5.14 % $ 144 $ (163) $ (19)
Advances 81,903 2,464 4.01 % 72,113 2,518 4.66 % 345 (399) (54)
MPF Loans held in portfolio 15,077 491 4.34 % 13,773 435 4.21 % 41 15 56
Federal funds sold 8,234 227 3.68 % 8,218 270 4.38 % - (43) (43)
Securities purchased under agreements to resell 8,139 225 3.69 % 6,266 205 4.36 % 61 (41) 20
Interest-bearing deposits 3,489 97 3.71 % 3,195 106 4.42 % 10 (19) (9)
Other interest-earning assets 59 2 4.52 % 69 2 3.86 % - - -
Interest-earning assets 151,976 4,694 4.12 % 134,948 4,743 4.69 % 601 (650) (49)
Noninterest-earning assets 1,950 1,642
Total assets $ 153,926 $ 136,590
Consolidated obligation discount notes 51,581 1,421 3.67 % 48,846 1,562 4.26 % 87 (228) (141)
Consolidated obligation bonds 88,641 2,497 3.76 % 75,053 2,427 4.31 % 436 (366) 70
Deposits and other interest-bearing liabilities 1,265 36 3.79 % 1,217 40 4.38 % 2 (6) (4)
Interest-bearing liabilities 141,487 3,954 3.73 % 125,116 4,029 4.29 % 525 (600) (75)
Noninterest-bearing liabilities 2,356 2,463
Total liabilities $ 143,843 $ 127,579
Net yield on interest-earning assets $ 151,976 $ 740 0.65 % $ 134,948 $ 714 0.71 % $ 94 $ (68) $ 26
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following analysis and comparisons apply to the periods presented in the above table unless otherwise indicated.
•Interest income from investment debt securities decreased primarily due to lower average short-term market interest rates in 2026 compared to 2025, mostly offset by increased volume.
•Interest income from advances decreased primarily due to lower average short-term market interest rates in 2026 compared to 2025, mostly offset by increased volume.
•Interest income from MPF Loans held in portfolio increased primarily due to acquisition volume that outpaced principal paydowns. Secondarily, the new loans acquired were originated at higher mortgage rates than the loans paid down, increasing the yield earned in 2026 compared to 2025.
•Interest income from overnight federal funds sold decreased primarily due to lower average short-term market interest rates in 2026 compared to 2025.
•Interest income from securities purchased under agreements to resell increased primarily due to increased volume, despite lower average short-term market interest rates in 2026 compared to 2025.
•For the three months ended September 30, 2026, interest income from interest-bearing deposits slightly increased primarily due to increased volume, despite lower average short-term market interest rates in 2026 compared to 2025. Lower average short-term market interest rates in 2026 compared to 2025 was the primary driver for the decrease in interest income for the nine months ended September 30, 2026, partially offset by increased volume.
•For the three months ended September 30, 2026, interest expense on our consolidated obligation discount notes decreased primarily due to decreased volume and, to a lesser extent, lower funding costs in 2026 compared to 2025. Lower funding costs in 2026 compared to 2025 was the primary driver for the decrease in interest expense for the nine months ended September 30, 2026, despite a slight increase in volume.
•Interest expense on our consolidated obligation bonds increased primarily due to increased volume, despite lower funding costs in 2026 compared to 2025.
•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 40.
Noninterest Income
Three months ended September 30, Nine months ended September 30,
2026 2025 2026 2025
Trading securities $ (21) $ 11 $ (39) $ 48
Derivatives and hedging activities
30 9 68 (11)
Instruments held under the fair value option (2) (2) 6 (1)
MPF fees, $9, $9, $26 and $24 from other FHLBs
11 10 32 29
Other, net - 8 7 12
Noninterest income (loss) $ 18 $ 36 $ 74 $ 77
The following analysis and comparisons apply to the periods presented in the above table.
