0001325878-15-000016.txt : 20150720 0001325878-15-000016.hdr.sgml : 20150720 20150720170724 ACCESSION NUMBER: 0001325878-15-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20150714 ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150720 DATE AS OF CHANGE: 20150720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Federal Home Loan Bank of Topeka CENTRAL INDEX KEY: 0001325878 STANDARD INDUSTRIAL CLASSIFICATION: FEDERAL & FEDERALLY-SPONSORED CREDIT AGENCIES [6111] IRS NUMBER: 480561319 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-52004 FILM NUMBER: 15996307 BUSINESS ADDRESS: STREET 1: ONE SECURITY BENEFIT PLACE, SUITE 100 CITY: TOPEKA STATE: KS ZIP: 66601 BUSINESS PHONE: 785 233 0507 MAIL ADDRESS: STREET 1: ONE SECURITY BENEFIT PLACE, SUITE 100 CITY: TOPEKA STATE: KS ZIP: 66601 8-K 1 fhlbtpfo71415.htm PFO CHANGE FHLBT PFO 7.14.15


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
 
July 14, 2015
Federal Home Loan Bank of Topeka
__________________________________________
(Exact name of registrant as specified in its charter)

Federally chartered corporation
000-52004
48-0561319
(State or other jurisdiction of
incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
 
One Security Benefit Pl. Suite 100
Topeka, KS
 
 
66606
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: 785.233.0507
 

Not Applicable
___________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On July 14, 2015, the Federal Home Loan Bank of Topeka (FHLBank) appointed William W. Osborn, Senior Vice President and Chief Financial Officer (CFO), as FHLBank’s Principal Financial Officer (PFO) under the rules of the Securities and Exchange Commission (SEC), effective on that same date. Denise L. Cauthon, Senior Vice President and Chief Accounting Officer, who served as FHLBank’s PFO until July 14, 2015, will continue to serve as FHLBank’s Principal Accounting Officer. Ms. Cauthon will report to Mr. Osborn.
Mr. Osborn has served as Senior Vice President and CFO since June 2010. Mr. Osborn joined FHLBank in May 2006 as Director of Product, Profitability and Pricing. He was promoted to Director of Banking Strategies in January 2008, to First Vice President in April 2008, and to Senior Vice President in April 2009.
FHLBank has not engaged in any transactions with Mr. Osborn or any members of his immediate family that require disclosure under applicable rules and regulations. There are no family relationships between Mr. Osborn and any of FHLBank’s directors or executive officers, and there are no arrangements or understandings between Mr. Osborn and any other person pursuant to which he was or is selected as an officer of FHLBank.
Mr. Osborn’s annual base salary is $284,000, effective as of July 1, 2015. As part of Mr. Osborn’s appointment as PFO, FHLBank amended the 2012, 2013, 2014 and 2015 Executive Incentive Compensation Plan (EICP) Targets documents to replace Ms. Cauthon with Mr. Osborn. The Board of Directors (Board) of FHLBank approved the revised EICP Targets replacing Ms. Cauthon with Mr. Osborn on June 19, 2015, subject to non-objection from the Federal Housing Finance Agency, which was received July 14, 2015. The incentive compensation opportunities made available to Mr. Osborn pursuant to the EICP are identical to those previously made available to Mr. Osborn pursuant to a similar plan for certain other officers of FHLBank who are not Named Executive Officers. Copies of the revised EICP Targets Documents are attached hereto as Exhibits 10.1 through 10.4 and are incorporated herein by reference. A description of the EICP and other compensation and benefits provided or made available to FHLBank’s Named Executive Officers, including Mr. Osborn, may be found in Item 11 - Executive Compensation of FHLBank’s Annual Report on Form 10-K filed with the SEC on March 13, 2015.
Item 9.01 Financial Statements and Exhibits
Exhibits
10.1 2012 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.2 2013 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.3 2014 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.4 2015 Executive Incentive Compensation Plan Targets, revised June 19, 2015.





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Federal Home Loan Bank of Topeka
 
 
 
 
July 20, 2015
/s/ Patrick C. Doran
Date
Patrick C. Doran
 
SVP, General Counsel
 
 





Exhibit Index
Exhibit
No.
Description
10.1
2012 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.2
2013 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.3
2014 Executive Incentive Compensation Plan Targets, revised June 19, 2015.
10.4
2015 Executive Incentive Compensation Plan Targets, revised June 19, 2015.



