Federal Home Loan Bank of Chicago 8-K/A 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. 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

4

Forward-looking Statement

mortgage interest rates and prepayment speeds on

mortgage assets, the Bank’s ability to successfully transition

to a new business model, 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. The second quarter 2009 financial results

included in this presentation are preliminary and unaudited.

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.

1980-82

Recession

1990-91

Recession

2001-

Recession

2007

Recession

10

U.S. Economic Update-Employment

•

Employment situation continues to be a drain on the economy

.

•

Nearly 6.5 million jobs have been lost since the recession began.

Source:Bloomberg.

1982-10.8%

Highest

unemployment

rate in the last 27

years

Current unemployment

rate=9.5% and rising?

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

Worst of the credit crisis. 

(Lehman, AIG, MER,

FNM&FRE, MS&GS become

banks.

Source:Bloomberg.

Source:Bloomberg.

Tight credit

environment

results in high

consumer

finance rates.

14

•

Federal Reserve has intentionally steepened the yield

curve, with Treasury spreads reaching historic highs.

Federal Reserve Developments-Yield Curve

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?

–

Treasury debt issuance

–

Unwinding of liquidity programs

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 or Angela Harris

–

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

20

FHLBC

Historical Perspective

21

21

FHLBC Balance Sheet History

* 1933 dollars in thousands; 1988 dollars in billions

$

%

$

%

$

%

Advances

10,649.7

$      

94%

3.8

$   

64%

14.9

$    

59%

MPF Loans Held in Portfolio

-

0%

-

0%

0.9

4%

Investment Securities & FF

-

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

44%

4.2

17%

Consolidated Obligations

-

0%

2.4

40%

18.6

75%

Other

137.3

2%

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%

1933 *

1988

1998

22

22

* 1933 dollars in thousands; other periods in billions

FHLBC Balance Sheet History

$

%

$

%

$

%

Advances

10,649.7

$      

94%

3.8

$   

64%

14.9

$    

59%

MPF Loans Held in Portfolio

-

0%

-

0%

0.9

4%

Investment Securities & FF

-

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

44%

4.2

17%

Consolidated Obligations

-

0%

2.4

40%

18.6

75%

Other

137.3

2%

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%

1933 *

1988

1998

23

23

* 1933 dollars in thousands; other periods in billions

FHLBC Balance Sheet History

$

%

$

%

$

%

$

%

Advances

10,649.7

$      

94%

3.8

$   

64%

14.9

$    

59%

38.1

$    

41%

MPF Loans Held in Portfolio

-

0%

-

0%

0.9

4%

32.1

35%

Investment Securities & FF

-

0%

2.0

33%

8.4

34%

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

44%

4.2

17%

0.8

1%

Consolidated Obligations

-

0%

2.4

40%

18.6

75%

84.8

92%

Other

137.3

2%

0.2

3%

0.8

3%

4.2

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%

1933 *

1988

1998

2008

24

24

Advance Balances, at Par

25

25

MPF Loans Held in Portfolio

26

26

Second Quarter

Performance Review

27

27

Other-Than-Temporary Impairment (OTTI) Impact on

YTD Net Income

$ in millions

Net interest income and Net Income have

improved significantly year-to-date 2009

compared to year-to-date 2008.

2009

2008

Net Income (Loss) Excluding OTTI

218

$        

(89)

$      

OTTI Charge

(210)

(63)

Additional Assessments due to OTTI

56

-

Net Income (Loss)

64

(152)

28

28

2009

2008

Difference

Net Interest Income

$298

$53

$245

Derivatives & Hedging Activities

50

(82)

132

Aggregate Gain/(Loss) on Securities incl OTTI

(204)

(63)

(141)

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

(5)

0

(5)

NII Including Adjustments

139

(92)

231

Other Income

6

4

2

Operating Expense

(50)

(59)

9

Mortgage Loan Expense

(5)

(3)

(2)

Operating Income

90

(150)

240

FHFA/OF Expenses

(3)

(2)

(1)

Net Income Before REFCO & AHP

87

(152)

239

REFCO

(16)

0

(16)

AHP

(7)

0

(7)

Net Income

64

(152)

216

Net Interest Income

Year-to-Date June 30

$ in millions

29

29

Quarterly Net Interest Income

30

30

Net Spread

31

31

Quarterly Net Income

32

32

2009

2008

Difference

Net Interest Income

$298

$53

$245

Derivatives & Hedging Activities

50

(82)

132

Aggregate Gain/(Loss) on Securities incl OTTI

(204)

(63)

(141)

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

(5)

0

(5)

NII Including Adjustments

139

(92)

231

Other Income

6

4

2

Operating Expense

(50)

(59)

9

Mortgage Loan Expense

(5)

(3)

(2)

Operating Income

90

(150)

240

FHFA/OF Expenses

(3)

(2)

(1)

Net Income Before REFCO & AHP

87

(152)

239

REFCO

(16)

0

(16)

AHP

(7)

0

(7)

Net Income

64

(152)

