Federal Home Loan Bank of Chicago
(Dollars in millions except per share amounts unless otherwise indicated)
Item 1. Business
Where to Find More Information
The Federal Home Loan Bank of Chicago a maintains a website located at www.fhlbc.com where we make available our financial statements and other information regarding us free of charge. We are required to file with the Securities and Exchange Commission (SEC) an annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. The SEC maintains a website that contains these reports and other information regarding our electronic filings located at www.sec.gov. These reports may also be read and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. Further information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information on these websites, or that can be accessed through these websites, does not constitute a part of this annual report.
A Glossary of Terms can be found on page 124.
Introduction
We are a federally chartered corporation and one of 12 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.
Each FHLB operates as a separate entity with its own management, employees, and board of directors. Each FHLB is a member-owned cooperative with members from a specifically defined geographic district. Our defined geographic district consists of the states of Illinois and Wisconsin. We are supervised and regulated by the Federal Housing Finance Agency (FHFA), an independent federal agency in the executive branch of the United States government.
As a cooperative, we do business with our members and, under limited circumstances, our former members. All federally-insured depository institutions, insurance companies engaged in residential housing finance, credit unions, and community development financial institutions located in Illinois and Wisconsin are eligible to apply for membership. All members are required to purchase our capital stock as a condition of membership; our capital stock is not publicly traded.
We entered into a Consent Cease and Desist Order with the Federal Housing Finance Board (Finance Board) on October 10, 2007 and an amendment thereto as of July 24, 2008 (collectively, the C&D Order). For information regarding our C&D Order, see Note 16 - Regulatory Actions to the financial statements.
As of December 31, 2011, we had 290 full time and 6 part time employees.
Mission Statement
Our mission is to partner with our member shareholders in Illinois and Wisconsin to provide them competitively priced funding, a reasonable return on their investment in the Bank, and support for community investment activities.
Business Overview
We provide credit to members 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 b.
Our primary funding source is proceeds from the sale to the public of FHLB debt instruments (consolidated obligations) which are, under the FHLB Act, the joint and several liability of all the FHLBs. Consolidated obligations are not obligations of the United States government, and the United States government does not guarantee them. Additional funds are provided by deposits, other borrowings, and the issuance of capital stock. We also provide members and non-members with correspondent services such as safekeeping, wire transfers, and cash management.
Membership Trends
The following table presents the geographic locations of our members by type of institution:
December 31, 2011
December 31, 2010
Number of Institutions
Number of Institutions
Illinois
Wisconsin
Total
Percent
Illinois
Wisconsin
Total
Percent
Commercial banks
384
209
593
78
%
399
213
612
79
%
Thrifts
77
32
109
14
33
112
14
Credit unions
22
26
48
6
17
20
37
5
Insurance companies
12
4
16
2
11
3
2
Community Development
Financial Institution a
1
—
—
Total
496
271
767
100
506
269
775
100
The following table presents the concentration of our members by asset size:
As of December 31,
2011
2010
Member Asset Size:
Less than $100 million
33
$100 million to $1 billion
59
59
Excess of $1 billion
8
8
Our total number of member institutions declined by 8 financial institutions in 2011. We lost 20 members due to mergers or acquisitions, of which 18 members merged with or were acquired by other members in our district and two members were acquired by out-of-district institutions. In addition, 10 members were placed into receivership by their regulator. We added 22 new members in 2011 as follows: 12 credit unions, seven commercial banks, two insurance companies, and one community development financial institution.
The following table presents by type of institution the outstanding advances and capital stock holdings of our members and former members. The former members have withdrawn from membership or have merged with out-of-district institutions, but continue to hold capital stock. Capital stock may not be redeemed without the approval of our regulator, as discussed in Consent Cease and Desist Order on page 17. With regulator approval we repurchased excess capital stock of $500 million on February 15, 2012. See Note 17 - Capital Stock and Mandatorily Redeemable Capital Stock (MRCS) to the financial statements.
Advances
Capital
Stock
Advances
Capital
Stock
Members
$
10,395
1,512
$
12,073
1,460
3,463
538
4,063
543
360
125
360
106
819
227
808
224
Community Development Financial Institutions
*
Members total
15,037
2,402
17,304
2,333
Former members
53
1,367
530
Total at par
15,090
2,406
18,671
2,863
Adjustments
201
a
(4
)
b
230
a
(530
)
b
Balance on the statements of condition
15,291
18,901
* Less than $1 million
a Hedging and fair value option adjustments.
In December 2011, prior to our conversion to our new Capital Plan, we redeemed $527 million of mandatorily redeemable capital stock (MRCS) for excess capital stock owned by 47 former members of the Bank that was not required to support outstanding obligations. For details on the implementation of our new Capital Plan, on member withdrawals and other terminations, and related amounts classified as mandatorily redeemable capital stock, see Note 17 - Capital Stock and Mandatorily Redeemable Capital Stock (MRCS) to the financial statements.
For a discussion of how regulatory actions affect redemption of our capital stock and may impact future membership trends, see Risk Factors on page 24.
For 2011 and 2010, 80% and 79% of our total number of members used one or more of our credit products such as advances or the MPF Program at any point during the year.
Product Offerings and Business Activities
We provide credit to members principally in the form of secured loans, called advances. Our advances to members: