FHLB To Restate Earnings

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CHICAGO - (12/27/04) -- The Federal Home Loan Bank ofChicago, the pioneer in the FHLBs' secondary market program, saidit will have to restate earnings all the way back to 2001 becauseof errors in calculations for its accounting for financialderivatives under FAS 133. The restatement will result in anincrease in the Bank's net income by more than $75 million duringthe period in question, and a corresponding increase in retainedearnings and regulatory capital. The changes will also force theBank to increase its contribution to its Affordable HousingProgram, to which it is required to contribute 10% of its annualearnings, by $6 million. As a result of the restatement, theChicago Bank's previously issued financial statements from 2001 tothe present should no longer be relied upon, the Banksaid.

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