Federally chartered corporation | 000-51402 | 04-6002575 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | 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)) |
Short-Term Goal | Weight | Threshold | Target | Excess |
Increase in Retained Earnings Over December 31, 2011, Balance | 25% | $52.9 million | $58.8 million | $70.6 million |
New Business and Mission Goal | 20% | $1 billion in new advances with terms greater than or equal to one year in term disbursed | $3 billion in new advances with terms greater than or equal to one year in term disbursed | $5 billion in new advances with terms greater than or equal to one year in term disbursed |
Pre-assessment, Pre-OTTI Core Net Income(1), subject to risk limits(2) | 20% | $151.7 million, as adjusted for interest rates(3) | $168.6 million, as adjusted for interest rates(3) | $202.3 MM, as adjusted for interest rates(3) |
Bankwide Operational Goals (Documentation of Policies, Records Retention, and Disaster Recovery/Business Continuity) | 20% | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP |
Individual, Bankwide or Department-Specific Initiatives | 15% | As documented by manager | As documented by manager | As documented by manager |
Short-Term Goal | Weight | Threshold | Target | Excess | ||
Increase in Retained Earnings Over December 31, 2011, Balance | 25% | $52.9 million | $58.8 million | $70.6 million | ||
Bankwide Enterprise Risk Management (ERM) Department's Initiatives | 30% | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP | ||
Bankwide Operational Goals (Documentation of Policies, Records Retention, and Disaster Recovery/Business Continuity) | 20% | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP | As set forth in Appendix A to the EIP | ||
Remediation of 2011 Report of Examination Findings, excluding certain findings from this goal as set forth in the EIP | 15% | 75% clearance | 100% clearance | Not applicable. | ||
Individual, Bankwide or Department-Specific Initiatives | 10% | As documented by manager | As documented by manager | As documented by manager |
Long-Term Goal | Retained Earnings as of December 31, 2014 | |
Threshold | $495.3 million | |
Target | $550.4 million | |
Excess | $660.5 million |
Combined Short and Long-Term Incentive Opportunities | |||
Threshold | Target | Excess | |
President | 24.00% | 48.00% | 72.00% |
All Other Named Executive Officers | 17.60% | 35.20% | 52.80% |
2012 Short-Term Incentive Opportunities | |||
Threshold | Target | Excess | |
President | 14.40% | 28.80% | 43.20% |
All Other Named Executive Officers | 10.56% | 21.12% | 31.68% |
• | the requirement that the participant be in employment with the Bank on the short-term award payment date in March 2013, although participants that terminate employment by reason of death or disability or who are eligible to retire prior to that date may receive a pro-rata payment of the award in certain instances as detailed in the EIP; and |
• | Board approval and Federal Housing Finance Agency, the Bank's principal regulator (the “Finance Agency”), review, if required. |
Long-Term Incentive Opportunities | |||||
Threshold | Target | Excess | |||
All Named Executive Officers | 50% of the remaining 40% of the combined short- and long-term incentive opportunity | The remaining 40% of the combined short- and long-term incentive opportunity | 150% of the remaining 40% of the combined short- and long-term incentive opportunity |
• | the requirement that the participant be in employment with the Bank on the long-term award payment date in March 2015, although participants that terminate employment by reason of death or disability or who are eligible to retire prior to that date may receive a pro-rata payment of the award in certain instances as detailed in the EIP; and |
• | Board approval and Finance Agency review, if required. |
• | operational errors or omissions resulting in material revisions to the 2012 financial results, information submitted to the Finance Agency supporting the goal results or payout calculation, or other data used to determine the combined award at year-end 2012; |
• | submission of significant information to the SEC, Office of Finance (the Bank's agent for the issuing and servicing of debt), and/or Finance Agency materially beyond any deadline or applicable grace period, other than late submissions that are caused by Acts of God or other events beyond the reasonable control of the participants; or |
• | failure by the Bank to make sufficient progress, as determined by the Finance Agency, in the timely remediation of examination and other supervisory findings relevant to the goal results or payout calculation. |
Date: | May 11, 2012 | Federal Home Loan Bank of Boston | |
By:/s/ Frank Nitkiewicz | |||
Frank Nitkiewicz | |||
Executive Vice President and Chief Financial Officer |
• | Recognize that the Bank's current overall focus is earnings generation and balance sheet strength that supports continued payment of dividends, resumption of the purchase of excess capital stock, and consistent funding of the AHP program as well as achievement of the retained earnings target. |
• | 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 the Bank's financial plan and strategic objectives as spelled out in the Bank's 2012 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 and independent of the areas that they monitor. |
Goal | Weight | Threshold | Target | Excess | ||
Pres. | Tier I | Tiers II & III | ||||
Increase in Retained Earnings Over 12/31/11 Balance | 25% | 25% | 25% | $52.9 MM | $58.8 MM | $70.6 MM |
New Business and Mission Goal | 20% | 20% | 20% | $1 Billion in new long term advances disbursed | $3 Billion in new long term advances disbursed | $5 Billion in new long term advances disbursed |
