EX-10.9




 Exhibit 10.9 

 
 



 
 Annual Incentive Compensation Plan 

AWARD LETTER FOR 2012 – EXECUTIVE 
 President and Chief Executive Officer 
  

			
	To:  

From:
  
 Re:
	 	 Executive Participants in the Annual Incentive Compensation Plan for 2012

 
 Bryan Delong, Director of Human Resources and Administrative Services

 
 Executive Performance Award for 2012


 You are receiving this Award Letter because you have been selected by the board of directors to be a Participant in the
Bank’s Annual Incentive Plan (the “Plan”) at the Executive level. This Award Letter describes your Performance Award for 2012. Capitalized terms that are used but not defined in this Award Letter will have the meanings given to
them in the Plan. In addition, this Award Letter is subject to the Plan in all respects. In the event of any inconsistency between this Award Letter and the Plan, the Plan will control. 
 You should read this Award Letter carefully. If you have any questions, please contact the human resources department. 
  

A.  Executive Performance Measures for 2012 
 1. Risk Management: Examination Performance (10% Weight) 
 The Bank will
effectively manage a range of risks in 2012. The performance measures are as follows: 
  

			
	Threshold  	  	No unsafe or unsound practice or condition and no repeat
findings on matters requiring board attention*.
	Target  	  	Develop action plans related to findings within 60 days of board presentation of report of examination.
	Maximum  	  	No decline in composite examination rating and develop
action plans related to findings within 60 days of board presentation of report of examination**.

 *Matters requiring board attention include items noted as unsafe or unsound practice or conditions, violations, or
weaknesses. Items noted as recommendations or referrals are excluded from this list. 
 **Performance level was established with the
understanding that the FHFA will introduce a revised examination rating scale during 2012. This change is expected to make year-over-year comparions, and achivement of maximum performance, more challenging. 

 
 2. Risk Management: Return on Equity as a Spread to 3-Month LIBOR (40% Weight)

 The Bank will achieve target ROE spread to 3-month LIBOR. ROE Spread to LIBOR measured as the spread between GAAP ROE and
3-month LIBOR excluding the impact of OTTI, with a sliding scale to recognize changes in spread and net income due to changes in 3-month LIBOR. The board of directors may reduce incentive awards for this goal by as much as 100% if the GAAP ROE
spread to LIBOR including OTTI is less than 150 bps. Spreads will increase by 25 bps if average leverage ratio is greater than 22 times. If LIBOR index is not available, management will present a recommendation for a successor index and associated
spreads. The performance measures are as follows: 

  

			
		 	Page 1 of 12











					
	  	  	
3-Month LIBOR

< .75 %
	  	 3-Month LIBOR
 = to or > .75 %

	  	 GAAP ROE spread to 3-month LIBOR

	Threshold  	  	300 bps	  	275 bps
	Target  	  	325 bps	  	300 bps
	Maximum  	  	350 bps	  	325 bps

 3. Risk Management: Market Value of Equity (20% Weight) 

The Bank will produce the following MVE/Capital Stock ratios during 2012. The 5 year swap rate as of December 30, 2011, was 1.22%.

  

							
	  	  	
5 Year Swap Rate
 < 1.00%
	  	
5 Year Swap Rate
 1.01% to 1.50%
	  	 5 Year Swap Rate
 > 1.50%

	
Threshold  
	  	>105	  	>105	  	>105
	 Target  
	  	>109	  	>108	  	>107
	 Maximum  
	  	>111	  	>110	  	>109

 4. Housing Mission: Disbursement of Affordable Housing Funds (15% Weight) 

The Bank will disburse the 2012 Affordable Housing Program (AHP) allocation according to the following schedule: 

 

			
	  

    Threshold  
  
	  	  

Document commitment of full 10% of AHP allocation by December 31, 2012.
  

	Target  	  	Document commitment of full 10% of AHP allocation by December 31, 2012, and document
commitment of at least 50% of returned funds received through September 30, 2012, by December 31, 2012.
	Maximum  	  	Document commitment of full 10% of AHP allocation by December 31, 2012, and document
commitment of at least 75% of returned funds received through September 30, 2012, by December 31, 2012.