Trading Securities, Derivatives and Hedging Activities, and Instruments Held Under the Fair Value Option
Noninterest income (loss) decreased for the three and nine months ended September 30, 2026, largely due to losses on trading securities. The decrease was mostly offset by gains on derivatives and hedging activities.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
The following table details the effect of hedging transactions recorded in the various line items in our Condensed Statements of Income. Hedge ineffectiveness on hedges qualifying for hedge accounting are recorded in net interest income rather than recorded in derivatives, as noted in the table below.
Total Net Effect Gain (Loss) of Hedging Activities
Advances Investments MPF Loans Discount Notes Bonds Other Total
Three months ended September 30, 2026
Recorded in net interest income $ 51 $ 42 $ - $ 4 $ (57) $ (1) $ 39
Recorded in derivatives and hedging activities
2 23 5 1 - (1) 30
Recorded in trading securities - (21) - - - - (21)
Recorded on instruments held under the fair value option (2) - 1 (1) - - (2)
Total net effect gain (loss) of hedging activities $ 51 $ 44 $ 6 $ 4 $ (57) $ (2) $ 46
Three months ended September 30, 2025
Recorded in net interest income $ 95 $ 96 $ - $ 5 $ (167) $ - $ 29
Recorded in derivatives and hedging activities
- 4 2 3 - - 9
Recorded in trading securities - 11 - - - - 11
Recorded on instruments held under the fair value option 1 - - (3) - - (2)
Total net effect gain (loss) of hedging activities $ 96 $ 111 $ 2 $ 5 $ (167) $ - $ 47
Nine months ended September 30, 2026
Recorded in net interest income $ 126 $ 153 $ - $ 10 $ (192) (1) $ 96
Recorded in derivatives and hedging activities
5 51 13 (1) - - 68
Recorded in trading securities - (39) - - - - (39)
Recorded on instruments held under the fair value option (3) - 1 8 - - 6
Total net effect gain (loss) of hedging activities $ 128 $ 165 $ 14 $ 17 $ (192) $ (1) $ 131
Nine months ended September 30, 2025
Recorded in net interest income $ 289 $ 290 $ 1 $ 15 $ (495) $ 1 $ 101
Recorded in derivatives and hedging activities
(2) (17) 4 3 - 1 (11)
Recorded in trading securities - 48 - - - - 48
Recorded on instruments held under the fair value option 5 - - (3) (3) - (1)
Total net effect gain (loss) of hedging activities $ 292 $ 321 $ 5 $ 15 $ (498) $ 2 $ 137
MPF fees (including from other FHLBs)
A majority of MPF fees are from other FHLBs that pay us a fixed membership fee to participate in the MPF Program and a volume-based administration fee for us to provide services related to MPF Loans carried on their balance sheets. MPF fees also include income from other third party off-balance sheet MPF Loan products and other related administration fees. These administration and membership fees are designed to compensate us for the expenses we incur to administer the program. MPF fees earned remained stable for the three and nine months ended September 30, 2026 compared to the same periods in 2025.
Other, net
Other, net includes fee income we earn from member standby letters of credit products.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Noninterest Expense
Three months ended September 30, Nine months ended September 30,
2026 2025 2026 2025
Compensation and benefits $ 33 $ 32 $ 101 $ 98
Nonpayroll operating expenses 37 26 100 79
Voluntary Community Investment contributions 33 7 49 44
Federal Housing Finance Agency and Office of Finance 5 4 15 14
Other, net 2 2 3 5
Noninterest expense $ 110 $ 71 $ 268 $ 240
The following analysis and comparisons apply to the periods presented in the above table.
Compensation and benefits remained stable for the three and nine months ended September 30, 2026 compared to the same periods in 2025. We had 458 employees as of September 30, 2026, compared to 476 employees as of September 30, 2025.
