Federal Home Loan Bank of Chicago 8-K This presentation contains forward-looking statements

Welcome

Summer 2009 Regional Meetings

EXHIBIT 99.1

Chad Brandt

3

Forward-looking Statement

This presentation 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.

The Bank cautions 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.

4

Forward-looking Statement

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 and the risk

factors set forth in the Bank’s periodic filings with the

Securities and Exchange Commission, which are available

on the Bank’s Web site at www.fhlbc.com. The Bank

assumes no obligation to update any forward-looking

statements made in this presentation.  "Mortgage

Partnership Finance" and "MPF" are registered trademarks

of the Federal Home Loan Bank of Chicago.  MPF Xtra™

is a trademark of the Federal Home Loan Bank of Chicago.

5

Why We’re Here

•

We want you to leave with a better

understanding of:

–

Where we are;

–

How we got here;

–

Where we’re going; and

–

How we’re going to get there.

6

Agenda

•

Market Update

•

Recent Financial Results

•

Recent Developments in Products,

Credit, and Collateral

•

Where we’re going

Market Update

Patrick Quinn

Vice President

Banking and Advance Products Group

8

•

U.S. Economic Update

–

GDP

–

Employment

•

Federal Reserve Developments

–

Quantitative Easing

–

Credit Improvement

–

Yield Curve

•

Reminder of Other FHLBC Services

•

FHLBC Member Transaction Desk

•

FHLBC Weekly Market Update Report

Agenda

9

U.S. Economic Update-Gross Domestic Product

•

Current recession is the most severe since the 1980s.

•

U.S. economy has experienced 6 recessions in the past 40

years lasting on average 10.7 months.

Source:Bloomberg.

Source:Bloomberg.

10

U.S. Economic Update-Employment

•

Employment

situation

continues

to

be

a

drain

on

the

economy

.

•

Nearly 6 million jobs have been lost since the recession began.

11

•

March 18, 2009:   U.S. Federal Reserve

announced quantitative easing strategy

•

Authority to purchase:

–

$1.25 trillion in mortgage-backed

securities

–

$300 billion in U.S. Treasury       

securities

–

$200 billion in GSE debt

Federal Reserve Developments-Quantitative Easing

12

•

Interest rates and mortgage rates

initially moved sharply lower but have

recently reversed course.

•

GSE funding levels have improved,

helping to lower term-advance rates.

Federal Reserve Developments-Quantitative Easing

13

•

Federal Reserve actions have improved the credit

environment, contributing to the economic improvement.

•

Ted Spread and consumer finance rates have improved.

Federal Reserve Developments-Credit Improvement

14

•

Federal Reserve has intentionally steepened the yield

curve, with Treasury spreads reaching historic highs.

Federal Reserve Developments-Yield Curve

Source:Bloomberg.

Source:Bloomberg

15

•

Economic conditions have stabilized, but risks

remain.

•

Adjustment phase will continue for a while.

•

Employment situation must improve before we

see stable GDP growth.

•

Short-term rates are expected to remain at

historic lows for the foreseeable future, keeping

the yield curve steep.

•

Risk of inflation?

–

Unwinding of liquidity programs

–

Treasury debt issuance

Summary

16

•

Derivatives

•

Letters of Credit

•

Term Deposits

•

Funding Scenario Analysis

Other FHLBC Services

17

•

Relationship Banker is still the main contact.

•

Member Transaction Desk can facilitate all of your

requests:

–

Advance execution/rolls/prepay requests

–

Letters of Credit

–

Term Deposits

•

Goal is to create an efficient, easy-to-use member

service experience.

•

Contact Information:

–

Patrick Quinn, Angela Harris, Betty Southwick

–

1-877-230-1610 (toll-free)

FHLBC Member Transaction Desk

18

•

Every Thursday afternoon at 3 p.m.

•

Discuss market developments, evaluate

news and events as they relate to our

members and Asset/Liability Management

strategies.

•

Interactive:  questions are always welcome.

•

Call 1-866-537-1632; passcode is

#9883778.

•

Presentations will be available on our website

for future reference.