 5. Shareholder Focus: Trusted Advisor (15% Weight) 

The Bank will increase the average number of products and services utilized by shareholders during 2012 as follows: 

 

			
	    Threshold  	  	Increase average product utilization by
6%.
	Target  	  	Increase average product utilization by 10%.
	Maximum  	  	Increase average product utilization by
14%.

 Performance is calculated as a ratio where the numerator represents total number of discrete product
and service utilizations and the denominator represents the eligible shareholder universe. Eligible products and services include advances, letters of credit, safekeeping services, CIS programs, and shareholder educational events. The final universe
of eligible shareholders with credit scores 1-9 will be frozen as of December 31, 2012, and will utilize the most recent credit scores available. New members joining prior to July 1, 2012, will be added to the universe. In the case of
mergers, dissolutions, downgrades to credit score 10, withdrawals from membership and requests for 

  

			
		 	Page 2 of 12










 
membership withdrawals, the disappearing/downgraded shareholder will be removed from the universe unless the shareholder utilized a product or service prior to the status change.

 
 B.  Executive Base Award Opportunities 

Your Base Award Opportunity will correspond to the percentage of your Actual Earnings for 2012, as set forth below: 

 

							
	 	  	Threshold	 	Target	 	Maximum
	President and Chief Executive Officer	  	32%	 	64%	 	96%

  
 C.  Determination and Payment of
Earned Award 
 The Committee will evaluate 2012 performance against the Performance Measures above and determine your Earned Award
based on that performance and your Base Award Opportunity. 
 Subject to Section D below, your Earned Award for 2012, if any, will be divided
into a “Current 2012 Incentive” and a “Deferred 2012 Incentive” as follows: 
  

			
	Payment	  	Description
	
Current 2012 Incentive
	  	50% of Earned Award for 2012
	
Deferred 2012 Incentive    
	  	50% of Earned Award for 2012

 Current 2012 Incentive. Your Current 2012 Incentive will be paid promptly after it has been determined (but
in no event later than March 15, 2013). 
 Deferred 2012 Incentive. Your Deferred 2012 Incentive will be deferred and paid,
together with positive or negative returns as described in the following paragraph, on the following schedule: 
  

			
	Payment Year(1)  	  	Payment
	
2014
	  	1/3 of balance (+/- 1-year return)
	 2015
	  	1/2 of balance (+/- 2-year return)
	 2016
	  	All remaining balance (+/- 3-year
return)
	  
     (1) Payment will be made no
later than March 15 in the year indicated.


 Return on Deferred 2012 Incentive. The balance of your unpaid Deferred 2012 Incentive will earn an annual
rate of return (which may be positive or negative) for each full calendar year of deferral during 2013, 2014, and 2015 equal to the Bank’s return on equity for the applicable year, as determined for financial statement reporting purposes in
accordance with GAAP. 
 Condition to Payment of Deferred 2012 Incentive. Without limitation on Sections 8.1 or 8.2 of the Plan,
it is intended to be a condition to payment of your Deferred 2012 Incentive that the Bank have the financial capacity to repurchase excess stock. The board has established the governing measures listed below when considering the Bank’s
financial capacity to repurchase excess stock. 
  

			
	Measure	  	Requirement


  

			
		 	Page 3 of 12











			
	 Retained Earnings
	  	Greater than $600 million
	 MVE/par
value of capital stock
	  	Greater than or equal to 100%
	 Capital
to asset ratio
	  	Greater than or equal to 4.75%
	 Net
income
	  	Positive GAAP quarterly net income

 Accordingly, if as of the time any payment of your Deferred 2012 Incentive would otherwise be due under this Award
Letter, the board has made the good faith determination that the Bank does not have such capacity (or earlier determination of the same remains unchanged), the board may, in its sole discretion, elect to reduce or eliminate that payment of your
Deferred 2012 Incentive. 
  
 D.  Termination of Employment
and Other Terms and Conditions 
 Forfeiture on Termination. Except as expressly set forth below, if your employment with
the Bank terminates for any reason before you have received payment of all of your Earned Award for 2012, you will forfeit all remaining payments (including, for the avoidance of doubt, any unpaid Deferred 2012 Incentive). 

Death, Disability, and Permanent Retirement. If you die, become Disabled or Retire, in each case as determined by the Committee in good
faith, you will be eligible to receive payments under this Award Letter as follows. 
  

