EX-10.2






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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