FHLBC Weekly Financial Markets Update

Recent Financial Results

Roger Lundstrom

Chief Financial Officer

20

FHLBC

Historical Perspective

21

FHLBC Balance Sheet History

* 1933 dollars in thousands; 1988 dollars in billions

$

%

$

%

Advances

10,649.7

$

94%

3.8

$

63%

MPF Loans Held in Portfolio

-

0%

-

0%

Investment Securities

-

0%

2.0

33%

Other

640.0

6%

0.2

3%

Total Assets

11,289.7

100%

6.0

100%

-

Deposits

40.4

0%

2.6

43%

COs

-

0%

2.4

40%

Other

137.3

1%

0.2

3%

Total Liabilities

177.7

2%

5.2

87%

-

Capital Stock

11,055.9

98%

0.6

10%

Retained Earnings

56.1

0%

0.2

3%

Accumulated OCI

-

0%

-

0%

1933 *

1988

22

FHLBC Balance Sheet History

* 1933 dollars in thousands; other periods in billions

$

%

$

%

$

%

Advances

10,649.7

$

94%

3.8

$

63%

14.9

$

60%

MPF Loans Held in Portfolio

-

0%

-

0%

0.9

4%

Investment Securities

-

0%

2.0

33%

8.4

34%

Other

640.0

6%

0.2

3%

0.7

3%

Total Assets

11,289.7

100%

6.0

100%

24.9

100%

-

Deposits

40.4

0%

2.6

43%

4.2

17%

COs

-

0%

2.4

40%

18.6

75%

Other

137.3

1%

0.2

3%

0.8

3%

Total Liabilities

177.7

2%

5.2

87%

23.6

95%

-

Capital Stock

11,055.9

98%

0.6

10%

1.3

5%

Retained Earnings

56.1

0%

0.2

3%

-

0%

Accumulated OCI

-

0%

-

0%

-

0%

1998

1933 *

1988

23

FHLBC Balance Sheet History

* 1933 dollars in thousands; other periods in billions

$

%

$

%

$

%

$

%

Advances

10,649.7

$

94%

3.8

$

63%

14.9

$

60%

38.1

41%

MPF Loans Held in Portfolio

-

0%

-

0%

0.9

4%

32.1

35%

Investment Securities

-

0%

2.0

33%

8.4

8%

21.2

23%

Other

640.0

6%

0.2

3%

0.7

3%

0.7

1%

Total Assets

11,289.7

100%

6.0

100%

24.9

100%

92.1

100%

-

Deposits

40.4

0%

2.6

43%

4.2

17%

0.8

1%

COs

-

0%

2.4

40%

18.6

75%

84.8

92%

Other

137.3

1%

0.2

3%

0.9

4%

4.3

5%

Total Liabilities

177.7

2%

5.2

87%

23.6

95%

89.8

98%

-

Capital Stock

11,055.9

98%

0.6

10%

1.3

5%

2.4

3%

Retained Earnings

56.1

0%

0.2

3%

-

0%

0.5

0%

Accumulated OCI

-

0%

-

0%

-

0%

(0.6)

-1%

1998

2008

1933 *

1988

24

Advance Balances, at Par

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

25

MPF Loans Held in Portfolio

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

26

First Quarter

Performance Review

27

Other-Than-Temporary Impairment (OTTI) Impact on

First Quarter-End vs. Prior Year Quarter-End Net Income

$ in millions

1Q-09

1Q-08

Net Income (Loss) Before OTTI

47

$       

(45)

$      

OTTI Charge

(86)

(33)

Net Income (Loss)

(39)

(78)

Net interest income and Net Income have improved

significantly in the First Quarter 2009 compared to

First Quarter 2008.