	 	1.	If you die, become Disabled or Retire during 2012, you will receive a prorated Earned Award for 2012 as soon as practicable in 2013 after it has been determined
(but in no event later than March 15, 2013). In this case, your prorated Earned Award for 2012 will not be subject to deferral beyond that time. 

  

	 	2.	If you die, become Disabled or Retire in 2013 or a later year, you will receive (a) your Current 2012 Incentive as scheduled and (b) a lump sum payment
of your unpaid Deferred 2012 Incentive, together with returns through the most recent date of determination, including the Board’s good faith estimates if applicable, as soon as practicable (but in no event later than 60 days thereafter or, if
earlier, the originally scheduled time). 

 For purposes of this Award, the following terms will have the meanings indicated.
“Disabled” means you are, by reason of any medically determined physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, either unable to
engage in any substantial gainful activity or receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank. “Retire” means you retire from
employment with a combination of age and years of service to the Bank totaling at least 70. 
 Other Terms and Conditions. Payment
of your Earned Award for 2012, if any, is subject in all respects to the provisions of the Plan, including those describing circumstances in which an Earned Award otherwise determined based on performance may be reduced or eliminated in the
discretion of the Committee or the Board. 
 No Effect on Future Awards. This Award Letter is applicable only to your Award for
2012. Awards under the Plan for any future year will be subject to the terms of a different Award Letter, not this Award Letter, unless the Bank specifically provides otherwise. 

  

			
		 	Page 4 of 12










  
 



 
 Annual Incentive Compensation Plan 

AWARD LETTER FOR 2012 – EXECUTIVE 
 Executive Vice President 
  

			
	To:  

From:
  
 Re:
	 	 Executive Participants in the Annual Incentive Compensation Plan for 2012

 
 Bryan Delong, Director of Human Resources and Administrative Services

 
 Executive Performance Award for 2012


 You are receiving this Award Letter because you have been selected by the board of directors to be a Participant in the
Bank’s Annual Incentive Plan (the “Plan”) at the Executive level. This Award Letter describes your Performance Award for 2012. Capitalized terms that are used but not defined in this Award Letter will have the meanings given to
them in the Plan. In addition, this Award Letter is subject to the Plan in all respects. In the event of any inconsistency between this Award Letter and the Plan, the Plan will control. 
 You should read this Award Letter carefully. If you have any questions, please contact the human resources department. 
  

A.  Executive Performance Measures for 2012 
 1. Risk Management: Examination Performance (10% Weight) 
 The Bank will
effectively manage a range of risks in 2012. The performance measures are as follows: 
  

			
	Threshold  	  	No unsafe or unsound practice or condition and no repeat
findings on matters requiring board attention*.
	Target  	  	Develop action plans related to findings within 60 days of board presentation of report of examination.
	Maximum  	  	No decline in composite examination rating and develop
action plans related to findings within 60 days of board presentation of report of examination**.

 *Matters requiring board attention include items noted as unsafe or unsound practice or conditions, violations, or
weaknesses. Items noted as recommendations or referrals are excluded from this list. 
 **Performance level was established with the
understanding that the FHFA will introduce a revised examination rating scale during 2012. This change is expected to make year-over-year comparions, and achivement of maximum performance, more challenging. 

2. Risk Management: Return on Equity as a Spread to 3-Month LIBOR (40% Weight) 

The Bank will achieve target ROE spread to 3-month LIBOR. ROE Spread to LIBOR measured as the spread between GAAP ROE and 3-month LIBOR
excluding the impact of OTTI, with a sliding scale to recognize changes in spread and net income due to changes in 3-month LIBOR. The board of directors may reduce incentive awards for this goal by as much as 100% if the GAAP ROE spread to LIBOR
including OTTI is less than 150 bps. Spreads will increase by 25 bps if average leverage ratio is greater than 22 times. If LIBOR index is not available, management will present a recommendation for a successor index and associated spreads. The
performance measures are as follows: 

  

			
		 	Page 5 of 12











					
	  	  	
3-Month LIBOR

< .75 %
	  	 3-Month LIBOR
 = to or > .75 %

	  	 GAAP ROE spread to 3-month LIBOR

	Threshold  	  	300 bps	  	275 bps
	Target  	  	325 bps	  	300 bps
	Maximum  	  	350 bps	  	325 bps

 3. Risk Management: Market Value of Equity (20% Weight) 

The Bank will produce the following MVE/Capital Stock ratios during 2012. The 5 year swap rate as of December 30, 2011, was 1.22%.

