Federally chartered corporation | 000-51401 | 36-6001019 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) | ||
200 East Randolph Drive Chicago, Illinois | 60601 | |||
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 | Member letter dated July 23, 2013 |
Federal Home Loan Bank of Chicago | |||
Date: July 23, 2013 | By: | /s/ Roger D. Lundstrom | |
Roger D. Lundstrom | |||
Executive Vice President and Chief Financial Officer |
• | Lower the overall cost of borrowing for members that use advances for long-term funding and short-term liquidity. The amendments to our capital plan, which became effective July 1, 2013, are designed to reduce the cost of advances for members using the Bank for borrowing by providing those members the opportunity to receive a higher dividend on their activity stock. Please read the member letter dated May 30, 2013, for details. You can read it here on our website. |
• | Restore full liquidity to member stock. In late May, the Bank completed the quarterly excess capital stock repurchase program initiated in 2012 and now repurchases excess stock held by members within three business days of receiving the request, subject to regulatory requirements and prudent business practices. |
• | Enhance the collateral capacity of our members. As part of our commitment to meet member funding and liquidity needs, we published revised Collateral Guidelines in early July that include significant changes to our Commercial Real Estate (CRE) collateral policies. These changes should make more member-owned CRE eligible as collateral and simplify the CRE pledging process. |
• | Introduce technology that makes it easier for members to use the Bank. Members can now initiate certain types of advances and wire transfers through our member-only website, eBanking. We also streamlined the competitive Affordable Housing Program (AHP) application process by implementing a new system called AHP Online. More than 50 members partnered with local community organizations this year to submit 143 online applications. We anticipate awarding $26.5 million in grants later this year. |
• | Support member communities in new and sustainable ways. This April we received approval for the Community First Fund™, a $50 million revolving loan fund designed to support affordable housing and economic development in Illinois and Wisconsin. The focus of this fund will be to provide unsecured low-interest loans, rather than one-time grants, to selected partner community organizations. Also this spring we completed a survey of potential partners and selected a subset that responded with a number of proposals; we are currently evaluating the proposals and anticipate making commitments on a rolling basis over the next year with the first commitment completed by the end of 2013. We will continue to update you on the progress of the fund as it develops. |
• | We recorded net income of $149 million for the second quarter of 2013, compared to $80 million in the first quarter of 2013. Interest income and interest expense are down from one year ago due to the combination of lower interest rates and the continued run-off of our MPF loan and investment portfolios, along with the debt used to fund those portfolios. Other non-interest gain (loss) increased from the first quarter of 2013, due primarily to gains on derivatives and hedging activities as rates rose just before quarter-end June 30, 2013. |
• | The approvals for our Community First Fund resulted in the Bank recognizing $50 million into earnings in the second quarter of 2013, which represents the reversal of the $50 million charge previously recognized in the fourth quarter of 2011. |
• | Total assets were $63.5 billion at June 30, 2013, down from $64.9 billion at March 31, 2013, and down more from $69.6 billion at December 31, 2012. Advances outstanding at June 30, 2013, were $16.7 billion, up 15% since December 31, 2012. As part of our amended capital plan, the Bank now has the ability to reduce capital stock requirements for certain future advance offerings. When we implement this part of the plan as expected later this year, we hope members will take advantage of this benefit to lower their cost of borrowing. |