 EX-10.1 2 a2012eicptargets.htm EXHIBIT 10.1 2012 EICP TARGETS 2012 EICP Targets


Revised June 19, 2015
                    
Federal Home Loan Bank of Topeka
2012 Executive Incentive Compensation Plan Targets
Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges, metric weights and shareholder safeguard for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).

A.
Total Base Opportunity Goal Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.
Adjusted Return Spread on Class B Common Stock

•
Definition: The spread between Pre-ASC 815 (formerly referred to as SFAS 133), Pre AHP adjusted return available for Class B Common Stock (weighted by the amount Class B Common Stock outstanding each day) and the weighted average daily Overnight Federal funds effective rate (Fed Effective).

•
Measure: Pre-ASC 815, AHP adjusted return available for Class B Common Stock (using core income as defined below), less earnings attributed to Class A Common Stock (defined as the sum of the daily amounts calculated by multiplying the outstanding Class A Common Stock times Fed Effective plus 0.84 percent for each day), relative to average Class B Common Stock outstanding for the period as a spread over the Fed Effective for the period.

Adjusted income is defined as follows:
◦
Net income calculated under generally accepted accounting principles (GAAP)
◦
Plus AHP assessments
◦
Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)
◦
Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under Statement of Financial Accounting Standards No. 150
◦
Minus prepayment fees
◦
Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)
◦
Minus/plus gains/losses on early retirement of debt and related derivatives
◦
Minus/plus any amortization/accretion of premium/discount on unswapped mortgage-backed securities in the FHLBank’s trading portfolio (not amortized/accreted under GAAP)

•
Performance Range:
 
Annual Performance Range
Threshold
5.73%
Target
9.84%
Optimum
13.96%

2.
Net Income after Capital Charge

•
Definition: The dollar amount of adjusted income as defined in the above metric, but Post-AHP assessment, which exceeds the cost of the required return on capital.

•
Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding Class B Common Stock times three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times three-month LIBOR for each day during the year.






•
Performance Range:
 
Annual Performance Range
Threshold
$26,631,425
Target
$53,262,850
Optimum
$79,894,275

3.
Retained Earnings

Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2012.

•
Measure: Retained earnings as defined above as reported on the 12/31/12 balance sheet.

•
Performance Ranges:
 
Annual Performance Range
Threshold
$404,426,667
Target
$445,961,018
Optimum
$487,495,369

4.
Mission Product Utilization

•
Definition: Member usage of mission-oriented products. Mission-oriented products consist of the following:
◦
Affordable Housing Program (AHP);
◦
CICA - Community Housing Program (CHP); CHP Plus; Community Development Program (CDP); and Housing and Community Development Emergency Loan Program (HELP)
◦
Homeownership Set-aside Programs (RFHP or TOP); and
◦
Joint Opportunities for Building Success (JOBS).

•
Measure: Calculate the number of FHLBank members at the time of mission product usage that qualify as a user of a product (as defined below following each product) at any time during the current calendar year. For purposes of calculating the number of qualifying users a member is counted only once within each mission-oriented product category. Program participation use is credited and remains credited for the entire calendar year irrespective of whether the participating member is subsequently acquired, merged or otherwise terminates FHLBank membership.

•
Mission-oriented Product Category Usage Definitions
◦
AHP - Applications submitted. Applications submitted by a member but subsequently deemed to be ineligible by FHLBank will be counted as a qualified use.
◦
CICA - Applications approved.
◦
Homeownership Set-aside Programs (RFHP or TOP) - Agreements submitted.
◦
JOBS - Applications submitted.

•
Performance Range:
 
Annual Performance Range
Threshold
300
Target
350
Optimum
400





5. Risk Management - Market, Credit and Liquidity Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area. General risk categories are market, credit, and liquidity risks.

