8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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) December 23, 2010

FEDERAL HOME LOAN BANK OF BOSTON

(Exact name of registrant as specified in its charter)

Federally chartered corporation	000-51402	04-6002575
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)

111 Huntington Avenue
Boston, MA 02199
(Address of principal executive offices, including zip code)

(617) 292-9600
(Registrant’s telephone number, including area code)

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 (see General Instruction A.2. below):

[  ]  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))

oo  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.

Amendments to the 2010 Executive Incentive Plan

On December 17, 2010, the Federal Home Loan Bank of Boston’s (the Bank’s) board of directors (the Board) approved the submission of certain amendments to the 2010 Executive Incentive Plan (the EIP), an incentive compensation plan for certain Bank officers, to the Federal Housing Finance Agency (the Finance Agency), the Bank’s regulator, such amendments only to be effective upon the completion of that review. The EIP was previously filed via Current Report on Form 8-K with the Securities and Exchange Commission (the SEC) on April 30, 2010, subject to the prior review of the Finance Agency. The Bank received comments on the EIP from the Finance Agency in September 2010, and the amendments described in this report were submitted to the Finance Agency for its review. The Finance Agency notified the Bank on December 23, 2010, that it had completed its review of the amendments to the EIP, and such amen dments became effective on that same day. The Bank’s principal executive officer, principal financial officer, and other, non-retired named executive officers, as identified in the Bank’s Annual Report on Form 10-K filed with the SEC on March 22, 2010 (the 2009 Annual Report), are participants in the EIP.

The amendments to the EIP include the following changes (in addition to a correction of a scrivener’s error in the description of the goal based on Community Development Advances and Economic Stimulus Advances):

·    The discretionary component of each participant’s short-term incentive goals was removed to provide greater objectivity in the final determination of each award of incentive compensation. The percentage that this goal had represented was added to each participant’s “Individual, Bank-Wide or Department Specific” goal, which goal includes various objective criteria for each participant.

·    The calculation of the long-term goal based on retained earnings as of December 31, 2012, was changed. Achieving the prior goal was subject to the condition that retained earnings would be a minimum of $400 million less dividends paid in 2010 through 2012. The amended long-term goal based on retained earnings does not subtract dividends paid. This goal was changed to incent participants to focus on growing retained earnings consistent with the Bank’s strategic goals.

·    Threshold, Target, and Excess long-term incentive opportunities for retained earnings were added to further incent participants to focus on growing retained earnings consistent with the Bank’s strategic goals. The following table sets forth the long-term incentives, as amended:

Long-Term Goal	Retained Earnings as of December 31, 2012	Incentive Opportunity (payable after Year-End 2012)
Threshold	$405 million	50% of the remaining 40% of the combined short- and long-term incentive opportunity
Target	$475 million	40% of the combined short- and long-term

		incentive opportunity
Excess	$545 million	150% of the remaining 40% of the combined short- and long-term incentive opportunity

The following table sets forth the combined short- and long-term incentive opportunities for the year 2010, which are unchanged as a result of the amendments described by this report:

Position	Combined Short- and Long-Term Incentive Opportunity as a Percent of Base Salary
	Threshold	Target	Excess
President	15.00%	30.00%	45.00%
Tier I	11.00%	22.00%	33.0%
Tier II	8.75%	17.50%	26.25%
Tier III	6.25%	12.50%	18.75%

The foregoing description of the EIP is qualified in its entirety by reference to the copy of the EIP included herein as Exhibit 4.1 and incorporated herein by reference. Additionally, a marked version of the EIP is attached to this report as Exhibit 4.2. The marked text in Exhibit 4.2 shows changes to the EIP as a result of the amendments disclosed in this report.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

       Exhibit Number

          4.1 Revised 2010 Executive Incentive Plan.

          4.2 Revised 2010 Executive Incentive Plan, marked to show changes.

Signature(s)

       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 Boston
Date: December 28, 2010	By:	/s/ Frank Nitkiewicz
		Frank Nitkiewicz
		Executive Vice President and Chief Financial Officer

EX-4.1

Exhibit 4.1

FEDERAL HOME LOAN BANK OF BOSTON

2010 EXECUTIVE INCENTIVE PLAN

Revised - December 2010

Purpose:

The Federal Home Loan Bank of Boston (Bank) has established a 2010 Executive Incentive Plan (EIP) which is designed to reward and retain corporate officers during turbulent economic conditions and an atypical period of financial performance challenges as evidenced by the lack of dividend payments to members, suspension of the repurchase of excess capital stock and lack of funding for the AHP program.  Payout opportunities for 2010 EIP participants are generally based on the Bank’s current financial situation, not the competitive market.  It is intended that in subsequent EIP performance periods opportunities will increase to competitive levels as the Bank’s financial performance improves, e.g. from 50% of recommended payouts to 75% when the Bank resumes meaningful dividend payments and to 100% when the Bank resumes repurchase of excess stock.