Nonpayroll operating expenses increased for the three and nine months ended September 30, 2026 compared to the same periods in 2025, as we continue our planned investment in information technology, specifically applications, infrastructure, and resiliency. In addition, we expect nonpayroll operating expenses to increase over the next several periods due to our investment in a multi-year core banking modernization initiative, as we seek to modernize key systems and processes, enhance operating effectiveness, reduce operational risk, and better respond to the evolving needs of our members.
Voluntary Community Investment contributions increased for the three and nine months ended September 30, 2026 compared to the same periods in 2025, primarily due to increased Community Advance subsidies and additional funding for the DPP Programs and AHP General Fund.
As required by statute, we allocate 10% of net income before assessments to fund affordable housing grants through the AHP General Fund and the DPP Programs (see Note 11 - Affordable Housing Program to the financial statements in our 2025 Form 10-K for further details.) We appreciate that additional funds would be beneficial in meeting community needs in affordable housing, as well as business and community development. For 2026, in addition to the 10% statutory allocation, our Board of Directors approved an allocation of 10% of prior year net income before assessments to discretionary funds to support our community needs. We expect to expense these funds throughout the year in our financial statements; however, the Bank's voluntary Community Investment contributions remain subject to many factors, including progress on initiating new programs, the nature of the programs, and utilization by members. For further discussion of risks faced by the Bank, see Risk Factors starting on page 16 in our 2025 Form 10-K.
Federal Housing Finance Agency and Office of Finance expenses consist of our share of the funding for the FHFA, our regulator, and the Office of Finance, which manages the consolidated obligation debt issuances of the FHLBs.
As noted in Noninterest Income on page 39, we earn MPF fees from the MPF Program, a majority of which are from other FHLBs, but also include income from other third party investors. These fees are designed to compensate us for the expenses we incur to administer the program. Our expenses relating to the MPF fees earned are included in the relevant line items in the noninterest expense table shown above. The following table summarizes MPF related fees and expenses.
Three months ended September 30, Nine months ended September 30,
2026 2025 2026 2025
MPF fees earned $ 11 $ 10 $ 32 $ 29
Expenses related to MPF fees earned 8 9 24 25
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 2025 Form 10-K for further details.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Other Comprehensive Income (Loss)
Three months ended September 30, Nine months ended September 30, Balance remaining in AOCI as of
2026 2025 2026 2025 September 30, 2026
Net unrealized gain (loss) available-for-sale debt securities $ (173) $ 87 $ (60) $ 74 $ 125
Net unrealized gain (loss) cash flow hedges 54 (6) 73 (47) 97
Postretirement plans (1) - (3) - 6
Other comprehensive income (loss) $ (120) $ 81 $ 10 $ 27 $ 228
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 AFS debt securities for the three and nine months ended September 30, 2026 was primarily driven by widening spreads to swaps in 2026. The net unrealized gain on AFS debt securities for the three and nine months ended September 30, 2025 was primarily driven by tightening swap spreads in 2025. As these securities approach maturity, we expect the net unrealized gains or losses in our AOCI as of September 30, 2026 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 on cash flow hedges for the three and nine months ended September 30, 2026 was primarily driven by the movement in market interest rates in 2026. The net unrealized loss on cash flow hedges for the three and nine months ended September 30, 2025 was primarily driven by the movement in market interest rates in 2025.
We did not recognize any instrument-specific credit risk in our Condensed Statements of Comprehensive Income as of September 30, 2026 due to our credit standing. For further details on the activity in our Other Comprehensive Income (Loss) see Note 12 - Accumulated Other Comprehensive Income (Loss) to the condensed financial statements.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Statements of Condition
September 30, 2026 December 31, 2025
Cash and due from banks, interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell $ 27,728 $ 30,363
Investment debt securities 35,195 34,244
Advances 72,436 61,145
MPF Loans held in portfolio, net of allowance for credit losses 15,600 14,731
Other, net of allowance for credit losses 661 719
Assets $ 151,620 $ 141,202
Consolidated obligation discount notes $ 34,924 $ 53,179
Consolidated obligation bonds 103,990 76,295
Other 2,313 2,273
Liabilities 141,227 131,747
Capital stock 4,264 3,573
Retained earnings 5,901 5,664
Accumulated other comprehensive income (loss) 228 218
Capital 10,393 9,455
Total liabilities and capital $ 151,620 $ 141,202
The following is an analysis of the above table and comparisons apply to September 30, 2026 compared to December 31, 2025.
