EXHIBIT 10.3

EXECUTIVE INCENTIVE COMPENSATION PLAN (EICP)

As of January 1, 2014

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TABLE OF CONTENTS
Section
 
Title
 
Page
 
 
 
 
 
1.0
 
Plan Objectives
 
3

2.0
 
Definitions
 
3

3.0
 
Eligibility
 
4

4.0
 
Goal Structure
 
5

5.0
 
Performance Measures
 
5

6.0
 
Award Determination
 
6

7.0
 
Award Conditions
 
7

8.0
 
Plan Communication
 
7

9.0
 
Administrative Control
 
8

10.0
 
Miscellaneous Conditions
 
8

 
 
 
 
 
 
 
Appendix A: 2014 Plan Year
Performance Measures
 
10

 
 
 
 
 
 
 
Appendix B: Table 1
Award Opportunity
 
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PLAN DOCUMENT
1.0    Plan Objectives
1.1
The purpose of the Federal Home Loan Bank of Seattle’s Executive Incentive
Compensation Plan (EICP) is to achieve these objectives:

1.1.1
Align executives and other key officers of the Bank on fulfilling the Bank’s
mission and vision within the framework of the Bank’s shared values;

1.1.2
Ensure that the Bank’s executives and other key officers focus on achieving the
Bank’s annual financial goals within the parameters of the Bank’s risk appetite;

1.1.3
Provide executives and other key officers incentives that, when combined with
base salaries, provide a competitive compensation package; and

1.1.4
Serve as a retention device by deferring a portion of the earned award.

1.2
The Plan is a cash-based incentive plan, formulaic in nature and definitive in
terms of minimum, target and excess levels of performance that reflects the
objectives in the Bank’s strategic business plan.

1.3
The Performance Measures and Award Opportunities for a Plan Year are set forth
in Appendix A and Appendix B, respectively.

2.0
Definitions

2.1
When used in this Plan, the following words and phrases shall have the following
meaning:

2.1.1
Award Opportunity is the award percentage (see Appendix B) that may be earned at
the end of the Plan Year based on achievement of the Performance Measures (see
Appendix A).

2.1.2
Bank means the Federal Home Loan Bank of Seattle.

2.1.3
Base Salary is defined as the Participant’s earned income for the Plan Year,
which includes their base pay, overtime (if applicable), before any other
add-ons (i.e. bonuses, incentive pay, etc.) and after any adjustments (i.e.
leave w/o pay).

2.1.4
Board means the Bank’s Board of Directors.

2.1.5
Committee means the Governance and Compensation Committee of the Board.

2.1.6
Disabled means the Participant is receiving benefits under the Bank’s Long Term
Disability Plan.

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2.1.7
Finance Agency or FHFA means the Federal Housing Finance Agency.

2.1.8
Other Designated Officer means a Participant in the Plan other than the
President or a Senior Officer.

2.1.9
Participant means an employee who participates in the Plan pursuant to Section
3.0.

2.1.10
Performance Measure means each performance factor that is taken into
consideration under the Plan in determining the Participant's incentive award.

2.1.11
Plan means the Executive Incentive Compensation Plan.

2.1.12
Plan Award means an amount that is determined at the end of the Plan Year based
on results of the Performance Measures, subject to adjustments as provided in
Section 6.0.

2.1.13
Plan Year means the calendar year, January 1 through December 31, over which the
Performance Measures identified in Appendix A are measured.

2.1.14
President means the President and Chief Executive Officer of the Bank.

2.1.15
Senior Officer means a Senior Executive Officer of the Bank who is SVP and above
(excluding the Director of Auditing).

3.0
Eligibility

3.1
Eligibility for participation in the Plan is limited to the President, Senior
Officers and Other Designated Officers of the Bank, as defined in Appendix B.

3.2
In order to participate in the Plan, all Participants must be employed by the
Bank prior to October 1st in the Plan Year.

3.3
Employees who are transferred or promoted into the President or Senior Officer
position during the Plan Year will become eligible for this Plan pursuant to
Section 10.2.

3.4
An Employee that is a participant in any other annual incentive compensation
plan of the Bank will not be eligible to participate in this Plan.