Guiding Principles:

The 2010 EIP is intended to:

·    Recognize that the Bank’s current overall focus is a return to earnings generation to a level that allows payment of dividends, resumption of the purchase of excess capital stock, and funding of the AHP program.

·    Reinforce and reward the Bank’s commitment to conservative, prudent, sound risk management practices and preservation of the par value of the Bank’s capital stock.

·    Reflect a reasonable assessment of the Bank’s financial situation and prospects while rewarding achievement of identified remediation milestones and the Bank’s financial plan and strategic objectives as spelled out in the Bank’s 2010 Business Plan.

·    Tie a significant percentage of incentive awards to the long-term financial condition and performance of the Bank.

·    Recognize the importance of individual performance through metrics linked to the Bank’s strategic goals and/or objectives of the participant’s principal functions.

·    Recognize that continued enhancements and upkeep of the Bank’s operational infrastructure are critical to the Bank’s long-term condition.

Incentive Goals:

The incentive goals for all participants, with the exception of those participants in Enterprise Risk Management, are summarized in the following table with more detail following in Appendix A:

Goal	Weight			Threshold	Target	Excess
	Pres.	Tier I	Tiers II & III
Pre-assessment Core Net Income	25%	20%	10%	$212.0 MM	$249.0 MM	$286.0 MM
Member Outreach	10%	10%	10%	45% of membership	60% of membership	75% of membership
Advance Restructures	0%	10%	10%	125	150	175
Growth in Membership	0%	5%	5%	4 New Members	6 New Members	8 New Members
2010 CDA and ESA Advances Balances	10%	10%	10%	$2.5 Billion	$2.619 Billion	$2.852 Billion
Remediation of 2009 Report of Examination Findings	25%	20%	20%	70% Clearance	85% Clearance	100% Clearance
Individual, Bank-Wide or Department-Specific	30%	25%	35%	As documented by supervisor	As documented by supervisor	As documented by supervisor

2

Incentive goals for Enterprise Risk Management participants in Tiers I, II and III are summarized in the following table with more detail following in Appendix A

Goal	Weight		Threshold	Target	Excess
	Tier I	Tiers II & III
Pre-assessment Core Net Income	10%	5%	$212.0 MM	$249.0 MM	$286.0 MM
Member Outreach	10%	10%	45% of membership	60% of membership	75% of membership
Advance Restructures	10%	10%	125	150	175
Growth in Membership	5%	5%	4 New Members	6 New Members	8 New Members
2010 CDA and ESA Advances Balances	10%	10%	$2.5 Billion	$2.619 Billion	$2.852 Billion
Remediation of 2009 Report of Examination Findings	30%	25%	70% Clearance	85% Clearance	100% Clearance
Individual, Bank-Wide or Department-Specific	25%	35%	As documented by supervisor	As documented by supervisor	As documented by supervisor

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Incentive Opportunity

Eligible participants will be assigned an incentive award opportunity that combines short and long-term incentives and is expressed as a percentage of the incumbent’s 2010 actual annual base salary, as illustrated in the chart below.

	Combined Short and Long-Term Incentive Opportunity as a Percent of Base Salary
	Threshold	Target	Excess
President	15.00%	30.00%	45.00%
Tier I	11.00%	22.00%	33.0%
Tier II	8.75%	17.50%	26.25%
Tier III	6.25%	12.50%	18.75%

Goal achievement and individual awards for the goals on pages two and three will be calculated at the conclusion of 2010 based on results as of December 31, 2010.  Participants will be eligible to receive sixty (60) percent of such award in a cash payment, subject to the final approval of the board and the review of the Federal Housing Finance Agency (FHFA), if required, on the first pay day in March 2011.  Except as otherwise described under EIP Administration, the participant must be employed by the Bank on the date of payment of the award to receive the award. The chart below illustrates the Threshold, Target and Excess payout potentials for this short-term award, by tier.

2010 Short-Term Incentive Opportunity
Tier	Threshold	Target	Excess
President	9.00%	18.00%	27.00%
Tier I	6.60%	13.20%	19.80%
Tier II	5.25%	10.50%	15.75%
Tier III*	6.25%	12.50%	18.75%

*100% of payout opportunity to be paid following year-end 2010; no long-term opportunity

Participants will be eligible to receive the long-term award opportunity as cash on the first pay day in March 2013, as follows:

Long-Term Goal:	Retained Earnings as of December 31, 20121:
Threshold:	$405.0 million
Target:	$475.0 million
Excess:	$545.0 million

1 The December 31, 2012 Retained Earnings goal is as projected in the Bank’s 2011 Strategic Business Plan.

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Long-Term Incentive Opportunity Payable after Year-End 2012:

Threshold:	An award equal to fifty (50) percent of the remaining forty (40) percent of the combined award opportunity
Target:	An award equal to the remaining forty (40) percent of the combined award opportunity
Excess:	An award equal to 150 percent of the remaining forty (40) percent of the combined award opportunity

In addition, the following conditions must be satisfied for participants to receive the long-term award opportunity:

·The participant is in employment with the Bank on the payment date, as described below in EIP Administration, and

·Subject to the final approval of the board and review of the FHFA, if required.