Pre-assessment, Pre OTTI Core Net Income, subject to risk limits | 20% | 20% | 20% | $151.7 MM, as adjusted for interest rates* | $168.6 MM, as adjusted for interest rates* | $202.3 MM, as adjusted for interest rates* |
Bank-wide Operational Goals (Documentation of Policies, Records Retention, and Disaster Recovery/Business Continuity) | 20% | 20% | 20% | As documented in Appendix A | As documented in Appendix A | As documented in Appendix A |
Individual, Bank-wide or Department-Specific Initiatives | 15% | 15% | 15% | As documented by manager | As documented by manager | As documented by manager |
Goal | Weight | Threshold | Target | Excess | |
Tier I | Tiers II & III | ||||
Increase in Retained Earnings Over 12/31/11 Balance | 25% | 25% | $ 52.9 MM | $ 58.8 MM | $70.6 MM |
Bank-wide ERM Initiatives | 30% | 20% | As documented in Appendix A | As documented in Appendix A | As documented in Appendix A |
Bank-wide Operational Goals (Documentation of Policies, Records Retention, and Disaster Recovery/Business Continuity) | 20% | 20% | As documented in Appendix A | As documented in Appendix A | As documented in Appendix A |
Remediation of 2011Report of Examination Findings** | 15% | 10% | 75% clearance | 100% clearance | N/A |
Individual, Bank-wide or Department Specific Initiatives | 10% | 25% | As documented by manager | As documented by manager | As documented by manager |
Combined Short and Long-Term Incentive Opportunity as a Percent of Base Salary | |||
Threshold | Target | Excess | |
President | 24.00% | 48.00% | 72.00% |
Tier I | 17.60% | 35.20% | 52.80% |
Tier II | 14.00% | 28.00% | 42.00% |
Tier III | 10.00% | 20.00% | 30.00% |
2012 Short-Term Incentive Opportunity | |||
Tier | Threshold | Target | Excess |
President | 14.40% | 28.80% | 43.20% |
Tier I | 10.56% | 21.12% | 31.68% |
Tier II | 8.40% | 16.80% | 25.20% |
Tier III* | 10.00% | 20.00% | 30.00% |
Threshold: | $495.3 million |
Target: | $550.4 million |
Excess: | $660.5 million |
Threshold: | An award equal to fifty 50 percent of the remaining 40 percent of the combined award opportunity |
Target: | An award equal to 100 percent of the remaining 40 percent of the combined award opportunity |
Excess: | An award equal to 150 percent of the remaining 40 percent of the combined award opportunity |
• | The participant is in employment with the Bank on the payment date, as described below in EIP Administration, and |
• | Subject to the discretion of the board, the long-term award calculated above may be reduced, (but not to a number that is less than zero) for all participants or for an individual participant, as applicable, if, during calendar years 2013 and/or 2014, any of the following occur such that if it had occurred prior to the year-end 2012 calculations, it would have negatively impacted the goal results and reduced the associated payout calculation: |
i. | operational errors or omissions resulting in material revisions to (A) the 2012 financial results, (B) information submitted to FHFA supporting the goal results or payout calculation, or (C) other data used to determine the combined award at year-end 2012; |
ii. | submission of significant information to the SEC, Office of Finance and/or FHFA materially beyond any deadline or applicable grace period, other than late submissions that are caused by acts of God or other events beyond the reasonable control of the participants, or |
iii. | failure by the bank to make sufficient progress, as determined by the FHFA, in the timely remediation of examination and other supervisory findings relevant to the goal results or payout calculation. |
• | All long-term award payouts shall be subject to the final approval of the board and review of the FHFA, if required. |
President | Tier I | Tier II | Tier III |
Edward A. Hjerpe III | Janelle K. Authur | Brian G. Donahue | Paul T. Pouliot |
Timothy J. Barrett | John F. Henderson Jr.* | Allison Santoro | |
George H. Collins* | Paul Peduto | Edward A. Schultze* | |
M. Susan Elliott | Kevin Whittaker* | Newton Thompson | |
Frank Nitkiewicz | Kenneth A. Willis | ||
Carol H. Pratt |
• | 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 2013 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 2012. To be eligible, the participant must complete at least six months of service in 2012 and otherwise satisfy the EIP's requirements. Participants who die, become disabled, or retire during 2012 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 2015, 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 2014 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. |
Threshold: | $151.7 million |
Target: | $168.6 million |
Excess: | $202.3 million |
• | Documentation of Bank Policies. This initiative will be achieved based on the following: |
Threshold: | Complete inventory of Bank policies by January 31, 2012. Adopt a Document Standards Policy (“DSP”) which will provide the form and content for policies and procedures, by February 15, 2012 (which may be modified as the overall review of Bank policies is completed). Develop a short-term plan for bringing policies and procedures into compliance with the DSP by March 31, 2012. |
Target: | Threshold, and assess inventoried policies (to the extent that they are determined to meet the DSP definition of “policy”), as well as procedures (as defined in the DSP) that relate to those policies, against the DSP and make modifications to bring such policies and procedures into conformance with the DSP within the timeframes set forth in the short-term plan (which, for policies, will be no later than the commencement of the 2012 examination). |
Excess: | Target, and organize policies and procedures in a manner that makes compliance most efficient and effective, including: |
