Note: Redacted portions have been marked with [^^^]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
U.S. Securities and Exchange Commission.

FEDERAL HOME LOAN BANK OF BOSTON

2019 EXECUTIVE INCENTIVE PLAN

Purpose:

The Federal Home Loan Bank of Boston (Bank) has established an Executive
Incentive Plan (EIP) to:

•
promote achievement of the Bank’s financial plan and strategic objectives as
spelled out in the 2019 Strategic Business Plan;

•
provide a total rewards package that is competitive with other financial
institutions in the employment markets in which the Bank competes, including
other Federal Home Loan Banks; and

•
facilitate the retention and commitment of corporate officers or a select group
of management or highly compensated employees.

Guiding Principles:

The 2019 EIP is intended to:

•
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 2019 Strategic Business Plan.

•
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.

•
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.

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Incentive Goals for Participants Outside Enterprise Risk Management:
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 in Appendix A. Levels of achievement for the
Pre-Assessment Core Return on Capital Stock goal have been rounded. Year-end
results will be rounded for award calculations.

Goal
Weight
Threshold
Target
Excess
 
Pres.
Tier I
Tiers II & III
 
 
 
Pre-assessment Core Return on Capital Stock, subject to risk limits
30%
30%
  30%
8.01%, as adjusted for interest rates1
8.90%, as adjusted for interest rates1
10.68%, as adjusted for interest rates1
Insurance Advances Disbursements
15%
15%
15%
$4.00 billion
$5.00 billion
$6.00 billion
Insurance Membership
15%
15%
 15%
3 new members
5 new members
7 new members
Core Mission Goal
10%
10%
10%
CMA Ratio = 73.41%
CMA Ratio = 73.91%
CMA Ratio = 74.41%
Jobs for New England (JNE) Initiative
10%
10%
10%
N/A
Disburse $7.5 million in subsidy by 12/31/19. Introduce a new JNE pilot for
economic development initiatives. Fund one or more of the pilot economic
development initiatives.
Target, plus a disbursement of any size to an economic development intiative and
15 new JNE users.
Helping to House New England (HHNE) Initiative
10%
10%
10%
N/A
Disburse $7.5 million in subsidy by 12/31/19. By 6/30/19, announce to the HFAs
and members, part 3 of HHNE.
Disburse the total allocated subsidy of $7.5 million, with full funding of
$5 million to the six New England HFAs,
$2 million to an EBP-like set aside and
$500,000 to HFAs and/or members.
Operational Efficiency
10%
10%
10%
2019 Core Operating Expenses do not exceed the 2019 operating expense budget
approved by the board of directors.
2019 Core Operating Expenses do not exceed 97.0% of the 2019 operating expense
budget approved by the board of directors.
2019 Core Operating Expenses do not exceed 93.0% of the 2019 operating expense
budget approved by the board of directors.

1 Each of the performance levels will be adjusted up/(down) by 2.2 basis point
for every basis point by which the average daily federal funds rate is greater
than/(less than) the 2.42 rate assumed in the 2019 Rebaseline Forecast.

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Incentive Goals for Participants from Enterprise Risk Management:
Incentive goals for Enterprise Risk Management participants in Tiers I, II and
III are summarized in the following table with more detail in Appendix A.
Year-end results will be rounded for award calculations.

Goal
Weight
Threshold
Target
Excess
 
Tier I
Tiers II & III
 
 
 
Bank wide ERM initiatives
35%
40%
As documented in Appendix A
As documented in Appendix A
As documented in Appendix A
Pre assessment Core Return on Capital Stock, subject to risk limits
20%
20%
8.01%, as adjusted for interest rates1
8.90%, as adjusted for interest rates1
10.68%, as adjusted for interest rates1
Remediation of 2018 Report of Examination Matters Requiring Attention and
recommendations
15%
10%
Clear all MRA’s and [^^^] of [^^^]
recommendations
Clear all MRA’s and recommendations
Target plus receive an upgrade in at least [^^^]
Jobs for New England (JNE) Initiative
10%
10%
N/A
Disburse $7.5 million in subsidy by 12/31/19. Introduce a new JNE pilot for
economic development initiatives. Fund one or more of the pilot economic
development initiatives.
Target, plus a disbursement of any size to an economic development intiative and
15 new JNE users.
Helping to House New England (HHNE) Initiative
10%
10%
N/A
Disburse $7.5 million in subsidy by 12/31/19. By 6/30/19, announce to the HFAs
and members, part 3 of HHNE.
Disburse the total allocated subsidy of $7.5 million, with full funding of
$5 million to the six New England HFAs,
$2 million to an EBP-like set aside and
$500,000 to HFAs and/or members.
Operational Efficiency
10%
10%
2019 Core Operating Expenses do not exceed the 2019 operating expense budget
approved by the board of directors.
2019 Core Operating Expenses do not exceed 97.0% of the 2019 operating expense
budget approved by the board of directors.
2019 Core Operating Expenses do not exceed 93.0% of the 2019 operating expense
budget approved by the board of directors.