Eligible Participants

The following individuals are participants in the EIP for 2010:

President	Tier I	Tier II	Tier III
Edward A. Hjerpe, III	Janelle K. Authur	Brian G. Donahue	Bryan Gulachenski
	Earl W. Baucom	John F. Henderson, Jr.*	Paul T. Pouliot
	George H. Collins*	Kelly A. LaCava	Allison Santoro
	M. Susan Elliott	Rachele McDonough	Edward A. Schultze*
	Frank Nitkiewicz	Paul Peduto	Kenneth A. Willis
	Carol H. Pratt	Kevin Whittaker*
		Thomas C. Wolf

*Denotes participant in Enterprise Risk Management Department

EIP Administration

The EIP is administered by the Personnel Committee of the Board of Directors (Committee), which shall have full power and binding authority to construe, interpret, and administer the EIP, and to adjust it for extraordinary circumstances.  Extraordinary circumstances may include changes in business strategy, termination or commencement of business lines, impact of severe economic fluctuations, significant growth or consolidation of the membership base, or significant regulatory or other changes impacting the Bank or Bank System.

The Committee reserves the right at any time to amend, suspend or terminate the EIP in whole or in part, for any reason, and without the consent of any EIP participant.

The Bank’s President and Chief Executive Officer will determine participation in the EIP with the concurrence of the Committee.

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EIP awards shall not be considered earned or payable, in whole or in part, to any participant for any reason until they are finally determined by the Bank’s President and Chief Executive Officer with the concurrence of the Committee following the end of the plan years.

Any individual hired or promoted into an eligible position during 2010 that is granted an award shall have any such incentive award prorated based on months of EIP participation, providing he/she has served a minimum of six months in that role in 2010 and otherwise satisfies the EIP’s requirements.

Except as described below, any EIP participant who terminates employment for any reason, whether voluntarily or involuntarily, before the applicable award payment date will not be entitled to any award, except as otherwise determined by the Bank’s President and Chief Executive Officer, with the concurrence of the Committee, at their sole discretion and subject to review of the FHFA, if required2.

·EIP participants who terminate employment with the Bank by reason of death or disability or who are eligible to retire3 from employment with the Bank prior to the March 2011 short-term award payment date may receive a pro rata payment of the sixty (60) percent short-term incentive opportunity as determined and recommended by the Bank’s President and Chief Executive Officer, with the concurrence of the Committee and at their sole discretion and subject to the review of the FHFA, if required, based on the months of completed service as an EIP participant during 2010.  To be eligible, the participant must complete at least six months of se rvice in 2010 and otherwise satisfy the EIP’s requirements. Participants who die, become disabled, or retire during 2010 will not be eligible for any long-term incentive award.

·EIP participants who terminate employment with the Bank by reason of death or disability prior to the long-term award payment date in March 2013, or who terminate prior to the long-term award payment date and are eligible to retire from employment with the Bank, may become eligible to receive a pro rata payment of the forty (40) percent long-term incentive opportunity based on the number of months of completed service as an EIP participant during the two year period following the plan year, subject to the granting of awards based on 2012 year-end results described above, the recommendation of the Bank’s President and Chief Executive Officer, with the concurrence of the Committee and at their sole discretion, and subject to review of the FHFA, if required.

Awards to retiring or disabled participants or beneficiaries will be paid at the same time as awards to all active participants. Beneficiaries of such payments will be the same as identified in the Bank’s group insurance plan.

2 Where the EIP refers to the participant’s termination of employment for purposes of receiving any payment, whether such a termination has occurred will be determined in accordance with Section 409A of the Internal Revenue Code and applicable regulations thereunder.

3 Eligibility to retire is defined as employees who are i) eligible for normal retirement as defined in the Pentegra Defined Benefit Plan for Financial Institutions or ii) meet the Rule of 70 as defined in the Pentegra Defined Benefit Plan for Financial Institutions, including credited service in the FHLB system, but excluding any other credited service at another Pentegra participating employer.

6

The Bank may make such provisions, as it deems appropriate, for withholding payroll taxes in connection with payment of EIP awards.

The Bank also has several other incentive programs for staff at the Bank designed to motivate employees to become more innovative and productive. The Bank’s President and Chief Executive Officer is responsible for the administration of each of these programs and has the authority to construe, implement, and administer programs, as appropriate.