•
Performance Ranges
Weighted Average Score
Payout
5 (superior)
150%
4 (highly successful)
125%
3 (successful)
100%
2.5 (moderately successful)
50%
2 (marginally successful)
0%
1 (unsuccessful)
0%

•
Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Area
Weighting
Liquidity Risk
30%
Market Risk
40%
Credit Risk
30%
Total
100%

6. Risk Management - Compliance, Business and Operations Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area. General risk categories are compliance, business and operations risks.

•
Performance Ranges
Weighted Average Score
Payout
5 (superior)
150%
4 (highly successful)
125%
3 (successful)
100%
2.5 (moderately successful)
50%
2 (marginally successful)
0%
1 (unsuccessful)
0%

•
Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Area
Weighting
Compliance Risk
30%
Business Risk
40%
Operations Risk
30%
Total
100%

B.
Deferred Incentive Goal Metrics.
In calculating Base Award amounts, performance shall be measured by evaluating the following:





 
Minimum
Threshold
Target
Maximum
Total Return(1)
>8/12 vs FHLBanks
8/12 vs FHLBanks
5/12 vs FHLBanks
2/12 or 1/12 vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.375
0.375
0.375
0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Expense Growth(2)
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
2/12 or 1/12
vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.25
0.25
0.25
0.25
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(3) 
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
2/12 or 1/12
vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.375
0.375
0.375
0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Total Value (Dollar Value for Total Return + Dollar Value for Expense Growth + Dollar Value for MVE/TRCS)
$
$
$
$
 
 
 
 
 
Base Award Opportunity Percentage
            Level I (40%)
            Level II (32.5%)
            Level III (25%)
%
%
%
%
Total Base Award (Total Value x Base Award Opportunity Percentage)
$
$
$
$

Footnotes:
1)    Total Return. Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/12 to 12/31/15; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/13 and ending 12/31/15. For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/12 to 12/31/15; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/13 and ending 12/31/15. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)    Expense Growth. Expense growth is the dollar amount of the change in operating expenses (including salaries and benefits, costs of quarters and other operating expenses) at FHLBank Topeka from calendar year 2012 to calendar year 2015. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the lowest increase (or greatest decrease) being the best performance, and a 1st out of the 12 FHLBanks being the highest ranking.

3)    MVE/TRCS. Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.





C.
Total Base Opportunity and Participant Levels.

Total Base Opportunity Matrix
(As a percent of base)

Participant
Total Base Opportunity
 Cash Incentive
Deferred Incentive Opportunity *
 
Thresh
Target
Max
Thresh
Target
Max
Thresh
Target
Max
Level 1
 
 
 
 
 
 
 
 
 
CEO
60
80
100
30
40
50
30
40
50
Level 2
 
 
 
 
 
 
 
 
 
COO
45
65
85
22.5
32.5
42.5
22.5
32.5
42.5
Level 3
 
 
 
 
 
 
 
 
 
CRO
30
50
70
15
25
35
15
25
35
General Counsel
30
50
70
15
25
35
15
25
35
CFO
30
50
70
15
25
35
15
25
35
* The final value of the deferred incentive opportunity may be $0 if at threshold metrics are not met, 75% of initial deferral at threshold, 100% at target and 125% at maximum.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:
Objective
CEO/COO/CFO
CRO
General Counsel
1. Adjusted Return Spread on Class B Common Stock
20%
10%
15%
2. Net Income after Capital Charge
20%
10%
15%
3. Retained Earnings
10%
20%
10%
4. Mission Product Utilization
10%
10%
10%
5. Risk Management- Market, Credit,
     Liquidity
20%
20%
20%
6. Risk Management- Compliance,
     Business, Operations
20%
30%
30%
Total
100%
100%
100%






 EX-10.2 3 a2013eicptargets.htm EXHIBIT 10.2 2013 EICP TARGETS 2013 EICP Targets


Revised June 19, 2015
                    
Federal Home Loan Bank of Topeka
Executive Incentive Compensation Plan Targets
Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges, metric weights and shareholder safeguard for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).
 
The Plan targets contained in this document specifically cover the 2013 Base Performance Period and the 2014-2016 Deferral Performance Period.

A.
2013 Base Performance Period Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.
Adjusted Return Spread on Class B Common Stock

•
Definition: The spread between Pre-ASC 815 (formerly referred to as SFAS 133), Pre AHP adjusted return available for Class B Common Stock (weighted by the amount Class B Common Stock outstanding each day) and the average daily Overnight Federal funds effective rate (Fed Effective).