Cash and due from banks, interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell
Amounts held in these typically overnight accounts will vary each day based on the following:
•Interest rate spreads between federal funds sold and securities purchased under agreements to resell and our debt;
•Liquidity requirements;
•Counterparties available; and
•Collateral availability on securities purchased under agreements to resell.
In the third quarter of 2026, we maintained a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
Investment Debt Securities
Investment debt securities increased at the end of the third quarter of 2026 compared to year-end 2025, primarily attributable to an increase in investment in Ginnie Mae reverse mortgage-backed securities and GSE mortgage-backed securities.
Advances
Advances increased at the end of the third quarter of 2026 compared to year-end 2025, driven mainly by increased borrowing by depository institution members and, to a lesser extent, insurance company members. Advance balances will vary based primarily on member demand or need for wholesale funding and the underlying cost of the advance to the member. It is possible that member demand for our advances could decline in future periods should their funding needs change, or to the extent they elect alternative funding resources.
MPF Loans Held in Portfolio, Net of Allowance for Credit Losses
MPF Loans held in portfolio increased at the end of the third quarter of 2026 compared to year-end 2025, as acquisition volume outpaced principal paydowns. In addition to our MPF Loans held in portfolio, we have MPF off-balance sheet products, where we buy and concurrently resell MPF Loans to Fannie Mae or pool and securitize them into Ginnie Mae MBS (although we stopped purchasing off-balance sheet loans intended to be pooled and securitized into Ginnie Mae MBS in the third quarter of 2026).
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Liquidity, Funding, & Capital Resources
Liquidity
For the period ending September 30, 2026, we maintained a liquidity position in accordance with FHFA regulations and guidance, which may be amended from time to time, and policies established by our Board of Directors. Based upon our excess liquidity position described below, we anticipate remaining in compliance with our current liquidity requirements for the foreseeable future. See Liquidity, Funding, & Capital Resources on page 44 in our 2025 Form 10-K for a detailed description of our current liquidity requirements. We use different measures of liquidity as follows:
Overnight Liquidity - Our policy requires us to maintain overnight liquid assets at least equal to 3.5% of total assets (or $5.3 billion as of September 30, 2026). As of September 30, 2026, our overnight liquidity was $35.4 billion or 23% of total assets, giving us an excess overnight liquidity of $30.1 billion.
Deposit Coverage - To support our member deposits, FHFA regulations require us to have an amount equal to the current deposits received from our members invested in obligations of the U.S. Government, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. As of September 30, 2026, we had excess liquidity of $72.7 billion to support member deposits.
Liquidity Reserves - As discussed on page 45 in the Liquidity, Funding, & Capital Resources section in our 2025 Form 10-K, FHFA guidance requires that: (i) we hold positive cash flow for a period of between ten to thirty calendar days, assuming no access to the capital markets and renewal of all maturing advances; (ii) we maintain liquidity reserves between one and 20 percent of our outstanding letter of credit commitments; (iii) we manage funding gaps for three-month and one-year maturities; and (iv) we monitor liquidity and funding balances to reduce refunding risk. In an effort to satisfy our liquidity requirements, we target a minimum amount of positive cash flow for the next five calendar days at the beginning of each day and generally maintain increased balances in short-term or liquidity investments.
The following table presents the unpaid principal balance of (1) MPF Loans held in portfolio, (2) AFS securities, and (3) HTM securities (including ABS and MBS investments), by expected principal cash flows. The table is illustrative of our assumptions about the expected cash flows of our assets, including prepayments made in advance of maturity.