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Appendix A – Goal Definitions

Profitability Goal

Pre-assessment Core Net Income =

Net Income – (Prepayment Fees – Historical Prepayment Fee Amortization)

+ (Debt Retirement Costs – Historical Debt Retirement Cost Amortization)

– Net Fair Value Adjustments + OTTI Credit Losses + REFCorp Expense + AHP Expense

Net Income = 2010 net income reported in accordance with GAAP in the United States.

Historical Prepayment Fee Amortization = the current-period, straight-line amortization of all historical prepayment fees (whether recognized at time of prepayment or as a yield adjustment on a modified loan) over the original remaining lives of the prepaid assets.

Historical Debt Retirement Cost Amortization = the current-period, straight-line amortization of all historical debt retirement costs over the original remaining lives of the retired liabilities.

Net Fair Value Adjustments = the net unrealized gains and losses as recognized under GAAP attributable to hedges, whether economic hedges or SFAS 133-qualifying hedges, plus trading securities gains and losses.

OTTI Credit Losses = the absolute value of the full-year amount of the credit loss portion of overall losses attributable to other-than-temporary impairments of securities.

In the event that the Bank is required to adjust current period net income to correct prior period accounting errors, positive adjustments to net income resulting from the correction of prior period accounting errors are to be excluded from Pre-assessment Core Net Income, while negative adjustments are to be retained in Pre-assessment Core Net Income.

The exclusion of prepayment fee income and associated debt retirement and swap unwind expense from the Pre-assessment Core Net Income metric removes the potential for “windfall” compensation in the event of heavy prepayment fee income and removes a potential disincentive to prudently respond to prepayment events by excluding the otherwise punitive cost of debt retirement and swap unwind expense.  The exclusion of net unrealized fair value adjustments is consistent with the way that management projects its financial performance and reflects the fact that these adjustments are merely timing adjustments to net income that have no net impact to the Bank’s net income if gains or losses are never realized.  OTTI Credit Losses are excluded from Pre-assessment Core Net Income because they cannot be controlled by management.

Member Outreach Goal

EIP participants, individually or as groups, will meet during the year with representatives from member institutions to develop Bank/member relationships and create new business opportunities. These meetings can range from one-on-one meetings to large group meetings.

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Advance Restructures Goal

To address member need to extend liabilities without increasing funding liabilities, the Bank introduced in late 2009 the Advance Restructuring solution, which allows members to extend the maturities of their current advances without booking prepayment fees in the current period.    This goal will be measured by the number of individual advances restructured during 2010 through the Bank’s Advances Restructuring product or as part of a member-directed restructure which does not blend the prepayment fee into the new advance interest rate.

Mission-Related Advances Goal

The focus of the mission-related metric will be to expand member lending activities in the communities they serve through the Bank’s Community Development Advances (CDA) and Economic Stimulus Advance (ESA). 1

Remediation of 2009 Report of Examination Findings Goal

To achieve the required improvement in the 2010 FHFA Examination, the exam goal requires that management work towards clearance of the 2009 Examination findings that identified weaknesses. We have targeted the 2009 weakness findings, and have established awards of 70% clearance for a threshold award, 85% clearance for a target award, and 100% clearance for an excess award.  While management has put in place remediation plans and in many cases has already implemented the plans, this component of the EIP recognizes both the need to ensure ongoing improvement and the need to address not only the specifics of the 2009 findings, but also the broad-based intent on the part of the finding.  For the purposes of this goal, the term clearance is defined as a 2009 finding not being repeated as a weakness in the 2010 examination.

Individual, Bank-wide or Department-Specific Goal

EIP participants are responsible for supporting significant Bank-wide strategic goals or department-specific initiatives and projects that contribute to the success of the bank. The Individual, Bank-wide or Department-Specific Goal provides for recognition of the participant’s successful contributions toward achievement of Bank-wide strategic goals or completion of department-specific initiatives.

Payments awarded under the Individual, Bank-wide or Department-Specific Goal will take into consideration the participant’s achievement of one to three individual goals that support the Bank’s strategic goals or department-specific initiatives, established at the beginning of the plan year. The goals or initiatives may be non-financial, operational objectives or may add additional weight to a profitability or growth goal. Revisions to these goals or initiatives may be considered on a case-by-case basis during the year but must be approved, in writing, by the President and Chief Executive Officer.

Payments under the Individual, Bank-wide or Department-Specific Goal will be based on the individual’s combined, overall performance on the one to three individual goals or initiatives, as evaluated by the participant’s manager.  The goals or initiatives may be shared within a department or across multiple departments, but the manager’s assessment will be based on the participant’s individual contribution as well as the overall achievement of the initiative. Managers may select a payout percentage for individual, Bank-wide or department-specific objectives from a range of threshold to a maximum payout at excess to recognize the degree to

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which the EIP participant accomplished these results. If the individual goals supporting Bank-wide strategic goals or department-specific initiative(s) are not substantially achieved, the manager may award zero for this goal. Managers need to provide reasonable documentation as the basis for any award recommended under this goal.