•
Measure: Pre-ASC 815, AHP adjusted return available for Class B Common Stock (using adjusted income as defined below), less earnings attributed to Class A Common Stock (defined as the sum of the daily amounts calculated by multiplying the outstanding Class A Common Stock times Fed Effective plus 0.76 percent for each day), relative to average Class B Common Stock outstanding for the period as a spread over the Fed Effective for the period.

Adjusted income is defined as follows:
◦
Net income calculated under generally accepted accounting principles (GAAP)
◦
Plus AHP assessments
◦
Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)
◦
Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under Statement of Financial Accounting Standards No. 150
◦
Minus prepayment fees
◦
Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)
◦
Minus/plus gains/losses on early retirement of debt and related derivatives
◦
Minus/plus any amortization/accretion of premium/discount on unswapped mortgage-backed securities in the FHLBank’s trading portfolio (not amortized/accreted under GAAP)

•
Performance Range:
 
Annual Performance Range
Threshold
6.24%
Target
11.28%
Optimum
16.32%

2.    Net Income after Capital Charge

•
Definition: The dollar amount of adjusted income as defined in the above metric, but Post-AHP assessment, which exceeds the cost of the required return on capital.

•
Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding regulatory Class B Common Stock times the average of three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times the average of three-month LIBOR for each day during the year.






•
Performance Range:
 
Annual Performance Range
Threshold
$39,780,680
Target
$79,561,359
Optimum
$119,342,039

3.
Retained Earnings

Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2013.

•
Measure: Retained earnings as defined above as reported on the 12/31/2013 balance sheet.

•
Performance Ranges:
 
Annual Performance Range
Threshold
$499,794,258
Target
$539,574,938
Optimum
$579,355,617

4.
Mission Product Utilization

•
Definition: Member usage of mission-oriented products. Mission-oriented products consist of the following:
◦
Affordable Housing Program (AHP);
◦
CICA - Community Housing Program (CHP); and Community Development Program (CDP)
◦
Homeownership Set-aside Programs; and
◦
Joint Opportunities for Building Success (JOBS).

•
Measure: Calculate the number of FHLBank members at the time of mission product usage that qualify as a user of a product (as defined below following each product) at any time during the current calendar year. For purposes of calculating the number of qualifying users a member is counted only once within each mission-oriented product category. Program participation use is credited and remains credited for the entire calendar year irrespective of whether the participating member is subsequently acquired, merged or otherwise terminates FHLBank membership.

•
Mission-oriented Product Category Usage Definitions
◦
AHP - Applications submitted. Applications submitted by a member but subsequently deemed to be ineligible by FHLBank will be counted as a qualified use.
◦
CICA - Applications approved.
◦
Homeownership Set-aside Programs - Agreements submitted.
◦
JOBS - Applications submitted.

•
Performance Range:
 
Annual Performance Range
Threshold
305
Target
360
Optimum
415





5. Risk Management - Market, Credit and Liquidity Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit, and liquidity risks.

•
Performance Ranges
 
Score
Payout
Threshold
3.0
50%
Target
3.5
100%
Optimum
5.0
150%

•
Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Liquidity Risk
30%
Market Risk
40%
Credit Risk
30%
Total
100%

6. Risk Management - Compliance, Business and Operations Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale . General risk categories are compliance, business and operations risks.

•
Performance Ranges
 
Score
Payout
Threshold
3.0
50%
Target
3.5
100%
Optimum
5.0
150%


•
Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Compliance Risk
30%
Business Risk
35%
Operations Risk
35%
Total
100%

B.
2014-2016 Deferral Performance Period Metrics.
These metrics apply to the 2014-2016 Deferral Performance Period.

In calculating Base Award amounts, performance shall be measured by evaluating the following:





 
Minimum
Threshold
Target
Maximum
Total Return(1)
>8/12 vs FHLBanks
8/12 vs FHLBanks
5/12 vs FHLBanks
2/12 or 1/12 vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(2) 
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
2/12 or 1/12
vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Total Value (Dollar Value for Total Return + Dollar Value for Expense Growth + Dollar Value for MVE/TRCS)
$
$
$
$
 
 
 
 
 
Deferred Incentive Opportunity Percentage
            Level I (40%)
            Level II (32.5%)
            Level III (25%)
%
%
%
%
Deferred Incentive Award (Total Value x Deferred Incentive Opportunity Percentage)
$
$
$
$

Footnotes:
1)    Total Return. Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/14 and ending 12/31/16. For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/14 and ending 12/31/16. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)    MVE/TRCS. Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Deferral Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.





