Approved December 17, 2009

Federal Home Loan Bank of Topeka
Executive Short-Term Incentive Plan Targets
Goal Metrics, Metric Performance Ranges, Metric Weights and Shareholder
Safeguard

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

A.   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.   Core Return Spread on Class B Common Stock

•   Definition: The spread between Pre-SFAS 133, Pre AHP/REFCORP core 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-SFAS 133, AHP and REFCORP core 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
1.61 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.

Core income is defined as follows:

  •   Net income calculated under generally accepted accounting principles
(GAAP)

  •   Plus AHP/REFCORP assessments

  •   Excluding the impact or adjustment required because of Statement of
Financial Accounting Standards No. 133 (SFAS 133)

  •   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 Ranges:

Annual and Interim Performance Ranges:

              Annual and Interim     Performance Ranges
Threshold
    4.05 %
Target
    6.76 %
Optimum
    9.47 %

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2. Net Income after Capital Charge

•   Definition: The dollar amount of core earnings, Pre-SFAS 133, which exceed
the cost of the required return on capital.

•   Measure: Core earnings as defined above but Post-AHP/REFCORP, 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 Ranges:

Annual Performance Range:

              Annual Performance Range
Threshold
  $ 26,120,000  
Target
  $ 52,230,000  
Optimum
  $ 78,350,000  

Interim Performance Ranges for Quarterly Payouts against Annual Award:

                      Interim Performance Ranges     March 31   June 30
Threshold
  $ 6,530,000     $ 13,060,000  
Target
  $ 13,057,500     $ 26,115,000  
Optimum
  $ 19,587,500     $ 39,175,000  

3.   Core Product Utilization

•   Definition: Weighted average member and housing associate usage of core
banking (profit-oriented) products.

•   Measure: Calculate the utilization ratio for each identified product by
dividing the number of members and housing associates at the end of the year
that qualify as a user of a product (as defined below after each product) at any
time during the current year by the total number of members and housing
associates at the end of the current year. A weighted average utilization ratio
across all products is calculated by multiplying the percentage weighting listed
below times the utilization ratio for that product and then summing the
products.

                 
Line of Credit Advances
    15 %   (outstanding balance on any day)
Regular Advances
    25 %   (outstanding balance on any day)
Letters of Credit
    15 %   (letter outstanding on any day)
MPF Program
    25 %   (sold loan on any day in last 12 months)
Overnight Deposits
    10 %   (outstanding balance on any day)
Safekeeping
    10 %   (balance at month-end)

   

•   Performance Ranges:

Annual Performance Range:

              Annual Performance Range
Threshold
    46.96 %
Target
    49.46 %
Optimum
    51.96 %

•   Interim Performance Ranges for Quarterly Payouts against Annual Award:

Calculate the 12 month rolling weighted average utilization, as defined above,
but using quarter end number of members and housing associates. The quarterly
payouts will be based upon this table:

                      Interim Performance Ranges     March 31   June 30
Threshold
    45.56 %     45.90 %
Target
    48.06 %     48.40 %
Optimum
    50.56 %     50.90 %

4.   Mission Product Utilization

•   Definition: Member usage of mission-oriented products. Mission-oriented
products consist of the following:

  •   Affordable Housing Program (AHP);

  •   Community Housing Program (CHP)/Community Development Program (CDP);

  •   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
FHLB membership.

•   Mission-oriented Product Category Usage Definitions

  •   AHP — Application submitted. Applications submitted by a member but
subsequently deemed to be ineligible by the FHLBank will be counted as a
qualified use.

• CHP/CDP – Applications approved.
• Homeownership Set-aside Programs (RFHP or TOP) — Agreement submitted.
• JOBS — Applications submitted.

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•   Performance Ranges:

Annual Performance Range:

              Annual Performance Range
Threshold
    369  
Target
    458  
Optimum
    547  

Interim Performance Ranges for Quarterly Payouts against Annual Award:

                      Interim Performance Ranges     March 31   June 30
Threshold
    175       289  
Target
    235       373  
Optimum
    292       449  

5.   Risk Management

DefinitionU: Risk Management – Management of FHLBank risks as determined by the
weighted average rating by the board of directors in an annual survey consisting
of five questions on risk management including internal controls. General risk
categories are business, operations, market, credit, liquidity and capital
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
Business Risk (stability of earnings over five-year period, ranking
among FHLBanks)
  20%

Operations Risk – Regulatory Compliance (exam results, management
responsiveness, etc.)
  25%

Operations Risk – Internal Controls (internal audit findings,
management responsiveness, etc.)
  25%

Market Risk (DOE, MVE/TRCS trends, etc.)
    20 %
Credit Risk (exam results, credit events/losses, OTTI, etc.)
    10 %
Total
    100 %

B.   Shareholder Safeguard. The shareholder safeguard metric is Threshold level
of performance on the Core Return Spread on Class B Common Stock. If this
threshold level of performance is not met, no incentive will be paid under this
plan. In addition, if the Risk Based Capital requirements are not met, then the
Compensation Committee shall have the right to determine whether incentive will
be paid under this plan.

C.   Metric Weights. The following metric weight for each goal metric is
assigned to the Participants.

          Objective   Metric Weight
1. Core Return Spread on Class B Common Stock
    25 %
2. Net Income after Capital Charge
    25 %
3. Core Product Utilization
    15 %
4. Mission Product Utilization
    10 %
5. Risk Management
    25 %

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