1This goal is measured using the following advance product types:  868, 877, 878, 879, 903, 904, 905, 910, 913, 914 and 915 and any new housing and community development product codes introdued during the Plan year.

10

EX-4.2

Exhibit 4.2

FEDERAL HOME LOAN BANK OF BOSTON

2010 EXECUTIVE INCENTIVE PLAN

MarchRevised - December 2010

Purpose:

The Federal Home Loan Bank of Boston (Bank) has established a 2010 Executive Incentive Plan (EIP) which is designed to reward and retain corporate officers during turbulent economic conditions and an atypical period of financial performance challenges as evidenced by the lack of dividend payments to members, suspension of the repurchase of excess capital stock and lack of funding for the AHP program.  Payout opportunities for 2010 EIP participants are generally based on the Bank’s current financial situation, not the competitive market.  It is intended that in subsequent EIP performance periods opportunities will increase to competitive levels as the Bank’s financial performance improves, e.g. from 50% of recommended payouts to 75% when the Bank resumes meaningful dividend payments and to 100% when the Bank resumes repurchase of excess stock.

Guiding Principles:

The 2010 EIP is intended to:

·Recognize that the Bank’s current overall focus is a return to earnings generation to a level that allows payment of dividends, resumption of the purchase of excess capital stock, and funding of the AHP program.

·Reinforce and reward the Bank’s commitment to conservative, prudent, sound risk management practices and preservation of the par value of the Bank’s capital stock.

·Reflect a reasonable assessment of the Bank’s financial situation and prospects while rewarding achievement of identified remediation milestones and the Bank’s financial plan and strategic objectives as spelled out in the Bank’s 2010 Business Plan.

·Tie a significant percentage of incentive awards to the long-term financial condition and performance of the Bank.

·Recognize the importance of individual performance through metrics linked to the Bank’s strategic goals and/or objectives of the participant’s principal functions.

·Recognize that continued enhancements and upkeep of the Bank’s operational infrastructure are critical to the Bank’s long-term condition.

Federal Home Loan Bank of Boston

2010 Executive Incentive Plan

Page 2

Incentive Goals:

The incentive goals for all participants, with the exception of those participants in Enterprise Risk Management, are summarized in the following table with more detail following in Appendix A:

Goal	Weight			Threshold	Target	Excess
	Pres.	Tier I	Tiers II & III
Pre-assessment Core Net Income	25%	20%	10%	$212.0 MM	$249.0 MM	$286.0 MM
Member Outreach	10%	10%	10%	45% of membership	60% of membership	75% of membership
Advance Restructures	0%	10%	10%	125	150	175
Growth in Membership	0%	5%	5%	4 New Members	6 New Members	8 New Members
2010 Average CDA and ESA Advances Balances	10%	10%	10%	$2.5 Billion	$2.619 Billion	$2.852 Billion
Remediation of 2009 Report of Examination Findings	25%	20%	20%	70% Clearance	85% Clearance	100% Clearance
Individual, Bank-Wide or Department-Specific Component	0%30%	0% 25%	15%35%	As defined As documented by supervisor	As defined As documented by supervisor	As defined As documented by supervisor
Discretionary Component	30%	25%	20%	As documented by supervisor	As documented by supervisor	As documented by supervisor

2

Federal Home Loan Bank of Boston

2010 Executive Incentive Plan

Page 3

Incentive goals for Enterprise Risk Management participants in Tiers I, II and III are summarized in the following table with more detail following in Appendix A

Goal	Weight		Threshold	Target	Excess
	Tier I	Tiers II & III
Pre-assessment Core Net Income	10%	5%	$212.0 MM	$249.0 MM	$286.0 MM
Member Outreach	10%	10%	45% of membership	60% of membership	75% of membership
Advance Restructures	10%	10%	125	150	175
Growth in Membership	5%	5%	4 New Members	6 New Members	8 New Members
2010 Average CDA and ESA Advances Balances	10%	10%	$2.5 Billion	$2.619 Billion	$2.852 Billion
Remediation of 2009 Report of Examination Findings	30%	25%	70% Clearance	85% Clearance	100% Clearance
Individual, Bank-Wide or Department-Specific Component	0% 25%	15%35%	As defined As documented by supervisor	As defined As documented by supervisor	As documented As defined by supervisor
Discretionary Component	25%	20%	As documented by supervisor	As documented by supervisor	As documented by supervisor

3

Federal Home Loan Bank of Boston

2010 Executive Incentive Plan

Page 4

Incentive Opportunity

Eligible participants will be assigned an incentive award opportunity that combines short and long-term incentives and is expressed as a percentage of the incumbent’s 2010 actual annual base salary, as illustrated in the chart below.