1 Each of the performance levels will be adjusted up/(down) by 2.2 basis point
for every basis point by which the average daily federal funds rate is greater
than/(less than) the 2.42 rate assumed in the 2019 Rebaseline Forecast.

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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 2019 base salary at year-end, as illustrated in the chart below.
 
Combined Short and Long-Term Incentive Opportunity as a Percent of Base
Salary (1) 
 
Threshold
Target
Excess
President
50.00%
75.00%
100.00%
Tier I
30.00%
50.00%
70.00%
Tier II
17.50%
35.00%
52.50%
Tier III
12.50%
25.00%
37.50%

1 Maximum incentive payable in March of any year equals 100% of the plan year
base salary.

Goal achievement and individual awards for the goals on pages two and three will
be calculated at the conclusion of 2019 based on results as of December 31,
2019. Participants in the President and Tier I will be eligible to receive fifty
(50) percent of such award in a cash payment, participants in Tier II 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, between March 1 and March 15, 2020. 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.

2019 Short-Term Incentive Opportunity
Tier
Threshold
Target
Excess
President
25.00%
37.50%
50.00%
Tier I
15.00%
25.00%
35.00%
Tier II
10.50%
21.00%
31.50%
Tier III*
12.50%
25.00%
37.50%

         *100% of payout opportunity to be paid following year-end 2019; no
long-term opportunity

Long-Term Goals:

Goal achievement and individual awards for the long-term opportunity will be
determined at the conclusion of 2021 based on results of the following two
long-term goals as of December 31, 2021.

•
Average Annual Pre-Assessment Core Return on Capital Stock over the period
2019-2021 as adjusted for interest rates*: ( 67% weight)

Threshold:     6.82%
Target:         8.53%
Excess:         10.24%

*Each of the performance levels will be adjusted up/(down) by 1.9 basis point
for every basis point by which the average daily federal funds rate is greater
than/(less than) the 2.28% rate assumed in the 2019-2021 Rebaseline Forecast.

See definitions in Appendix A under Pre-assessment Core Return on Capital Stock

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•
Regulatory Results: (33% weight)

This goal will be measured by the achievement of targeted regulatory goals by
December 31, 2021.

Participants will be eligible to receive the long-term award opportunity as cash
between March 1 and March 15, 2022, as follows:

Long-Term Incentive Opportunity Payable after Year-End 2021:

Threshold: An award equal to 50 percent of the remaining 50 percent for
President and Tier I and 40 percent for Tier II of the combined award
opportunity

Target:
An award equal to 100 percent of the remaining 50 percent for President and Tier
I and 40 percent for Tier II of the combined award opportunity

Excess:
An award equal to 150 percent of the remaining 50 percent for President and Tier
I and 40 percent for Tier II 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 or otherwise
meets employment-related requirements 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 2020
and/or 2021, any of the following occur such that if it had occurred prior to
the year-end 2019 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 2019
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 2019;

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 and non-objection by the FHFA (to the extent required by FHFA).

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Eligible Participants:

The Executive Incentive Plan is intended to be an integral component of the
Bank’s Total Reward Philosophy. All Corporate Officers are eligible to
participate in the 2019 Executive Incentive Plan, at participation tier levels,
and subject to any limitations on participation, as may be set by the Human
Resources and Compensation Committee herein and/or by separate action.

Other members of management or highly compensated employees (i.e. non-Corporate
Officers) may also be selected for participation in the 2019 Executive Incentive
Plan: (i) by the Committee, for participation in Tiers I and II or (ii) by the
President and CEO, for participation in Tier III. Any such participation shall
be subject to any limitations as may be set by the Human Resources and
Compensation Committee herein and/or by separate action.

EIP Administration:

The EIP is administered by the Human Resources and Compensation 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 shall not make adjustments for extraordinary
circumstances that include changes to goals, weights, or levels of achievement
without re-submission to FHFA.