MPF Loans Investment Debt Securities
As of September 30, 2026 Held in Portfolio Available-for-Sale Held-to-Maturity
Year of Expected Principal Cash Flows
One year or less $ 1,345 $ 1,517 $ 401
After one year through five years 4,708 11,907 126
After five years through ten years 4,130 15,361 411
After ten years 5,218 2,396 87
Total $ 15,401 $ 31,181 $ 1,025
We consider our liabilities available to fund assets until their contractual maturity. For further discussion of the liquidity risks related to our access to funding, see Risk Factors on page 16 in our 2025 Form 10-K.
Funding
For a discussion of our sources of funding, see Sources of Funding starting on page 47 in our 2025 Form 10-K.
Conditions in Financial Markets
The Federal Open Market Committee (FOMC) maintained its target range of the federal funds rate at each of its first five meetings in 2026 before raising the target range to 3.75% to 4.00% at its meeting in September 2026 and then maintaining that target range at its meeting in October 2026. The FOMC stated in October 2026 that economic activity has been expanding at a strong pace despite elevated uncertainty due in part to geopolitical developments. In addition, inflation remains elevated, but the FOMC stated that it will deliver price stability and that the accumulation of more information will help determine the policy stance appropriate to ensure a timely return to its 2% annual inflation goal.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Additionally, developments associated with U.S. trade and fiscal policies, including tariffs, the military conflict involving Iran that began in late February 2026, and the market focus on investments related to artificial intelligence all contributed to ongoing uncertainty about the economic environment and volatility in the financial markets; however, we maintained ready access to funding throughout the third quarter of 2026.
For further discussion on how broader geopolitical instability and unfavorable economic and market conditions could adversely affect the Bank's business activities and results of operation, including our cost of funding or access to funding, see Risk Factors starting on page 16 of the Bank's 2025 Form 10-K.
Condensed Statements of Cash Flows
Net cash flows from operating activities
Nine months ended September 30, 2026 2025
Net cash provided by (used in) operating activities $ 1,909 $ (133)
In 2026, the majority of our operating cash inflows were related to cash received from clearinghouses to settle mark-to-market positions and net income. In 2025, the majority of our operating cash outflows were related to cash paid to clearinghouses to settle mark-to-market positions.
Net cash flows from investing activities with significant activity
Nine months ended September 30, 2026 2025
Liquid assets consisting of interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell $ 2,566 $ (802)
Investment debt securities (2,172) (2,385)
Advances (11,850) (4,714)
MPF Loans held in portfolio (895) (1,065)
Other (13) (16)
Net cash provided by (used in) investing activities $ (12,364) $ (8,982)
Our investing activities consist predominantly of investments in liquid assets, investment debt securities, advances, and MPF Loans held in portfolio. The reasons for the changes in net cash provided by (used in) investing activities and changes in allocation within investing activities are discussed below for the nine months ended September 30, unless otherwise stated.
•The cash flows relating to our liquid assets fluctuate depending on the needs of our members, our investing strategy, the economic environment, and/or regulatory requirements. We maintain a sufficient pool of liquidity to support anticipated member demand for advances and letters of credit.
•In 2026, our net cash outflows from investment debt securities were primarily attributable to an increase in investment in Ginnie Mae reverse mortgage-backed securities and GSE mortgage-backed securities. In 2025, our net cash outflows from investment debt securities were primarily attributable to an increase in investment in GSE mortgage-backed securities and U.S. Treasuries.
•In 2026 and 2025, our net cash outflows from advances were primarily attributable to increased borrowing by depository institution and insurance company members.