• | Mortgage Partnership Finance® (MPF®) loans held in portfolio declined to $8.9 billion at June 30, 2013, from $9.7 billion at March 31, 2013, and $10.4 billion at December 31, 2012. The MPF outstanding loan balance has steadily declined as a result of paydowns and our 2008 decision to stop adding MPF loans to our balance sheet. The MPF Xtra® product, however, continues to gain popularity with both participating members and other Home Loan Banks. The Federal Home Loan Bank of Seattle joined the MPF Program in early July to offer the MPF Xtra product, the second Federal Home Loan Bank to join this year. The MPF Xtra product enables financial institutions that are members of participating Home Loan Banks to sell fixed-rate, conforming mortgage loans in the secondary market. Through MPF Xtra, we purchase these loans from Participating Financial Institutions at competitive rates and sell them to Fannie Mae. In the second quarter of 2013, MPF Xtra® loan volume for the program overall was $1.4 billion; for FHLBC Participating Financial Institutions alone it was $714 million. |
• | Total investment securities were down 10% to $30.7 billion this quarter from $34.3 billion at the end of 2012. Restrictions on our investments limit us from purchasing new longer-term investments at this time. |
• | Retained earnings continued to grow as a result of our strong net income; at June 30, 2013, we recorded a record-high $1.9 billion in retained earnings-up 13% from December 31, 2012. |
• | We remained in compliance with all of our regulatory capital requirements. |
Condensed Statements of Condition | |||||||||||
(Dollars in millions) | |||||||||||
(Preliminary and Unaudited) | |||||||||||
June 30, 2013 | December 31, 2012 | Change | |||||||||
Cash and due from banks | $ | 315 | $ | 3,564 | (91 | )% | |||||
Federal Funds sold and securities purchased under agreement to resell | 6,711 | 6,500 | 3 | % | |||||||
Investment securities | 30,687 | 34,250 | (10 | )% | |||||||
Advances | 16,663 | 14,530 | 15 | % | |||||||
MPF Loans held in portfolio, net | 8,870 | 10,432 | (15 | )% | |||||||
Other | 256 | 308 | (17 | )% | |||||||
Total assets | $ | 63,502 | $ | 69,584 | (9 | )% | |||||
Consolidated obligation discount notes | $ | 21,583 | $ | 31,260 | (31 | )% | |||||
Consolidated obligation bonds | 36,239 | 32,569 | 11 | % | |||||||
Subordinated notes | 1,000 | 1,000 | — | % | |||||||
Other | 1,192 | 1,307 | (9 | )% | |||||||
Total liabilities | 60,014 | 66,136 | (9 | )% | |||||||
Capital stock | 1,540 | 1,650 | (7 | )% | |||||||
Retained earnings | 1,917 | 1,691 | 13 | % | |||||||
Accumulated other comprehensive income (loss) | 31 | 107 | (71 | )% | |||||||
Total capital | 3,488 | 3,448 | 1 | % | |||||||
Total liabilities and capital | $ | 63,502 | $ | 69,584 | (9 | )% | |||||
Condensed Statements of Income | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||
(Preliminary and Unaudited) | ||||||||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||
Interest income | $ | 380 | $ | 485 | (22 | )% | $ | 783 | $ | 1,010 | (22 | )% | ||||||||||
Interest expense | (282 | ) | (347 | ) | (19 | )% | (572 | ) | (713 | ) | (20 | )% | ||||||||||
Provision for credit losses | 2 | (2 | ) | 200 | % | 2 | (8 | ) | 125 | % | ||||||||||||
Net interest income | 100 | 136 | (26 | )% | 213 | 289 | (26 | )% | ||||||||||||||
Other-than-temporary impairment (credit loss) | — | (14 | ) | (100 | )% | — | (15 | ) | (100 | )% | ||||||||||||
Other non-interest gain (loss) | 35 | (13 | ) | 369 | % | 36 | (6 | ) | 700 | % | ||||||||||||
Other community investment | 50 | — | — | % | 50 | — | — | % | ||||||||||||||
Other non-interest expense | (25 | ) | (32 | ) | (22 | )% | (50 | ) | (62 | ) | (19 | )% | ||||||||||
Affordable Housing Program assessment | (11 | ) | (8 | ) | 38 | % | (20 | ) | (21 | ) | (5 | )% | ||||||||||
Net income | $ | 149 | $ | 69 | 116 | % | $ | 229 | $ | 185 | 24 | % | ||||||||||
Net yield on interest-earning assets | 0.60 | % | 0.80 | % | (0.20 | )% | 0.64 | % | 0.85 | % | (0.21 | )% | ||||||||||