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 but will not do so without re-submission to FHFA.

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 and following the non-objection of the FHFA
(to the extent required by the FHFA).

Participants must receive a performance rating of “Meets Expectations” or better
for 2019 in order to be eligible to receive an EIP payout.

Any individual hired into an eligible position during 2019 that is granted an
award shall have any such incentive award prorated based on actual base salary
paid during the plan year providing he/she has served a minimum of three months
in that role in 2019 and otherwise satisfies the EIP’s requirements.

If an individual becomes a participant of the EIP during the plan year, e.g. due
to a job change or promotion, then any EIP award will be prorated based on
months in the EIP, provided he/she serves a minimum of three months in the EIP
and otherwise satisfies the plan'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 prior to the March 2020 short-term award payment date, or who
terminate employment prior to the short term award payment date and are eligible
to retire3 from employment with the may receive a pro rata payment of the
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 2019. To
be eligible, the participant must complete at least six months of service in
2019 and otherwise satisfy the EIP’s requirements. A minimum of six months
advanced notice to the Bank will be required, and it must be determined that
there has been an effective transition of responsibilities leading to the
retirement date. Participants who die, become disabled, or retire during 2019
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 2022, or who
terminate employment prior to the long-term award payment date and are eligible
to retire3 from employment with the Bank, may become eligible to receive a
payment of the long-term incentive opportunity, subject to the granting of
awards based on 2021 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 terminated (who met retirement criteria3) or disabled participants or
beneficiaries of deceased participants will be paid at the same time as awards
to all active participants. Beneficiary means the participant’s (i) surviving
spouse; or (ii) duly appointed and qualified executor or personal representative
or estate. The Administrator may permit participants to designate other persons
as beneficiaries, but no designation of a beneficiary shall be effective unless
made in accordance with the procedure specified by the Administrator and
actually received by the Administrator prior to the participant’s death.

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

________________________
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.

--------------------------------------------------------------------------------

Appendix A - Goal Definitions

Pre-assessment Core Return on Capital Stock:

The metric for this goal is defined below. The required performance level for
Target is based on the 2019 Strategic Business Plan Base Case projection.

To account for the expected sensitivity of Pre-Assessment Core Return on Capital
Stock to changes in interest rates, the required performance levels for
Threshold, Target and Excess for 2019 will be adjusted upward or downward by 2.2
basis point for every basis point by which the average daily federal funds rate
deviates from the 2.42% assumed in the Rebaselined 2019 forecast for the 2019
Business Plan, and for 2019-2021 will be adjusted upward or downward by 1.9
basis point for every basis point by which the average daily federal funds rate
deviates from the 2.28% assumed in the Rebaselined 2019-2021 forecast in the
2019 Business Plan.

Achievement of the goal is subject to compliance with the Bank’s VaR and
Duration of Equity limits for at least 10 of the 12 months of the year. If this
requirement is not met, the Board may use its discretion to reduce or eliminate
payouts for this goal of the EIP.

Pre-assessment, Pre-OTTI Core Return on Capital Stock =

Net Income -
Prepayment Fees + Historical Prepayment Fee Amortization
+Debt Retirement Costs - Historical Debt Retirement Cost Amortization
-Net Fair Value Adjustments + OTTI Credit Losses
-Accretion of Prior OTTI Credit Losses Due to Improvements in Projected PLMBS
Performance
+AHP Expense +JNE/HHNE Expense - PLMBS Litigation Income
+Interest Expense on Mandatorily Redeemable Capital Stock
____________________________________________________________________________________
Average Daily Outstanding Balance of Capital Stock including Mandatorily
Redeemable Capital Stock

Net Income = 2019 net income reported in accordance with GAAP in the United
States.

Prepayment Fees = Fee income resulting from the exercise of prepayment options
on financial instruments, net of hedge unwind gain/loss.

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.

Debt Retirement Costs = Losses incurred under GAAP when outstanding debt is
purchased for retirement, net of hedge unwind gain/loss

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 private-label mortgage-backed securities.

Accretion of Prior OTTI Credit Losses Due to Improvements in Projected PLMBS
Performance = incremental interest income earned due to yield adjustments
applied to OTTI PLMBS that are projected to have a significant improvement in
credit performance over their remaining lives.

AHP Expense = the Bank’s required set aside of 10% of net income before AHP
Expense as recognized for the full Plan calendar year(s).

JNE/HHNE Expense = subsidy amounts expensed through the Bank’s Jobs for New
England and Helping to House New England programs.