•In 2026 and 2025, our net cash outflows for MPF Loans held in portfolio were due to acquisition volume that outpaced principal paydowns.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Net cash flows from financing activities with significant activity
Nine months ended September 30, 2026 2025
Consolidated obligation discount notes $ (18,260) $ 16,496
Proceeds on discount note transfers with other FHLBs
246 -
Consolidated obligation bonds 28,126 (7,714)
Other 274 352
Net cash provided by (used in) financing activities $ 10,386 $ 9,134
Our financing activities primarily reflect cash flows related to issuing and repaying consolidated obligation bonds and discount notes. The change in net cash provided by (used in) financing activities and change in funding allocations are discussed below for the nine months ended September 30, unless otherwise stated.
•In 2026, we paid down our discount notes and increased our use of bonds to align with advantageous funding opportunities. The increased borrowing on our bonds also reflects an increase in debt financing to match the overall increase in assets outstanding as discussed in investing activities above. In 2025, bonds matured or were called without being replaced, and we increased our use of discount notes to replace this funding. The increased borrowing on our discount notes also reflects an increase in debt financing to match the overall increase in assets outstanding as discussed in investing activities above.
•In the third quarter of 2026, we assumed consolidated obligation discount notes from another FHLB due to an advantageous funding opportunity. We had no such discount note transfers in 2025.
•In 2026 and 2025, our net cash inflows for Other were primarily attributable to proceeds from issuance of our capital stock.
Capital Resources
Capital Rules
Each member is required to own capital stock as set forth in our amended and restated Capital Plan, effective May 3, 2021 (Capital Plan). 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. For details on our capital stock requirements and our repurchase and redemption requirements, see Capital Resources on page 50 in our 2025 Form 10-K. 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 in our 2025 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.
We offer a reduced capitalization advance program permitting members to borrow advances with a lower activity stock requirement than under our Capital Plan's general provisions. This program is further described in Reduced Capitalization Advance Program on page 50 in our 2025 Form 10-K.
Dividend Payments
We may not pay dividends if we fail to satisfy our minimum capital and/or liquidity requirements under the FHLB Act and FHFA regulations. On October 28, 2026, our Board of Directors declared a 9.75% dividend (annualized) for Class B1 activity stock and a 3.75% dividend (annualized) for Class B2 membership stock based on our preliminary financial results for the third quarter of 2026. This dividend totaled $95 million (recorded as $94 million dividends on capital stock and $1 million interest expense on mandatorily redeemable capital stock) and is scheduled for payment on November 13, 2026.
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 53 in our 2025 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Joint Capital Enhancement Agreement
We continue to allocate 20% of our net income each quarter to a restricted retained earnings account in accordance with the Joint Capital Enhancement Agreement that we entered into with the other FHLBs, as further discussed in Joint Capital Enhancement Agreement in Note 12 - Capital and Mandatorily Redeemable Capital Stock (MRCS) to the financial statements in our 2025 Form 10-K.
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.
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 56 in our 2025 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 and other obligations make up the rest. Of the total credit outstanding, $73.2 billion were advances (par value) and $14.4 billion were letters of credit at September 30, 2026, compared to $61.3 billion and $12.9 billion at December 31, 2025.
September 30, 2026 December 31, 2025
Rating Borrowing Members Credit Outstanding
Total Collateral Value
Borrowing Members Credit Outstanding Total Collateral Value
1-3 482 $ 86,791 $ 187,089 494 $ 73,476 $ 188,204
4 11 1,025 1,452 12 899 1,400
5 4 211 292 4 248 293
Total 497 $ 88,027 $ 188,833 510 $ 74,623 $ 189,897
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 financial statements in our 2025 Form 10-K.
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: (a) the borrower's equity (which represents the fair value of the underlying property in excess of the outstanding MPF Loan held in portfolio balance), and (b) our ability to recover losses from primary mortgage insurance, Recoverable CE Income, and the CE Amount (which may include supplemental mortgage insurance (SMI)). The Participating Financial Institution (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 in our 2025 Form 10-K, and Credit Risk Exposure and Setting Credit Enhancement Levels starting on page 59 in our 2025 Form 10-K.
For 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 60 in our 2025 Form 10-K.