28

Net Interest Income

First Quarter-End vs. Prior Year Quarter-End

$ in millions

2009

2008

Difference

Net Interest Income

$141

$31

$110

Derivatives & Hedging Activities

(72)

(62)

(10)

Aggregate Gain/(Loss) on Securities

(76)

(18)

(58)

Gain/(Loss) on Transfer of Debt to Other FHLBs

(5)

0

(5)

NII Including Adjustments

(12)

(49)

37

Other Income

2

2

0

Operating Expense

(24)

(28)

4

Mortgage Loan Expense

(4)

(2)

(2)

Operating Income

(38)

(77)

39

FHFA/OF Expenses

(1)

(1)

0

Net Income Before REFCO & AHP

(39)

(78)

39

REFCO

0

0

0

AHP

0

0

0

Net Income

(39)

(78)

39

29

$ in millions

Quarterly Net Interest Income

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

30

Net Spread

-0.10%

0.10%

0.30%

0.50%

0.70%

0.90%

1.10%

1.30%

1.50%

1.70%

1.90%

31

Quarterly Net Income

$ in millions

$(100.0)

$(80.0)

$(60.0)

$(40.0)

$(20.0)

$-

$20.0

$40.0

32

Operating Expenses

First Quarter-End vs. Prior Year Quarter-End

$ in millions

2009

2008

Difference

Net Interest Income

$141

$31

$110

Derivatives & Hedging Activities

(72)

(62)

(10)

Aggregate Gain/(Loss) on Securities

(76)

(18)

(58)

Gain/(Loss) on Transfer of Debt to Other FHLBs

(5)

0

(5)

NII Including Adjustments

(12)

(49)

37

Other Income

2

2

0

Operating Expense

(24)

(28)

4

Mortgage Loan Expense

(4)

(2)

(2)

Operating Income

(38)

(77)

39

FHFA/OF Expenses

(1)

(1)

0

Net Income Before REFCO & AHP

(39)

(78)

39

REFCO

0

0

0

AHP

0

0

0

Net Income

(39)

(78)

39

33

Number of Employees

0

50

100

150

200

250

300

350

400

450

500

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

34

Selected Balance Sheet Items -

Assets

First Quarter-End vs. Prior Year Quarter-End

$ in millions

3/31/2009

3/31/2008

Difference

ASSETS

     Advances

$31,197

$32,662

($1,465)

     MPF Loans Held in Portfolio

29,825

34,508

(4,683)

     Long-term Investments

16,053

11,276

4,777

Total Housing/Mission

- Related Assets

77,075

78,446

(1,371)

Other Investments

5,019

8,569

(3,550)

Other Assets

1,656

581

1,075

Total Assets

83,750

87,596

(3,846)

35

Selected Balance Sheet Items –

Liabilities

& Capital

First Quarter-End vs. Prior Year Quarter-End

$ in millions

3/31/2009

3/31/2008

Difference

LIABILITIES

Total Deposits

$1,352

$1,304

$48

CO's, DN's, Repos

77,362

80,345

(2,983)

Subordinated Notes

1,000

1,000

0

Mandatorily Redeemable Capital Stock

409

176

233

Other Liabilities

2,175

1,867

308

Total Liabilities

82,298

84,692

(2,394)

CAPITAL

Capital Stock

2,355

2,525

(170)

Retained Earnings

734

581

153

Accumulated OCI

(1,637)

(202)

(1,435)

Total Capital

1,452

2,904

(1,452)

Total Liabilities and Capital

83,750

87,596

(3,846)

36

We continue to be in compliance with our

regulatory capital requirements.

$3.764 billion in regulatory capital stock plus

designated amount of subordinated notes at

March 31, 2009; (required minimum of $3.600

billion).

3/31/2009

3/31/2008

Minimum

Regulatory

Capital Ratio

5.37%

4.89%

4.50%

Regulatory

Capital Requirements

37

Other-Than-Temporary Impairment

38

Private-label MBS Securities

As of March 31, 2009

$ in millions

*  All private-label MBS were rated AAA at purchase date.

**  In accordance with FSP FAS 115-2 and FAS 124-2, which we early adopted in

the first quarter of 2009.

Amortized

OTTI related to

Cost

Credit Losses**

Prime

Residential MBS

2,395

$    

(52)

$            

Commercial MBS

88

0

Total Prime

2,483

(52)

Alt-A

Residential MBS

182

(11)

Total Alt-A

182

(11)

Subprime

Home Equity Loans

1,305

(23)

Total Subprime

1,305

(23)

Total Private-label MBS*

3,970

$    

(86)

$            

39

Ratings Migration

Private-Label MBS Securities

As % of Total Par Amount

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12/31/07

12/31/08

3/31/09

AAA

AAA (-W)

AA

AA (-W)

A

A (-W)

BBB

BBB (-W)

BB

BB (-W)

B

B (-W)

CCC/below

Credit ratings on our private-label MBS have deteriorated

significantly in a very short time frame.