3.5
Contract employees, temporary employees, and part-time employees are not
eligible to participate in the Plan.

4.0    Goal Structure
4.1
Incentive payments under the EICP will be based on achievement of corporate
financial performance goals such as:

•
·Level of retained earnings;

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•
Ratio of market value of equity-to-par value of capital stock (MVE/PVCS);

•
Profitability, e.g. net interest margin or spread between return on capital and
one-month LIBOR;

•
Advances outstanding to members;

•
Improvements in Bank operations/reduced operational risk; and

•
Customer satisfaction as measured by a survey.

5.0
Performance Measures

5.1
Performance Measures will be established with respect to each Plan Year as
described in Appendix A. Three achievement levels will be set for each Bank
Performance Measure:

Threshold
The minimum level of achievement for the Performance Measure(s).

Target
The target level of achievement for the Performance Measure(s).

Excess
The maximum level of achievement for the Performance Measure(s).

5.2
At the beginning of each Plan Year, Performance Measures will be reviewed by the
Committee and approved by the Board.

5.3
The Participant’s incentive award will be based on the achievement level of the
Performance Measures.

5.4
All Performance Measures are to remain in effect for the entire Plan Year.
However, after the Plan Year commences, the Committee and with Board approval,
may modify Bank Performance Measures, subject to FHFA review and non-objection.

6.0
Award Determination

6.1
Each Performance Measure will be evaluated at the end of the Plan Year based on
performance results at or between threshold and target, or target and excess, as
identified in Appendix A.

6.2
Based on the results from Section 6.1, an interpolated Award Opportunity will be
derived from Appendix B, and an incentive award will be determined for each
Performance Measure.

6.3
The Plan Award will be the composite of the incentive awards derived in Section
6.2, for each Performance Measure provided in Appendix A, less any reductions
due to non-achievement of other key objectives.

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7.0
Award Conditions

7.1
No incentive award will be earned on any individual Performance Measure in which
the Bank fails to achieve threshold.

7.2
No incentive award will be paid if the Participant does not have satisfactory
performance during the Plan Year.

7.3
Fifty percent (50%) of any award earned in a Plan Year will be paid to
Participants in the first quarter of the following calendar year. The remaining
50% will be deferred and will be paid according to the terms in Appendix B.

8.0
Plan Communication

8.1
Communications with Participants regarding the Plan should be made according to
the following schedule:

First quarter of
Communicate Anticipated

Plan Year
Performance Measures.

30 days after Finance
Communicate Plan document and

Agency non-objection
material changes.

After end of Plan Year
Final assessment of Bank Performance

Measures and Other Key Objectives.
    
9.0
Administrative Control

9.1
The Committee will administer the Plan and may delegate day-to-day
administration to the Bank’s Human Resources Department.

9.2
In addition to the authority expressly provided in the Plan, the Board shall
have such authority to control and manage the operation of the Plan and shall
have all authority necessary to accomplish these purposes, including, but not
limited to, authority over interpretation of the terms of the Plan, the
eligibility of any person to participate in the Plan and to receive benefits
under the Plan, and any Plan Award payouts from the Plan. The Board’s
determinations and interpretations regarding the Plan shall be final, binding,
and conclusive, subject to FHFA review and non-objection.

10.0
Miscellaneous Conditions

10.1
Except as provided in Section 10.3, Participants must be employed by the Bank
until the pay period in which the Plan Award payments are made.

10.2
After the Plan Year commences, employees of the Bank who are promoted into a
Senior Officer position will become eligible for this Plan and eligible to
receive a pro-rated incentive award.

10.3
The President may nominate Senior Officers who retire, die, or become disabled
to be eligible to receive a prorated current Plan Year or deferred award,
subject to Board approval, and consistent with other provisions of the Plan.

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10.4
Notwithstanding any Plan provision to the contrary, mere participation in the
Plan will not entitle a Participant to an award.

10.5
The designation of an employee as a Participant in the Plan does not guarantee
employment. Nothing in this Plan shall be deemed (i) to give any employee or
Participant any legal or equitable rights against the Bank, except as expressly
provided herein or provided by law; or (ii) to create a contract of employment
with any employee or Participant, to obligate the Bank to continue the service
of any employee or Participant, or to affect or modify any employee's or
Participant's term of employment in any way.

10.6
The right of the Bank to discipline or discharge a Participant shall not be
affected by any provision of this Plan.

10.7
All incentive awards under the Plan will be paid out through regular payroll and
will be subject to applicable payroll tax withholdings and other appropriate
deductions.