	Combined Short and Long-Term Incentive Opportunity as a Percent of Base Salary
	Threshold	Target	Excess
President	15.00%	30.00%	45.00%
Tier I	11.00%	22.00%	33.0%
Tier II	8.75%	17.50%	26.25%
Tier III	6.25%	12.50%	18.75%

Goal achievement and individual awards for the goals on pages two and three will be calculated at the conclusion of 2010 based on results as of December 31, 2010.  Participants will be eligible to receive sixty (60) percent of such award in a cash payment, subject to the final approval of the board and the review of the Federal Housing Finance Agency (FHFA), if required, on the first pay day in March 2011.  Except as otherwise described under EIP Administration, the participant must be employed by the Bank on the date of payment of the award to receive the award. The chart below illustrates the Threshold, Target and Excess payout potentials for this short-term award, by tier.

2010 Short-Term Incentive Opportunity
Tier	Threshold	Target	Excess
President	9.00%	18.00%	27.00%
Tier I	6.60%	13.20%	19.80%
Tier II	5.25%	10.50%	15.75%
Tier III*	6.25%	12.50%	18.75%

*100% of payout opportunity to be paid following year-end 2010; no long-term opportunity

Participants will be eligible to receive the remaining forty (40) percent of thelong-term award opportunity as cash on the first pay day in March 2013, ifas follows:

Long-Term Goal:Retained Earnings as of December 31, 20121:

Threshold:$405.0 million

Target:$475.0 million

Excess:$545.0 million

1 The December 31, 2012 Retained Earnings goal is as projected in the Bank’s 2011 Strategic Business Plan.

4

Federal Home Loan Bank of Boston

2010 Executive Incentive Plan

Page 5

Long-Term Incentive Opportunity Payable after Year-End 2012:

Threshold:An award equal to fifty (50) percent of the remaining forty (40) percent of the combined award opportunity

Target:An award equal to the remaining forty (40) percent of the combined award opportunity

Excess:An award equal to 150 percent of the remaining forty (40) percent of the combined award opportunity

In addition, the following conditions aremust be satisfied for participants to receive the long-term award opportunity:

·    The Bank’s Retained Earnings at year-end 2012 are at a minimum of $400 million less dividends paid in 2010 through 2012, and

·The participant is in employment with the Bank on the payment date, as described below in EIP Administration, and

·Subject to the final approval of the board and review of the FHFA, if required:.

The chart below illustrates the Threshold, Target and Excess payout potentials for the long-term award described above, by tier.

2010 Long-Term Incentive Opportunity Payable after Year-End 2012
Tier	Threshold			Target			Excess
	2010	2011	2012	2010	2011	2012	2010	2011	2012
President	0.0%	0.0%	6.0%	0.0%	0.0%	12.0%	0.0%	0.0%	18.0%
Tier I	0.0%	0.0%	4.4%	0.0%	0.0%	8.8%	0.0%	0.0%	13.2%
Tier II	0.0%	0.0%	3.5%	0.0%	0.0%	7.0%	0.0%	0.0%	10.5%
Tier III	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%

Eligible Participants

The following individuals are participants in the EIP for 2010:

President	Tier I	Tier II	Tier III
Edward A. Hjerpe, III	Janelle K. Authur	Daniel HBrian G. DevineDonahue	Bryan Gulachenski
	Earl W. Baucom	Brian GJohn F. DonahueHenderson, Jr.*	Paul T. Pouliot
	George H. Collins*	John FKelly A. Henderson, Jr.*LaCava	Allison Santoro
	M. Susan Elliott	Kelly A. LaCavaRachele McDonough	Edward A. Schultze*
	Frank Nitkiewicz	RachelePaul McDonoughPeduto	Kenneth A. Willis

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Federal Home Loan Bank of Boston

2010 Executive Incentive Plan

Page 6

General Counsel	Paul Peduto
Carol H. Pratt	Kevin Whittaker*
	Chief Technology OfficerThomas C. Wolf

*Denotes participant in Enterprise Risk Management Department

EIP Administration

The EIP is administered by the Personnel Committee of the Board of Directors (Committee), which shall have full power and binding authority to construe, interpret, and administer the EIP, and to adjust it for extraordinary circumstances.  Extraordinary circumstances may include changes in business strategy, termination or commencement of business lines, impact of severe economic fluctuations, significant growth or consolidation of the membership base, or significant regulatory or other changes impacting the Bank or Bank System.

The Committee reserves the right at any time to amend, suspend or terminate the EIP in whole or in part, for any reason, and without the consent of any EIP participant.

The Bank’s President and Chief Executive Officer will determine participation in the EIP with the concurrence of the Committee.

EIP awards shall not be considered earned or payable, in whole or in part, to any participant for any reason until they are finally determined by the Bank’s President and Chief Executive Officer with the concurrence of the Committee following the end of the plan years.

Any individual hired or promoted into an eligible position during 2010 that is granted an award shall have any such incentive award prorated based on months of EIP participation, providing he/she has served a minimum of six months in that role in 2010 and otherwise satisfies the EIP’s requirements.