40

Other-than-Temporary Impairment

As of March 31, 2009

$ in millions

*Credit

Losses

=

losses

due

to

cash

shortfalls

on

the

underlying

securities

Non-Credit

Losses

=

losses

that

primarily

result

from

current

market

conditions

Credit Losses*

Recognized in Income

Non-Credit Losses*

Deferred in

Accumulated OCI

FY 08

$53

N/A

1Q 09

$86

$1,151

$139

41

We continue to move towards becoming an    

Advances focused Bank.  MPF Loan balances are now

less than Advances. 

Balance Sheet Spread has improved significantly.

Future OTTI credit losses (i.e. those due to projected

cash-flow shortfalls on the underlying securities)

remain uncertain and are strongly linked to home

sales, home price appreciation/depreciation and

employment.

Conclusions

Recent Developments:

Products, Credit, Collateral

Chad Brandt

Executive Vice President

Banking and Advance Product Group

43

Backdrop for recent developments

•

Extraordinary market conditions

•

Crisis of confidence in credit from retail to

commercial standards

•

Need to transform FHLBC

–

Difficult under ideal conditions

–

Process of making change continues

44

Our commitment to members

•

Rapid access to liquidity…

•

In normal and stressed markets

–

Advances

–

Letters of Credit

–

MPF Xtra™

45

Liquidity: A Case Study

•

Advances grew from $34.7 billion at 6/30/08 to     

$37.5 billion at 12/31/08

•

This was the most difficult period to access

liquidity

•

No member request for advances went

unfunded

•

Nearly 500 members borrowed during this

period

46

Letters of Credit

•

Letter of Credit business went from    

$595 million at 6/30/08 to $857 million    

by year-end 2008. 

•

FHLBC provides a favorable collateral

arrangement and attractive pricing relative

to other providers, many of whom exited

the market.

•

Letter of Credit balances continue to grow.

47

MPF

Xtra™

Product

•

Off-balance

sheet

MPF

®

product

integral

to FHLBC balance sheet strategy

•

No stock purchase requirement

•

No credit enhancement collateral

requirement

•

No risk-based capital requirement

48

MPF

Xtra™

Product

•

Blew away our rosiest business forecasts

–

Refi wave over the winter revealed bottlenecks

which have been corrected

•

“Just in time!”

•

260+ Participating Financial Institutions (PFIs) are

now using the product

–

150+ FHLBC PFIs

•

Other FHLBs now participating

•

$2.4 billion funded system-wide October ’08 to

3/31/09

($1.3 billion from FHLBC members)

49

MPF

Xtra™

Product

•

Looking forward to more automated

front-end

•

Investigating servicing-released options

50

Post-July 23, 2008 Stock Redemptions

•

Amendment to Cease and Desist Order

with regulator

•

Between 7/24/08 and mid-June ‘09,           

$120+ million in new member stock has       

been purchased (38 members)

•

In the same time period, $90 million has

been redeemed

51

Community Investment

•

20

th

anniversary of FHLB Affordable Housing

Program in 2009

•

FHLBC:  $12 million in grants and down

payment assistance in 2008

•

FHLBC: $292 million in grants and down

payment assistance since program inception

•

Community Investment Cash Advances

available

•

Standby letters of credit

52

Credit, Collateral, Cooperative

•

Decisions we make at FHLBC affect every

member

•

Decisions driven by two goals:

–

Providing liquidity

–

Building value

•

Rebuilding the bank and taking steps to

protect collective member capital has

posed challenges to some members

53

Member Credit and Collateral

•

Releasing the risk ratings last year was not

without controversy

•

The decision was timely

•

Many more members rated 4 or 5

•

Many more members listing and delivering

collateral

54

Member Credit and Collateral

•

Price differentiation occurs through the

collateral process:

–

Increased frequency of reporting

–

Eligible collateral, haircuts

–

Listing, delivery

•

Actions taken to protect collective member

capital

55

Member Credit and Collateral

•

Goal

=

minimizing

credit

risk

•

FHLBC has never taken a credit loss

on an advance

•

Dialogue with regulators

56

Member Credit and Collateral

•

Collateral management poses its own

challenges

–

Collateral values have deteriorated

–

Tracking collateral increasingly important

•

New collateral system (STOC) installation

critical element of collateral management

57

Collateral System Installation

•

Not a perfect system

•

Unanticipated challenges to members

–

FICO scores

–

Excel versions

–

Null fields

58

Collateral System Installation

•

Committed to helping members through

process

•

Working with members on a case-by-case

basis to complete Qualified Collateral

Reports (QCRs) and listings

•

Goals = timely information on collateral to

ensure member access to liquidity

59

Why a new collateral system?

•

Timely reporting of collateral

–

Fewer operational errors

–

Faster turnaround

•

Move to mark-to-market essential for   

21

st

century

financial

markets

•

Ability to accommodate future expansion

of eligible collateral types (e.g.

Commercial Real Estate, subject to

regulator approval)

•

Expected long-term cost savings

60

System Enhancements

•

Move to web-based QCR and Listing

–

Use familiar MPF architecture

•

Enhanced reporting

•

Web-based collateral management and

pledging

61

You will be seeing more of us:

•

Member Transaction Desk has freed up

bankers to get out and see more

members more often

•

Executive calling program

62

What’s Next?

Matthew R. Feldman

President & CEO

63

63

How We Got Here

•

Over-concentration of fixed-rate

mortgages

•

Supported by voluntary stock

•

Generated upfront income

•

Higher-than-market dividends

•

Focus on MPF diverted attention from

important investments in core business

64

64

How We Got Here

•

Slowdown in mortgage acquisitions led to

declining income

•

Methods of funding and hedging led to further

compression of net interest margin

•

Purchased private-label mortgage-backed

securities to improve net interest margin

•

Merger discussions with Dallas FHLBank

•

Determination to remediate and transition

balance sheet away from mortgages

65

Where We Are Going

•

Transition to Advances Bank

•

Advance spreads supporting

operating expenses

–

Scale to converge

•

Investment spreads support dividend

payments to members

–

Investments must yield consistent

income with very low credit risk

66

Where We Are Going

•

MPF supported as a fee-based           

off-balance sheet service

•

Use by other FHLBs supports

infrastructure and scale

•

Overall, FHLBC must be made simpler

to operate

67

Transition to Advances Bank

•

Build sustainable net interest margin

•

Stabilize and grow capital

68

Transition to Advances Bank

•

Build sustainable net interest margin

–

Significant improvement from Q1 08

–

Earnings still impacted by legacy debt and

hedging expense

–

Engaged in asset replacement to mitigate

impact of mortgage prepayments

–

New assets are lower credit risk and simpler

to hedge

69

Transition to Advances Bank

•

Stabilize and grow capital

•

Implement capital conversion plan

–

New tenor is likely to be 5 years

–

Redemptions unlikely in short-term

–

Capital plan requires FHFA approval

•

Restore dividends based on new Retained

Earnings and Dividend policy

70

Transition to Advances Bank

•

Grow retained earnings to cover any gap

between book and market

•

Pay nominal dividend as supported by

current income

71

Transition to Advances Bank

•

Maximize membership and utilization of

FHLBC

•

Build advances book to better support

membership

•

More consultative support

•

Focus products on serving

•

Market services to insurance companies and

credit unions

72

How we are getting there

•

Components of a five-year tactical plan

•

Member Relationship and Development Plan

•

Balance Sheet Management and Transition Plan

•

Human Resources Plan

•

Retained Earnings and Dividend Management

Plan

•

Operating Plan

•

Risk Management Framework

•

Legal & Regulatory Framework

73

Commitment to our members

•

Change is disruptive because so much

needs to be changed.

•

Economic environment impacts us all and

makes everything more challenging.

•

Leadership of the Bank out in District

meeting with members, regulators,

accountants, and other service providers.

•

Our primary goals are to support you and

maximize the value of your FHLBC

membership.

74

Questions?

Welcome

Summer 2009 Regional Meetings