216

Operating Expenses

Year-to-Date June 30

$ in millions

33

33

Number of Employees

34

34

Selected Balance Sheet Items –

Assets

Second Quarter

$ in millions

6/30/2009

6/30/2008

Difference

ASSETS

     Advances

$27,192

$34,679

($7,487)

     MPF Loans Held in Portfolio

26,964

33,763

(6,799)

     Long-term Investments

18,086

12,964

5,122

Total Housing/Mission

- Related Assets

72,242

81,406

(9,164)

Other Investments

17,113

10,901

6,212

Other Assets

515

520

(5)

Total Assets

89,870

92,827

(2,957)

35

35

Selected

Balance

Sheet

Items

–

Liabilities

&

Capital

Second Quarter

$ in millions

6/30/2009

6/30/2008

Difference

LIABILITIES

Total Deposits

$1,186

$808

$378

CO's, DN's, Repos

82,485

87,123

(4,638)

Subordinated Notes

1,000

1,000

0

Mandatorily Redeemable Capital Stock

426

180

246

Other Liabilities

3,075

923

2,152

Total Liabilities

88,172

90,034

(1,862)

CAPITAL

Capital Stock

2,375

2,548

(173)

Retained Earnings

837

507

330

Accumulated OCI

(1,514)

(262)

(1,252)

Total Capital

1,698

2,793

(1,095)

Total Liabilities and Capital

89,870

92,827

(2,957)

36

36

Regulatory Capital  Requirements

The Bank continues to be in compliance with

all required capital ratios.

$3.801 billion in regulatory capital stock plus

designated amount of subordinated notes at

June 30, 2009; (required minimum of $3.600

billion).

6/30/2009

Minimum Regulatory

Capital Ratio

5.16%

4.76%

37

37

Other-Than-Temporary Impairment

38

38

Private-label MBS Securities

As of June 30, 2009

$ in millions

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

Amortized

Cost

Prime

Residential MBS

2,238

$     

Commercial MBS

84

Total Prime

2,322

Alt-A

Residential MBS

167

Total Alt-A

167

Subprime

Home Equity Loans

1,221

Total Subprime

1,221

Total Private-label MBS*

3,710

$     

39

39

Ratings Migration Private-Label MBS % Total Par

Credit ratings on our private-label MBS have deteriorated

significantly in a very short time frame.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12/31/2007

12/31/2008

6/30/2009

AAA

AAA (-W)

AA

AA (-W)

A

A (-W)

BBB

BBB (-W)

BB

BB (-W)

B

B (-W)

CCC/below

40

40

Other-than-Temporary Impairment

As of June 30, 2009

$ in millions

* Accumulated Other Comprehensive Income

Credit Losses = losses due to cash shortfalls on the underlying securities

Non-Credit Losses = net losses that primarily result from current market conditions

FY 08

$53

N/A

1Q 09

$86

$1,151

2Q 09

$124

$62

$263

$1,213

Credit Losses

Recognized in

Income

Non-Credit Losses*

Deferred in

Accumulated OCI

41

41

The Bank continues to move towards an Advances

focused Bank.  MPF balances are now below

Advances. 

Balance Sheet Spread has increased strongly.

OTTI Credit loss levels 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     

$38.1 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.

•

We’d like Letter of Credit volume 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!”

•

169 FHLBC participating financial

institutions (PFIs) are now using the product

•

$2.3 billion funded for Chicago PFIs

October ’08 to 6/30/09

•

Other FHLBs

now participating

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 June 30, 2009           

$124 million in new member stock has       

been purchased (approx. 10% members)

•

In the same time period, $93 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

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

•

Ability to accommodate future expansion

of eligible collateral types (e.g.

Commercial Real Estate, subject to

regulator approval)

•

Expected long-term cost savings

•

Move to mark-to-market essential for   

21

st

century

financial

markets

60

Mark-to-Market

•

Targeting MTM implementation 1/1/10

•

For FHLBC internal use only

•

Affects members listing collateral (% of

MTM)

•

Members on blanket lien still use % of

unpaid balance

•

Interim haircuts may be adjusted based on

MTM data

61

System Enhancements

•

Move to web-based QCR and Listing

–

Use familiar MPF architecture

•

Enhanced reporting

•

Web-based collateral management and

pledging

62

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

63

What’s Next?

Matthew R. Feldman

President & CEO

64

64

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

65

65

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

66

Where We Are Going

•

Transition to Advances Bank

•

Advance spreads supporting operating

expenses

–

Scale to converge

•

Investment spreads support retained

earnings and dividend payments to

members

–

Investments yield consistent income

with very low credit risk

67

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

68

Transition to Advances Bank

•

Build sustainable net interest margin

•

Stabilize and grow capital

69

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

70

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

71

Transition to Advances Bank

•

Grow retained earnings to cover any gap

between book and market

•

Pay nominal dividend as supported by

current income

72

Transition to Advances Bank

•

Maximize membership and utilization of

FHLBC

•

Build advances book to better support

membership

•

More consultative support

•

Focus products on serving member needs

•

Market services to insurance companies and

credit unions

73

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

74

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.

75

Questions?

Welcome

Summer 2009 Regional Meetings