Except as described below, any EIP participant who terminates employment for any reason, whether voluntarily or involuntarily, before the applicable award payment date will not be entitled to any award, except as otherwise determined by the Bank’s President and Chief Executive Officer, with the concurrence of the Committee, at their sole discretion and subject to review of the FHFA, if required12.

·EIP participants who terminate employment with the Bank by reason of death or disability or who are eligible to retire23 from employment with the Bank prior to the March 2011 short-

12 Where the EIP refers to the participant’s termination of employment for purposes of receiving any payment, whether such a termination has occurred will be determined in accordance with Section 409A of the Internal Revenue Code and applicable regulations thereunder.

23 Eligibility to retire is defined as employees who are i) eligible for normal retirement as defined in the Pentegra Defined Benefit Plan for Financial Institutions or ii) meet the Rule of 70 as defined in the Pentegra Defined Benefit Plan for Financial Institutions, including credited service in the FHLB system, but excluding any other credited service at another Pentegra participating employer.

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term award payment date may receive a pro rata payment of the sixty (60) percent short-term incentive opportunity as determined and recommended by the Bank’s President and Chief Executive Officer, with the concurrence of the Committee and at their sole discretion and subject to the review of the FHFA, if required, based on the months of completed service as an EIP participant during 2010.  To be eligible, the participant must complete at least six months of service in 2010 and otherwise satisfy the EIP’s requirements. Participants who die, become disabled, or retire during 2010 will not be eligible for any long-term incentive award.

·EIP participants who terminate employment with the Bank by reason of death or disability prior to the long-term award payment date in March 2013, or who terminate prior to the long-term award payment date and are eligible to retire from employment with the Bank, may become eligible to receive a pro rata payment of the forty (40) percent long-term incentive opportunity based on the number of months of completed service as an EIP participant during the two year period following the plan year, subject to the granting of awards based on 2012 year-end results described above, the recommendation of the Bank’s President and Chief Executive Officer, with the concurrence of the Committee and at their sole discretion, and subject to review of the FHFA, if required.

Awards to retiring or disabled participants or beneficiaries will be paid at the same time as awards to all active participants. Beneficiaries of such payments will be the same as identified in the Bank’s group insurance plan.

The Bank may make such provisions, as it deems appropriate, for withholding payroll taxes in connection with payment of EIP awards.

The Bank also has several other incentive programs for staff at the Bank designed to motivate employees to become more innovative and productive. The Bank’s President and Chief Executive Officer is responsible for the administration of each of these programs and has the authority to construe, implement, and administer programs, as appropriate.

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Appendix A – Goal Definitions

Profitability Goal

Pre-assessment Core Net Income =

Net Income – (Prepayment Fees – Historical Prepayment Fee Amortization)

+ (Debt Retirement Costs – Historical Debt Retirement Cost Amortization)

– Net Fair Value Adjustments + OTTI Credit Losses + REFCorp Expense + AHP Expense

Net Income = 2010 net income reported in accordance with GAAP in the United States.

Historical Prepayment Fee Amortization = the current-period, straight-line amortization of all historical prepayment fees (whether recognized at time of prepayment or as a yield adjustment on a modified loan) over the original remaining lives of the prepaid assets.

Historical Debt Retirement Cost Amortization = the current-period, straight-line amortization of all historical debt retirement costs over the original remaining lives of the retired liabilities.

Net Fair Value Adjustments = the net unrealized gains and losses as recognized under GAAP attributable to hedges, whether economic hedges or SFAS 133-qualifying hedges, plus trading securities gains and losses.

OTTI Credit Losses = the absolute value of the full-year amount of the credit loss portion of overall losses attributable to other-than-temporary impairments of securities.

In the event that the Bank is required to adjust current period net income to correct prior period accounting errors, positive adjustments to net income resulting from the correction of prior period accounting errors are to be excluded from Pre-assessment Core Net Income, while negative adjustments are to be retained in Pre-assessment Core Net Income.

The exclusion of prepayment fee income and associated debt retirement and swap unwind expense from the Pre-assessment Core Net Income metric removes the potential for “windfall” compensation in the event of heavy prepayment fee income and removes a potential disincentive to prudently respond to prepayment events by excluding the otherwise punitive cost of debt retirement and swap unwind expense.  The exclusion of net unrealized fair value adjustments is consistent with the way that management projects its financial performance and reflects the fact that these adjustments are merely timing adjustments to net income that have no net impact to the Bank’s net income if gains or losses are never realized.  OTTI Credit Losses are excluded from Pre-assessment Core Net Income because they cannot be controlled by management.

Member Outreach Goal

EIP participants, individually or as groups, will meet during the year with representatives from member institutions to develop Bank/member relationships and create new business opportunities. These meetings can range from one-on-one meetings to large group meetings.