C. Total Base Opportunity and Participant Levels.

Total Base Opportunity Matrix
(As a percent of base)

Participant
Total Base Opportunity
 Cash Incentive
Deferred Incentive Opportunity *
 
Thresh
Target
Max
Thresh
Target
Max
Thresh
Target
Max
Level 1
 
 
 
 
 
 
 
 
 
CEO
60
80
100
30
40
50
30
40
50
Level 2
 
 
 
 
 
 
 
 
 
COO
45
65
85
22.5
32.5
42.5
22.5
32.5
42.5
Level 3
 
 
 
 
 
 
 
 
 
CRO
30
50
70
15
25
35
15
25
35
General Counsel
30
50
70
15
25
35
15
25
35
CFO
30
50
70
15
25
35
15
25
35
* The final value of the deferred incentive opportunity may be $0 if threshold metrics are not met, 75% of initial deferral at threshold, 100% at target and 125% at maximum.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:
Objective
CEO/COO/CFO
CRO
General Counsel
1. Adjusted Return Spread on Class B Common Stock
20%
10%
15%
2. Net Income after Capital Charge
20%
10%
15%
3. Retained Earnings
10%
20%
10%
4. Mission Product Utilization
10%
10%
10%
5. Risk Management- Market, Credit,
     Liquidity
20%
25%
25%
6. Risk Management- Compliance,
     Business, Operations
20%
25%
25%
Total
100%
100%
100%






 EX-10.3 4 a2014eicptargets.htm EXHIBIT 10.3 2014 EICP TARGETS 2014 EICP Targets


Revised June 19, 2015
                    
Federal Home Loan Bank of Topeka
Executive Incentive Compensation Plan Targets
Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges/objectives, and metric weights for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).
 
The Plan targets contained in this document specifically cover the 2014 Base Performance Period (January 1, 2014 through December 31, 2014) and the 2015 - 2017 Deferral Performance Period (January 1, 2015 through December 31, 2017).

A.
2014 Base Performance Period Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.
Adjusted Return Spread on Regulatory Total Capital
Definition: The spread between (a) adjusted net income divided by daily average regulatory total capital and (b) the average daily Overnight Federal funds effective rate (Fed Effective).

Measure:
Adjusted net income is defined as follows:
◦
Net income calculated under generally accepted accounting principles (GAAP)
◦
Plus recorded AHP assessments
◦
Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)
◦
Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under ASC 450
◦
Minus prepayment fees
◦
Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)
◦
Minus/plus gains/losses on mortgage loans held for sale
◦
Minus/plus gains/losses on early retirement of debt and related derivatives
◦
Minus/plus any amortization/accretion of premium/discount on unswapped mortgage-backed securities in the FHLBank’s trading portfolio (not amortized/accreted under GAAP)
◦
Less a calculated 10% AHP assessment

Performance Range:
 
Annual Performance Range
Threshold
4.73%
Target
6.02%
Optimum
7.30%

2.
Net Income after Capital Charge
Definition: The dollar amount of adjusted net income as defined in the above metric which exceeds the cost of the required return on capital.

Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding regulatory Class B Common Stock times the average of three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times the average of three-month LIBOR for each day during the year.

Performance Range:
 
Annual Performance Range
Threshold
$80,208,963
Target
$105,208,963
Optimum
$130,208,963





3.
Retained Earnings
Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2014.

Measure: Retained earnings as defined above as reported on the 12/31/2014 balance sheet.

Performance Ranges:
 
Annual Performance Range
Threshold
$617,202,106
Target
$646,572,966
Optimum
$675,943,826

4.
Core Mission Assets (CMA) Ratio
Definition: Core Mission Assets Ratio is defined as daily advances divided by daily consolidated obligations.