PLMBS Litigation Income = Net income resulting from settlements or judgments
stemming from the Bank’s lawsuits against certain defendants alleging fraud and
misrepresentation surrounding PLMBS sold to the Bank.

Interest Expense on Mandatorily Redeemable Capital Stock = Dividends declared
payable to Class B Stock that has been classified as Mandatorily Redeemable
Capital Stock, and are thus recorded in interest expense under GAAP.

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 Return on Capital Stock, while negative
adjustments are to be retained in Pre-Assessment Core Return on Capital Stock.

The exclusion of prepayment fee income and associated debt retirement and hedge
unwind gain/loss from the Pre-Assessment Core Return on Capital Stock 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
Return on Capital Stock because they cannot be controlled by management.
Similarly, Accretion of Prior OTTI Credit Losses Due to Improvements in
Projected PLMBS Performance and PLMBS Litigation Income are excluded as they
represent recoveries of or offsets to OTTI Credit Losses, which are excluded.
The Bank may make additional adjustments, subject to approval by the Board and
non-objection by the FHFA, for extraordinary items such as unbudgeted voluntary
pension contributions, which are expected to be made only if the Bank earns
sufficient PLMBS litigation income to cover the unbudgeted portion of such
contributions.

Core Mission Goal:

Core Mission Asset Ratio or CMA Ratio is:
(1)
The average annual par amount of the sum of Advances and MPF Loans owned by the
Bank, divided by

(2)
The result obtained by subtracting the average annual amount of U.S. Treasury
securities classified as Trading Securities or Available for Sale Securities
from the average annual par amount of Consolidated Obligation Debt owed by the
Bank.

--------------------------------------------------------------------------------

The average annual par amount is measured as the par amount outstanding on each
calendar day of 2019 divided by 365. 

Insurance Advances Originations:

Advances originated (any type and maturity of advance) to insurance company
members qualify toward the achievement of this goal. Advances originations is
defined as the sum of advance amounts disbursed or originated in 2019 net of
advance rollovers. Advance rollovers are defined as advances disbursed on the
maturity date of another advance previously disbursed in 2019 where the new
advance amount is the same as or smaller than the maturing advance. If the new
advance is larger than the maturing advance, the net increase will count towards
the goal. Advance rollovers include pre-funding of maturing advances where the
disbursement date of the new advance and maturity date of the old advance do not
line up exactly. Member Services will identify pre-funding for the President's
approval. If the new advance prefunding maturities is larger than the maturing
advances, the net increase will count towards the goal.

Insurance Membership:

The number of insurance companies approved for membership during the calendar
year 2019 qualify toward the achievement of this goal. Applications from
insurance companies that are affiliated and submitted within a 90 day period
will count as separate memberships if each applicant’s net admitted assets are
$250 million or greater.

Jobs for New England:

JNE will be divided into two parts in 2019:

1.
$6.5 million of the subsidy will be allocated for continued use to reduce the
cost of long term advances for the purpose of funding small business loans
throughout New England (Core JNE).

2.
$1 million will be allocated under a pilot program to fund specific economic
development initiatives. Three potential initiatives have been identified. Any
subsidy not committed by 9/30/19 would be reallocated to the Core JNE program
and made available to members

“Core” JNE program is defined as the subsidized advances program offered to
members to fund small business initiatives.

“New User” defined as a member that has not used the JNE program during the
pilot years 2016-2018 (JNE advance must have been disbursed, so any member that
has applied for but not drawn down funding will be considered a new user). Also,
any member participating in the economic development initiative pilot that has
not used the JNE program during the pilot years will be considered a new user.

Disbursement of $7.5 million of JNE subsidy and launch of the pilot economic
development initiative will meet the target goal. Launch is defined as
notification to the membership and a request for funding for one economic
development initiative.

The disbursement and new user excess goal will be weighted 75 percent
disbursement of the $7.5 million Core JNE program and 25 percent for the
achievement of the new users goal. New user results below the 15 will be
interpolated based upon the ratio of new users to the goal of 15. Any amount of
subsidy disbursed through the economic development pilot counts toward meeting
the goal.

--------------------------------------------------------------------------------

Helping to House New England:

HHNE subsidy will be divided into three parts in 2019.

1.
$5 million in subsidy will be made available to the six New England Housing
Finance Agencies. HHNE advances will qualify toward the achievement of the goal
as will bond purchases (when credit quality meets the Bank’s requirements), or
direct subsidy allocation. Subsidy dollars must be disbursed by 12/31/19.