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Advance Restructures Goal

To address member need to extend liabilities without increasing funding liabilities, the Bank introduced in late 2009 the Advance Restructuring solution, which allows members to extend the maturities of their current advances without booking prepayment fees in the current period.    This goal will be measured by the number of individual advances restructured during 2010 through the Bank’s Advances Restructuring product or as part of a member-directed restructure which does not blend the prepayment fee into the new advance interest rate.

Mission-Related Advances Goal

The focus of the mission-related metric will be to expand member lending activities in the communities they serve through the Bank’s Community Development Advances (CDA), and Economic Stimulus Advance (ESA). i

Remediation of 2009 Report of Examination Findings Goal

To achieve the required improvement in the 2010 FHFA Examination, the exam goal requires that management work towards clearance of the 2009 Examination findings that identified weaknesses. We have targeted the 2009 weakness findings, and have established awards of 70% clearance for a threshold award, 85% clearance for a target award, and 100% clearance for an excess award.  While management has put in place remediation plans and in many cases has already implemented the plans, this component of the EIP recognizes both the need to ensure ongoing improvement and the need to address not only the specifics of the 2009 findings, but also the broad-based intent on the part of the finding.  For the purposes of this goal, the term clearance is defined as a 2009 finding not being repeated as a weakness in the 2010 examination.

Individual, Bank-wide or Department-Specific ComponentGoal

EIP participants are responsible for supporting significant Bank-wide strategic goals or department-specific initiatives and projects that contribute to the success of the bank. The Individual, Bank-wide or Department-Specific ComponentGoal provides for recognition of the participant’s successful contributions toward achievement of Bank-wide strategic goals or completion of thosedepartment-specific initiatives.

Payments awarded under the Individual, Bank-wide or Department-Specific ComponentGoal will take into consideration the participant’s achievement of one to three individual, goals that support the Bank’s strategic goals or department-specific initiatives, established at the beginning of the plan year. The goals or initiatives may be non-financial, operational objectives or may add additional weight to a profitability or growth goal. Revisions to these goals or initiatives may be considered on a case-by-case basis during the year but must be approved, in writing, by the President and Chief Executive Officer.

Payments under the Individual, Bank-wide or Department-Specific ComponentGoal will be based on the individual’s combined, overall performance on the one to three individual, department-specific goals or  initiatives, as evaluated by the participant’s manager.  The goals or initiatives may be shared within a department or across multiple departments, but the manager’s assessment will be based on the participant’s individual contribution as well as the overall achievement of the initiative. Managers may select a payout percentage for individual, Bank-wide or department-specific objectives from a range of threshold to a maximum payout at excess

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to recognize the degree to which the EIP participant accomplished these results.  If the individual, goals supporting Bank-wide strategic goals or department-specific initiative(s) are not substantially achieved, the manager may award zero for this component. goal. Managers need to provide reasonable documentation as the basis for any award recommended under this componentgoal.

Discretionary Component

It is understood that the success of the bank in achieving its goals as set forth in the Plan requires individual contribution. Payments awarded under the Discretionary Component will take into consideration and recognize an individual participant’s achievement of and contribution toward Bank, department, or individual goals or initiatives, as assessed by the President and Chief Executive Officer or the participant’s manager and recommended to the Personnel Committee.

For Tier I participants, the Discretionary Component may include the President and Chief Executive Officer’s or the manager’s assessment of achievement of a participant’s individual and department-specific goals, including operational initiatives, established at the beginning of the plan year. It also may include an evaluation of the participant’s contributions in areas such as expense control and operational efficiency, risk management and control, Board communication, and succession planning.  There may also be a subjective element in this component so that the President and Chief Executive Officer or manager can award a participant’s leadership, work ethic, attitude, or other such similar intangible attribute that contributes to the Bank’s success.

The President and Chief Executive Officer or participant’s manager may recommend a payout percentage for the Discretionary Component from a range of threshold to a maximum payout at excess to recognize the degree of achievement and contribution.  The President and Chief Executive Officer or manager may also recommend zero award for this component.  The President and Chief Executive Officer or manager needs to provide reasonable documentation to the Personnel Committee that states the basis for whatever award is recommended under the Discretionary Component for Tier I participants.

For Tier II and III participants, the manager will assess, recommend and document a payout percentage as discussed above for Tier I participants, as applicable, but excluding the achievement of the one to three individual, department-specific initiatives awarded under the Individual, Department-Specific Component.

For the President and Chief Executive Officer, the Personnel Committee will assess, recommend and document a payout percentage as discussed above for Tier I participants. At the end of the plan year, the President and Chief Executive Officer will provide the Personnel Committee with a self-assessment of individual, Bank and personal achievements to be used in determining the Discretionary Component award.

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i This goal is measured using the following advance product types: 822, 868, , 873, 877, 878, 879, 903, 904, 905, 910, 913, 914 and 915 and any new housing and community development product codes introdued during the Plan year.