• | Populate a central repository with Bank policies and procedures |
• | Communicate and train employees on how to use the central repository |
• | Cross-link policies and procedures, as appropriate, to facilitate their use |
• | Records Retention |
Threshold: | Update and approve existing Records Management Program documentation related to the records in the participant's department. This will include ensuring that the annual review of all Scheduled Records by each Record Owner and the annual review of records scheduled for destruction are conducted by the target dates established by the |
Target: | Threshold, and ensure staff awareness of the requirements of new FHFA records retention regulation and the resulting changes in the Bank's records management processes by requiring all department staff to participate in Bank training related to the Bank's revised Records Management Policy and Procedures. Identify all agents and independent contractors that generate Scheduled Records used in the departmental processes and ensure that the employees responsible for those relationships are not only designated as Record Owners, but also have Scheduled the related records pursuant to the Bank's Records Management Policy and Procedures. |
Excess: | Target, and for those departments participating in the electronic records management project for 2012, ensure that identified staff resources are dedicated to work with the Bank's subject matter expert to define record types, work flow requirements, retention rules and retrieval needs, among other project requirements, and that the electronic records solution is deployed within the planned timeframe. |
• | Disaster Recovery/Business Continuity |
Threshold: | Update and approve Business Continuity Plans for all departments/business areas including 1) Review and update all Business Impact Assessments 2) Review or define all Recovery Time Objectives for systems/ business processes based on business need and 3) Define Recovery Point objectives. |
Target: | Threshold, and participate in defining business continuity and disaster recovery testing requirements and execute on defined tests including the potential BC/DR site migration. |
Excess: | Target, and identify, review and update departmental/business area manual procedures required for business continuity. Ensure Continuity awareness through Bank-wide and department training or other activities. |
• | Develop Compliance Function |
Threshold: | Hire a compliance officer in ERM by June 30, 2012, or sooner. |
Target: | Threshold, and develop plan and for developing the Compliance function within ERM and present the plan to Management Committee by June 30, 2012. |
Excess: | Target, and adopt recommended model that clarifies the role and responsibilities of compliance between all the Bank constituents to ensure Bank-wide regulatory compliance by December 31, 2012. |
• | Co-lead ongoing effort to implement the Collateral Study First Stage Implementation Plan and initiate the MPF study. |
Threshold: | Present revised Products Policy to the board and post to the Bank's website by March 31, 2012 and complete Collateral Study Second Stage plan by June 30, 2012. |
Target: | Threshold, and complete new Business Committee six month pilot and report to Management Committee regarding accomplishments and recommendation regarding continuation of Committee by June 30, 2012. Also develop MPF study First Stage recommendations and obtain Management Committee approval by September 30, 2012. |
Excess: | Threshold and Target plus, work with at least 3 members on a pilot basis to introduce enhanced data gathering processes by December 31, 2012. |
• | Address Risk Assessment Recommendations |
Risk Type | Recommendation | New or In Process |
Market | Provide the ALCO and the Risk Committee of the Board the impact of extreme changes in interest rates on VaR by April 30, 2102. | New |
Market | Review with ALCO and Risk Committee existing and proposed limit structures by March 31, 2012 with implementation of those limits and management action triggers approved and inclusion in policy by June 30, 2012 | New |
Credit | Report stress testing of MPF losses to the Credit Committee quarterly and the Risk Committee of the Board twice in 2012 | New |
Credit | By the end of the first quarter analyze the appropriateness of limits and management action triggers for unsecured money market investments; make recommendations to Credit Committee and the Board during the second quarter of 2012. | New |
Liquidity | By April 2012, fully incorporate Basel III liquidity metrics into regular liquidity reporting | New |
Market, Credit, Liquidity | Provide regular stress testing results to the ALCO or Credit Committee quarterly, and to the Risk Committee of the board twice in 2012 | New |
Operational | Retraining - by March 31st, provide an email to business unit leadership summarizing findings from operational exceptions suggesting re-training might help reduce people performance related exceptions and encourage business units to consider periodic re-training as a preventive control. | New |
Operations | Improve operational risk related KRIs and KPIs: By 12/31/12, define information, reports and report submission frequencies of operational risk related KRIs and KPIs to provide to the Operations Committee. | New |
Market | Provide ongoing analysis of prepayment sensitivities and their impact on market risk metrics, quarterly beginning in the first quarter of 2012. | In Process |
Model | Accept or find a suitable replacement to the adjustment factor in the Levels model in relation to MPF credit enhancements by June 30, 2012. | In Process |
Market, Liquidity | Present and discuss the issue of investment capital in longer term investments during 2012 with FHFA. | In Process |