Measure: Average Daily Advances as reported to the Federal Housing Finance Agency (CRS reference SC11800) divided by the average daily consolidated obligations as reported to the Federal Housing Finance Agency (CRS reference SC15100) averaged over the Performance Period.

Performance Range:
 
Annual Performance Range
Threshold
57.40%
Target
59.40%
Optimum
61.40%

5. Risk Management - Market, Credit and Liquidity Risks
Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit, and liquidity risks.

Performance Ranges
 
Score
Threshold
3.0
Target
4.0
Optimum
5.0

Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Liquidity Risk
30%
Market Risk
40%
Credit Risk
30%
Total
100%

6. Risk Management - Compliance, Business and Operations Risks
Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are compliance, business and operations risks.





Performance Ranges
 
Score
Threshold
3.0
Target
4.0
Optimum
5.0

Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Compliance Risk
30%
Business Risk
35%
Operations Risk
35%
Total
100%

B.
2015-2017 Deferral Performance Period Metrics.
These metrics apply to the 2015-2017 Deferral Performance Period.

In calculating Final Deferred Incentive Award amounts, performance shall be measured by evaluating the following:

 
Minimum
Threshold
Target
Optimum
Total Return(1)
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
2/12 or 1/12 vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(2) 
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
2/12 or 1/12
vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
Final Deferred Incentive Award (Dollar value for Total Return + Dollar Value for MVE/TRCS)
 
 
 
 

Footnotes:
1)    Total Return. Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/2014 to 12/31/2017; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/2015 and ending 12/31/2017. For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/2014 to 12/31/2017; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/2015 and ending 12/31/2017. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)    MVE/TRCS. Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Deferral Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.





C.
Total Base Opportunity Metric Weights.

Total Base Opportunity Matrix
(As a percent of base)

Participant
Total Base Opportunity
 
Thresh
Target
Optimum
Level 1
 
 
 
CEO
40
80
120
Level 2
 
 
 
COO
32.5
65
97.5
Level 3
 
 
 
CRO
25
50
75
General Counsel
25
50
75
CFO
25
50
75
1 In the event FHLBank’s performance during the Base Performance Period results in the achievement of a Total Base Opportunity that exceeds 100% of a Participant’s base salary at the start of the Base Performance Period, the Total Base Opportunity shall be capped at 100% of the Participant’s base salary.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:
Objective
CEO/COO/CFO
CRO
General Counsel
1. Adjusted Return Spread on Regulatory Total Capital
20%
10%
15%
2. Net Income after Capital Charge
20%
10%
15%
3. Retained Earnings
10%
20%
10%
4. Core Mission Assets (CMA) Ratio
10%
10%
10%
5. Risk Management- Market, Credit,
     Liquidity
20%
25%
25%
6. Risk Management- Compliance,
     Business, Operations
20%
25%
25%
Total
100%
100%
100%





 EX-10.4 5 a2015eicptargets.htm EXHIBIT 10.4 2015 EICP TARGETS 2015 EICP Targets

Revised June 19, 2015
                    
Federal Home Loan Bank of Topeka
Executive Incentive Compensation Plan Targets
Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges/objectives, and metric weights for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).
 
The Plan targets contained in this document specifically cover the 2015 Base Performance Period (January 1, 2015 through December 31, 2015) and the 2016 - 2018 Deferral Performance Period (January 1, 2016 through December 31, 2018).

A.
2015 Base Performance Period Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.
Adjusted Return Spread on Regulatory Total Capital
Definition: The spread between (a) adjusted net income divided by daily average regulatory total capital and (b) the average daily Overnight Federal funds effective rate (Fed Effective).

Measure:
Adjusted net income is defined as follows:
◦
Net income calculated under generally accepted accounting principles (GAAP)
◦
Plus recorded AHP assessments
◦
Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)
◦
Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under ASC 450
◦
Minus prepayment fees
◦
Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)
◦
Minus/plus gains/losses on mortgage loans held for sale
◦
Minus/plus gains/losses on early retirement of debt and related derivatives
◦
Minus/plus any amortization/accretion of premium/discount on unswapped securities in the FHLBank’s trading portfolio and any investment that is tied to an economic swap where an upfront fee was not received (not amortized/accreted under GAAP)
◦
Less a calculated 10% AHP assessment

Performance Range:
 
Annual Performance Range
Threshold
4.72%
Target
5.85%
Optimum
6.42%

2.
Net Income after Capital Charge
Definition: The dollar amount of adjusted net income as defined in the above metric which exceeds the cost of the required return on capital.

Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding regulatory Class B Common Stock times the average of three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times the average of three-month LIBOR for each day during the year.



Performance Range:
 
Annual Performance Range
Threshold
$71,477,000
Target
$91,477,000
Optimum
$101,477,000

3.
Retained Earnings
Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2015.

Measure: Retained earnings as defined above as reported on the 12/31/2015 balance sheet.

Performance Ranges:
 
Annual Performance Range
Threshold
$655,263,000
Target
$681,920,000
Optimum
$702,007,000

4.
Core Mission Assets (CMA) Ratio
Definition: Core Mission Assets Ratio is defined as daily advances plus mortgage loans held for portfolio divided by daily consolidated obligations.

Measure: Average Daily Advances as reported to the Federal Housing Finance Agency (CRS reference SC11800) plus Daily Average mortgage loans held for portfolio (CRS reference SC12100) divided by the average daily consolidated obligations as reported to the Federal Housing Finance Agency (CRS reference SC15100) averaged over the Performance Period.

Performance Range:
 
Annual Performance Range
Threshold
60%
Target
70%
Optimum
80%

5. Risk Management - Market, Credit and Liquidity Risks
Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit, and liquidity risks.

Performance Ranges
 
Score
Threshold
3.0
Target
4.0
Optimum
5.0



Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Liquidity Risk
30%
Market Risk
40%
Credit Risk
30%
Total
100%

6. Risk Management - Compliance, Business and Operations Risks
Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are compliance, business and operations risks.

Performance Ranges
 
Score
Threshold
3.0
Target
4.0
Optimum
5.0

Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:
Risk Management Category
Weighting
Compliance Risk
30%
Business Risk
35%
Operations Risk
35%
Total
100%



B.
2016-2018 Deferral Performance Period Metrics.
These metrics apply to the 2016-2018 Deferral Performance Period.

In calculating Final Deferred Incentive Award amounts, performance shall be measured by evaluating the following:
 
Minimum
Threshold
Target
Optimum
Total Return(1)
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
<=2/12 vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
 
 
 
 
 
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(2) 
>9/12 vs FHLBanks
9/12 vs FHLBanks
6/12 vs FHLBanks
<=2/12
vs FHLBanks
Deferred Incentive
 
 
 
 
Performance Measure Percentage
0%
75%
100%
125%
Weighting
0.50
0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)
$
$
$
$
Final Deferred Incentive Award (Dollar value for Total Return + Dollar Value for MVE/TRCS)
 
 
 
 

Footnotes:
1)    Total Return. Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/2015 to 12/31/2018; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/2016 and ending 12/31/2018. For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/2015 to 12/31/2018; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/2016 and ending 12/31/2018. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)    MVE/TRCS. Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Deferral Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.



C.
Total Base Opportunity Metric Weights.

Total Base Opportunity Matrix
(As a percent of base)

Participant
Total Base Opportunity 1
 
Threshold
Target
Optimum
Level 1
 
 
 
CEO
40
80
120
Level 2
 
 
 
COO
32.5
65
97.5
Level 3
 
 
 
CRO
25
50
75
General Counsel
25
50
75
CFO
25
50
75
1 In the event FHLBank’s performance during the Base Performance Period results in the achievement of a Total Base Opportunity that exceeds 100% of a Participant’s base salary at the start of the Base Performance Period, the Total Base Opportunity shall be capped at 100% of the Participant’s base salary.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:
Objective
CEO/COO/CFO
CRO
General Counsel
1. Adjusted Return Spread on Regulatory Total Capital
20%
10%
15%
2. Net Income after Capital Charge
20%
10%
15%
3. Retained Earnings
10%
20%
10%
4. Core Mission Assets (CMA) Ratio
10%
10%
10%
5. Risk Management- Market, Credit,
     Liquidity
20%
25%
25%
6. Risk Management- Compliance,
     Business, Operations
20%
25%
25%
Total
100%
100%
100%