10.8
Incentive awards will be made as soon as practical following the end of the Plan
Year, but no later than March 15, and are subject to Finance Agency
non-objection.

10.9
The Board has the right to revise, modify, or terminate the Plan in whole or in
part at any time or for any reason, and the right to reduce any recommended
incentive award amount, without the consent of any Participant, subject to FHFA
review and non-objection. The Board shall consider other factors in determining
a reduced award amount, including but not limited to: imprudent or excessive
risk-taking that might jeopardize the financial condition or the future
performance of the Bank; operational errors or omissions that result in material
revisions to the financial results, information submitted to the FHFA, or data
used to determine incentive payouts; submission of information to the Securities
and Exchange Commission, Office of Finance and/or FHFA that is untimely; or the
Bank fails to make sufficient progress, as determined by the FHFA, in the timely
remediation of examination, monitoring, and other supervisory findings and
matters requiring attention.

10.10
Since no employee has a guaranteed right to any award under this Plan, any
attempt by an employee to sell, transfer, assign, pledge, or otherwise encumber
any anticipated award shall be void, and the Bank shall not be liable in any
manner for or subject to the debts, contracts, liabilities, engagements or torts
of any person who might anticipate an award under this program.

10.11
This Plan shall at all times be entirely unfunded and no provision shall at any
time be made with respect to segregating assets of the Bank for payment of any
award under this program.

10.12
The Plan shall be construed, regulated, and administered in accordance with the
laws of the state of Washington, unless otherwise preempted by the laws of the
United States.

10.13
If any provision of the Plan is held invalid or unenforceable, its invalidity or
unenforceability shall not affect any other provision of the Plan, and the Plan
shall be construed and enforced as if such provision had not been included
herein.

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10.14
In accordance with 10.3, if a Participant dies before receiving his or her
award, any amounts determined to be paid under this Plan shall be paid to the
Participant’s surviving spouse, if any, or if none, to the Participant’s estate.
The Bank’s determination as to the identity of the proper payee of any amount
under this Plan shall be binding and conclusive and payment in accordance with
such determination shall constitute a complete discharge of all obligations on
account of such amount.

10.15
Any agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter of this Plan which are not contained herein will
have no effect or enforceability.

10.16
If, after all or a portion of a Participant’s award has been paid, the Board
determines that the Participant perpetrated or engaged in a fraud, deception or
other corporate malfeasance, the Board will pursue repayment of any such award
and/or may require the Participant to forfeit future deferred payments, subject
to FHFA review and non-objection.

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APPENDIX B

2014 Plan Year Award Opportunities (as a percentage of Base Salary)
The following table provides the Minimum, Target and Excess percentage payouts
or Award Opportunities, as a percentage of Base Salary, for the 2014 Plan Year
at each level in the EICP:
Classification
Threshold/Target/Excess
Reward as a % of Base
Salary
Level 3
30% /
60% /
95%
Level 2
25% /
50% /
80%
Level 1
20% /
40% /
60%

Timing of Payments
Fifty percent (50%) of any award earned in 2014 will be paid to Participants in
early 2015. The remaining 50% will be deferred and will be paid in one-third
increments in 2016, 2017, and 2018, provided that the quarterly average of the
Bank’s Economic Value of Capital Stock1 (EVCS) in the preceding calendar year
remains at or above 100%. If the quarterly average of EVCS in the preceding
calendar year is less than 100%, then the deferred payment for the year in
question will be forfeited.
Tying the amount of the deferred award paid to the level of the Bank’s EVCS
ensures that over the interim period, management continues to operate the Bank
in a profitable, prudent manner. It also ensures that management does not take
short-term measures in 2015 to secure a long-term incentive award in 2016 or
later that would be detrimental to the Bank over the long-term.
Participation Levels
Level 3: President & CEO
Level 2: Senior Vice Presidents
Level 1: Other Designated Officers - may include senior positions at the First
Vice President or Vice President level who are key contributors in the
organization. Participation will be determined by the President, in cooperation
with the Senior Officers.
1 EVCS is defined as the economic value of equity (EVE) divided by the book
value of capital stock (BVCS). EVE measures the net present value of the Bank by
discounting all future cash flows at the CO curve. EVCS thus measures the value
of the Bank as a going concern (i.e., represents the Bank’s long-term earnings
potential with positions held to maturity rather than exposed to temporary
market value fluctuations).

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