Investment Debt Securities
We hold a variety of investment debt securities, mostly government backed or insured securities. There have been no material changes in the credit ratings of these securities since December 31, 2025. We believe these investments are currently low risk. For further details see Investment Debt Securities on page 61 in our 2025 Form 10-K.
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 64 in our 2025 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. The ratings shown in the following table reflect the lowest long-term debt rating reported among the three largest Nationally Recognized Statistical Rating Organizations (NRSROs). FHFA regulations require the Bank to develop and assign internal credit ratings for its counterparties that do not rely exclusively on ratings reported by NRSROs. As such, the ratings shown in the following table are for presentation purposes only. The unsecured investment credit exposure presented in the table may not reflect the average or maximum exposure during the period as the table reflects only the balances at period end.
As of September 30, 2026 AA A Total
Domestic U.S.
Interest-bearing deposits
$ 1,000 $ 2,090 $ 3,090
Foreign commercial banks - federal funds sold:
Australia 1,700 - 1,700
Canada - 2,225 2,225
Finland 224 - 224
France - 900 900
Germany 1,100 - 1,100
Netherlands - 810 810
Sweden 1,500 - 1,500
Total U.S. branches and agency offices of foreign commercial banks 4,524 3,935 8,459
Total unsecured credit exposure $ 5,524 $ 6,025 $ 11,549
All $11.55 billion of the unsecured credit exposure shown in the above table were overnight investments.
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
The Bank manages certain credit risk through its regular monitoring of our exposure across various credit products and financial instruments, including derivative agreements, for any potential impacts related to economic or financial disruptions. See Note 9 - Derivatives and Hedging Activities to the financial statements in our 2025 Form 10-K 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 ratings shown in the following table reflect the lowest long-term debt rating reported among the three largest NRSROs. FHFA regulations require the Bank to develop and assign internal credit ratings for its counterparties that do not rely exclusively on ratings reported by NRSROs. As such, the ratings shown in the following table are for presentation purposes only. Noncash collateral pledged consists of initial margin we posted through our Futures Commission Merchants (FCMs), on behalf of the Derivatives Clearing Organizations (DCOs) for cleared derivatives and is included in our cleared derivative positions with credit exposure. Noncash collateral pledged also consists of net initial margin exchanged on our bilateral derivatives, which for presentation purposes we have reported on a net basis.
Net Derivative Fair Value Before Collateral Cash Collateral Pledged Noncash Collateral Pledged Net Credit Exposure to Counterparties
a
As of September 30, 2026
Nonmember counterparties -
Undercollateralized asset positions -
Bilateral derivatives -
A $ 269 $ (268) $ - $ 1
BBB 3 (3) - -
Cleared derivatives 2 - 789 791
Overcollateralized liability positions -
Bilateral derivatives -
A (92) 94 - 2
Nonmember counterparties 182 (177) 789 794
Total $ 182 $ (177) $ 789 $ 794
a Less than $1 million is shown as zero.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Legislative and Regulatory Developments
The Bank is subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus of the current administration have changed and continue to change the regulatory environment. These changes have affected, and likely will continue to affect, certain aspects of the Bank's business operations, and could affect the financial condition, results of operations, and reputation of the Bank. Additionally, the Bank is subject to extensive regulatory oversight, including ongoing monitoring and targeted examinations by our regulator, which could affect our business operations and financial results.
In light of recent changes in the regulatory environment discussed in the 2025 Form 10-K and our prior filings on Form 10-Q this year and above, there is uncertainty with respect to the ultimate result of future regulatory actions and their ultimate impact on the housing market, the Bank and the FHLB System. The Bank continues to monitor these actions as they evolve and to evaluate their potential effect on the Bank. For further discussion of related risks, see Risk Factors starting on page 16 in the 2025 Form 10-K.
Federal Home Loan Bank of Chicago
(U.S. Dollars in tables in millions except per share amounts unless otherwise indicated)
Federal Home Loan Bank of Chicago published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 18:50 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]