EX-10.1






December 14, 2012




Federal Home Loan Bank of Topeka

Executive Incentive Compensation Plan Targets

Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights




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



The Plan targets contained in this document specifically cover the 2013 Base Performance Period and
the 2014-2016 Deferral Performance Period.




	A.	 	2013 Base Performance Period 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.	 	Adjusted Return Spread on Class B Common Stock






	•	 	Definition: The spread between Pre-ASC 815 (formerly referred to as SFAS 133), Pre
AHP adjusted return available for Class B Common Stock (weighted by the amount Class B Common
Stock outstanding each day) and the average daily Overnight Federal funds effective rate (Fed
Effective).






	•	 	Measure: Pre-ASC 815, AHP adjusted return available for Class B Common Stock (using
adjusted 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 0.76 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.






Adjusted income is defined as follows:


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


 — Plus AHP assessments


 — Excluding the impact or adjustment required because of Accounting Standards Codification 815
(ASC 815)


 — 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 Range:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	 	6.24	%
	 
	 	 	 	 
	Target
	 	 	11.28	%
	 
	 	 	 	 
	Optimum
	 	 	16.32	%
	 
	 	 	 	 






2. Net Income after Capital Charge




	•	 	Definition: The dollar amount of adjusted income as defined in the above metric,
but Post-AHP assessment, which exceeds the cost of the required return on capital.






	•	 	Measure: Adjusted income as defined in the Net Income after Capital Charge
Definition above, less required return on all capital. The required return on capital is the
sum of the outstanding regulatory Class B Common Stock times the average of 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
the average of three-month LIBOR for each day during the year.






	•	 	Performance Range:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	$	39,780,680	 
	 
	 	 	 	 
	Target
	 	$	79,561,359	 
	 
	 	 	 	 
	Optimum
	 	$	119,342,039	 
	 
	 	 	 	 







	3.	 	Retained Earnings






Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2013.




	•	 	Measure: Retained earnings as defined above as reported on the 12/31/2013 balance
sheet.






	•	 	Performance Ranges:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	$	499,794,258	 
	 
	 	 	 	 
	Target
	 	$	539,574,938	 
	 
	 	 	 	 
	Optimum
	 	$	579,355,617	 
	 
	 	 	 	 







	4.	 	Mission Product Utilization





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



Affordable Housing Program (AHP);


CICA — Community Housing Program (CHP); and Community Development Program (CDP)


Homeownership Set-aside Programs; 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
FHLBank membership.






	•	 	Mission-oriented Product Category Usage Definitions





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



CICA — Applications approved.



Homeownership Set-aside Programs — Agreements submitted.



JOBS — Applications submitted.




	•	 	Performance Range:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	 	305	 
	 
	 	 	 	 
	Target
	 	 	360	 
	 
	 	 	 	 
	Optimum
	 	 	415	 
	 
	 	 	 	 







	5.	 	Risk Management – Market, Credit and Liquidity Risks





Definition: Management of FHLBank risks as determined by the weighted average rating by
the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1
(lowest) to 5 (highest) point scale. General risk categories are market, credit, and liquidity
risks.




	•	 	Performance Ranges





	 	 	 	 	 	 	 	 	 
	
 
	 	Score
	 	Payout

	
 
	 	 	 	 	 	 	 	 
	Threshold

	 	 	3.0	 	 	 	50	%
	 

	 	 	 	 	 	 	 	 
	Target

	 	 	3.5	 	 	 	100	%
	 

	 	 	 	 	 	 	 	 
	Optimum

	 	 	5.0	 	 	 	150	%
	 

	 	 	 	 	 	 	 	 







	•	 	Risk Management Metric Weights: The following metric weight for each goal metric is
assigned to the Participants:





	 	 	 	 	 
	Risk Management Category

	 	Weighting

	 

	 	 	 	 
	Liquidity Risk

	 	 	30	%
	 

	 	 	 	 
	Market Risk

	 	 	40	%
	 

	 	 	 	 
	Credit Risk

	 	 	30	%
	 

	 	 	 	 
	Total

	 	 	100	%
	 

	 	 	 	 







	6.	 	Risk Management – Compliance, Business and Operations Risks





Definition: Management of FHLBank risks as determined by the weighted average rating by
the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1
(lowest) to 5 (highest) point scale . General risk categories are compliance, business and
operations risks.




	•	 	Performance Ranges





	 	 	 	 	 	 	 	 	 
	
 
	 	Score
	 	Payout

	
 
	 	 	 	 	 	 	 	 
	Threshold

	 	 	3.0	 	 	 	50	%
	 

	 	 	 	 	 	 	 	 
	Target

	 	 	3.5	 	 	 	100	%
	 

	 	 	 	 	 	 	 	 
	Optimum

	 	 	5.0	 	 	 	150	%
	 

	 	 	 	 	 	 	 	 







	•	 	Risk Management Metric Weights: The following metric weight for each goal metric is
assigned to the Participants:





	 	 	 	 	 
	Risk Management Category

	 	Weighting

	 

	 	 	 	 
	Compliance Risk

	 	 	30	%
	 

	 	 	 	 
	Business Risk

	 	 	35	%
	 

	 	 	 	 
	Operations Risk

	 	 	35	%
	 

	 	 	 	 
	Total

	 	 	100	%
	 

	 	 	 	 







	B.	 	2014-2016 Deferral Performance Period Metrics.






These metrics apply to the 2014-2016 Deferral Performance Period.