2.
$2 million in subsidy will be made available to FHLBank Boston members in the
form of a downpayment and closing cost assistance program for workforce housing
(for individuals and families with incomes at 81 to 100 percent area median
income (urban area) or 115 percent area median income (rural area). If these
subsidy dollars are not fully subscribed by 9/30/19, with a commitment to
disburse by 12/31/19, the remaining subsidy dollars will be made available to
the other two HHNE components or transferred to the Jobs for New England
program.

3.
By 6/30/19, announce to the six New England Housing Finance Agencies and members
that $500,000 of the HHNE subsidy is available to fund housing initiatives that
one or more HFAs and/or members present to the Bank for approval. Housing
initiatives may include downpayment and closing cost assistance, subsidizing the
cost of construction of rental housing or homeownership units or other housing
initiatives. If these subsidy dollars are not fully subscribed by 10/31/19, with
a commitment to disburse by 12/31/19, the remaining subsidy dollars will be made
available to the other two HHNE components or transferred to the Jobs for New
England program.

The disbursement target goal will be weighted 75 percent HFA subsidy
disbursement and 25 percent EBP-like program disbursement for the purpose of
interpolating the results.
The disbursement excess goal will be weighted 50 percent HFA $5 million subsidy
disbursement, 25 percent $2 million EBP-like disbursement and 25 percent
$500,000 housing initiatives, either of the other HHNE parts or JNE, for the
purpose of interpolating the results.

Operational Efficiency:

Core Operating Expenses are defined as normal expenses associated with enabling
the Bank to conduct business operations, but excluding significant discretionary
expenses approved by the board of directors in an amount not to exceed judgment
or settlement income associated with the Bank’s ongoing PLMBS litigation,
provided that they are incurred in the plan year(s). HHNE and JNE subsidies are
not included in operating expenses. The board of directors establishes an
operating expense budget for each calendar year and may amend the budget as
needed at their sole discretion.

Bank-wide ERM Initiatives:

Goal: Collaboration with business units

Project 1 - Working with Bank Technology and Information Security, conduct a
cyber risk quantification exercise and develop a Cyber Risk Appetite Statement
(for presentation to and approval by the Risk Committee). (15%)
Threshold:     Complete all of the above by December 31, 2019
Target:     Complete all of the above by October 31, 2019
Excess:     Complete all of the above by September 30, 2019

--------------------------------------------------------------------------------

Project 2 - Recommend and implement best practice enhancements for the Bank’s
OAS risk modeling with approval by Model Risk Management Committee and review by
the ALCO. (15%)
Threshold:     Complete all by December 31, 2019
Target:     Complete all by October 31, 2019
Excess:     Complete all by September 30, 2019

Goal: Completion of the next iteration of Market Risk Goals
Introduce, monitor, and complete ERM assessments of potential new market risk
MATs and limits as consistent with the conclusions/recommendations documented in
the September 2018 “Structural Review of Market Risk Limits” and present
assessments to the Risk Committee. (30%)
Threshold:     December 31, 2019
Target:     October 31, 2019
Excess:     September 30, 2019

Goal: Comprehensive review of next generation Credit Models (20%)
Present the following components to Model Risk Management Committee:
Threshold:     Document credit risk model usage in the Bank as the foundation
for analyzing
potential replacement by June 30, 2019
Target:     Threshold plus assess at least 5 models to determining best fit for
the Bank by
October 31, 2019
Excess:     Target plus select final candidates for review in 2020 by December
31, 2019

Goal: Implement phase 1 of the new collateral system as the system of record.
(20%)
Threshold:     December 31, 2019
Target:     October 31, 2019
Excess:     September 30, 2019

Remediation of 2018 Report of Exam Findings:
The 2018 Examination by the Federal Housing Finance Agency noted [^^^] Matters
Requiring Attention (MRA) and [^^^] recommendations. The target goal established
for the remediation of these MRAs requires management to receive clearance of
the MRAs, defined as non-reoccurrence of the MRA during the 2019 examination due
to either addressing or by having in place an acceptable action plan to address
the MRA and clearance all recommendations. The threshold goal is the successful
remediation of all the MRAs and clearance of [^^^] of the recommendations. The
excess level of achievement for this goal is to achieve the target level of
achievement plus an upgrade in at least [^^^] in the 2019 examination by the
Federal Housing Finance Agency.