In calculating Base Award amounts, performance shall be measured by evaluating the following:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Minimum	 	Threshold	 	Target	 	Maximum
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	2/12 or 1/12 vs
	Total Return(1)
	 	>8/12 vs FHLBanks	 	8/12 vs FHLBanks	 	5/12 vs FHLBanks	 	FHLBanks
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Incentive
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance Measure Percentage
	 	 	0	%	 	 	75	%	 	 	100	%	 	 	125	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighting
	 	 	0.50	 	 	 	0.50	 	 	 	0.50	 	 	 	0.50	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dollar Value (Deferred
Incentive x Performance
Measure Percentage x Weight)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Market Value of Equity (MVE)
/ Total Regulatory Capital
	 	 	 	 	 	 	 	 	 	 	 	 	 	2/12 or 1/12
	Stock (TRCS)(2)
	 	>9/12 vs FHLBanks	 	9/12 vs FHLBanks	 	6/12 vs FHLBanks	 	vs FHLBanks
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Incentive
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance Measure Percentage
	 	 	0	%	 	 	75	%	 	 	100	%	 	 	125	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighting
	 	 	0.50	 	 	 	0.50	 	 	 	0.50	 	 	 	0.50	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dollar Value (Deferred
Incentive x Performance
Measure Percentage x Weight)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Value (Dollar Value for
Total Return + Dollar Value
for Expense Growth + Dollar
Value for MVE/TRCS)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Incentive
Opportunity Percentage
Level I (40%)
Level II (32.5%)
Level III (25%)
	 	 	%	 	 	 	%	 	 	 	%	 	 	 	%	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Incentive Award
(Total Value x Deferred
Incentive Opportunity
Percentage)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







Footnotes:


1) Total Return. Total Return equals the Total Dividends, plus the Change in
Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is
defined as the sum of the actual dividends paid on required Class A Common Stock and all Class
B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined
as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as
the average daily ending balance of required Class A Common Stock and all Class B Common Stock
for dates starting with 01/01/14 and ending 12/31/16. For the other FHLBanks, unless
determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends
paid on all capital stock during the three-year period; Change in Retained Earnings is defined
as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as
the average daily ending balance of all capital stock outstanding for dates starting with
01/01/14 and ending 12/31/16. For performance comparison purposes, FHLBank Topeka will be
ranked against the other FHLBanks, with the highest total return being the best performance,
and ranking 1st out of the 12 FHLBanks.




2) MVE/TRCS. Using amounts reported on the Trendbook Analysis from the FHFA Call
Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated
as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Deferral
Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against
the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking
1st out of the 12 FHLBanks.



1




	C.	 	Total Base Opportunity and Participant Levels.





Total Base Opportunity Matrix

(As a percent of base)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Participant	 	Total Base Opportunity	 	Cash Incentive	 	Deferred Incentive
Opportunity *
	 	 	 	 	 	 	 
	 
	 	Thresh	 	Target	 	Max	 	Thresh	 	Target	 	Max	 	Thresh	 	Target	 	Max
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Level 1
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CEO
	 	 	60	 	 	 	80	 	 	 	100	 	 	 	30	 	 	 	40	 	 	 	50	 	 	 	30	 	 	 	40	 	 	 	50	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Level 2
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COO
	 	 	45	 	 	 	65	 	 	 	85	 	 	 	22.5	 	 	 	32.5	 	 	 	42.5	 	 	 	22.5	 	 	 	32.5	 	 	 	42.5	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Level 3
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CRO
	 	 	30	 	 	 	50	 	 	 	70	 	 	 	15	 	 	 	25	 	 	 	35	 	 	 	15	 	 	 	25	 	 	 	35	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	General Counsel
	 	 	30	 	 	 	50	 	 	 	70	 	 	 	15	 	 	 	25	 	 	 	35	 	 	 	15	 	 	 	25	 	 	 	35	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CAO
	 	 	30	 	 	 	50	 	 	 	70	 	 	 	15	 	 	 	25	 	 	 	35	 	 	 	15	 	 	 	25	 	 	 	35	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






• The final value of the deferred incentive opportunity may be $0 if threshold metrics are not
met, 75% of initial deferral at threshold, 100% at target and 125% at maximum.



D. Base Opportunity Metric Weights. The following metric weight for each goal metric
is assigned to the Participants:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	Objective

	 	CEO/COO
	 	CRO/CAO
	 	General Counsel

	 

	 	 	 	 	 	 	 	 	 	 	 	 
	1. Adjusted Return Spread on Class B

Common Stock

	 	20%



	 	10%



	 	15%




	 

	 	 	 	 	 	 	 	 	 	 	 	 
	2. Net Income after Capital Charge

	 	 	20	%	 	 	10	%	 	 	15	%
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	3. Retained Earnings

	 	 	10	%	 	 	20	%	 	 	10	%
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	4. Mission Product Utilization

	 	 	10	%	 	 	10	%	 	 	10	%
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	5. Risk Management- Market, Credit,

Liquidity

	 	20%



	 	25%



	 	25%




	 

	 	 	 	 	 	 	 	 	 	 	 	 
	6. Risk Management- Compliance,

Business, Operations

	 	20%



	 	25%



	 	25%




	 

	 	 	 	 	 	 	 	 	 	 	 	 
	Total

	 	 	100	%	 	 	100	%	 	 	100	%
	 

	 	 	 	 	 	 	 	 	 	 	 	 







2