  

							
	  	  	 5 Year Swap
Rate
 < 1.00%
	  	
5 Year Swap Rate
 1.01% to 1.50%
	  	 5 Year Swap Rate
 > 1.50%

	
Threshold  
	  	>105	  	>105	  	>105
	 Target  
	  	>109	  	>108	  	>107
	 Maximum  
	  	>111	  	>110	  	>109

 4. Housing Mission: Disbursement of Affordable Housing Funds (15% Weight) 

The Bank will disburse the 2012 Affordable Housing Program (AHP) allocation according to the following schedule: 

 

			
	    Threshold  	  	Document commitment of full 10% of AHP allocation by
December 31, 2012.
	    Target  	  	Document commitment of full 10% of AHP allocation by December 31, 2012, and document commitment of at least 50% of
returned funds received through September 30, 2012, by December 31, 2012.
	Maximum  	  	Document commitment of full 10% of AHP allocation by
December 31, 2012, and document commitment of at least 75% of returned funds received through September 30, 2012, by December 31, 2012.

 5. Shareholder Focus: Trusted Advisor (15% Weight) 

The Bank will increase the average number of products and services utilized by shareholders during 2012 as follows: 

 

			
	    Threshold  	  	Increase average product utilization by
6%.
	    Target  	  	Increase average product utilization by 10%.
	Maximum  	  	Increase average product utilization by
14%.

 Performance is calculated as a ratio where the numerator represents total number of discrete product
and service utilizations and the denominator represents the eligible shareholder universe. Eligible products and services include advances, letters of credit, safekeeping services, CIS programs, and shareholder educational events. The final universe
of eligible shareholders with credit scores 1-9 will be frozen as of December 31, 2012, and will utilize the most recent credit scores available. New members joining prior to July 1, 2012, will be added to the universe. In the case of
mergers, dissolutions, downgrades to credit score 10, withdrawals from membership and requests for 

  

			
		 	Page 6 of 12










 
membership withdrawals, the disappearing/downgraded shareholder will be removed from the universe unless the shareholder utilized a product or service prior to the status change.

 
 B.  Executive Base Award Opportunities 

Your Base Award Opportunity will correspond to the percentage of your Actual Earnings for 2012, as set forth below: 

 

							
	 	  	Threshold	 	Target	 	Maximum
	 Executive Vice President
	  	25%	 	50%	 	75%

  
 C.  Determination and Payment of
Earned Award 
 The Committee will evaluate 2012 performance against the Performance Measures above and determine your Earned Award
based on that performance and your Base Award Opportunity. 
 Subject to Section D below, your Earned Award for 2012, if any, will be divided
into a “Current 2012 Incentive” and a “Deferred 2012 Incentive” as follows: 
  

			
	Payment	  	Description
	 Current
2012 Incentive
	  	50% of Earned Award for 2012
	
Deferred 2012 Incentive    
	  	50% of Earned Award for 2012

 Current 2012 Incentive. Your Current 2012 Incentive will be paid promptly after it has been determined (but
in no event later than March 15, 2013). 
 Deferred 2012 Incentive. Your Deferred 2012 Incentive will be deferred and paid,
together with positive or negative returns as described in the following paragraph, on the following schedule: 
  

			
	Payment Year(1)  	  	Payment
	 2014
	  	1/3 of balance (+/- 1-year return)
	 2015
	  	1/2 of balance (+/- 2-year return)
	
2016
	  	All remaining balance (+/- 3-year return)
	  
     (1) Payment will be made no
later than March 15 in the year indicated.


 Return on Deferred 2012 Incentive. The balance of your unpaid Deferred 2012 Incentive will earn an annual
rate of return (which may be positive or negative) for each full calendar year of deferral during 2013, 2014, and 2015 equal to the Bank’s return on equity for the applicable year, as determined for financial statement reporting purposes in
accordance with GAAP. 
 Condition to Payment of Deferred 2012 Incentive. Without limitation on Sections 8.1 or 8.2 of the Plan,
it is intended to be a condition to payment of your Deferred 2012 Incentive that the Bank have the financial capacity to repurchase excess stock. The board has established the governing measures listed below when considering the Bank’s
financial capacity to repurchase excess stock. 

  

			
		 	Page 7 of 12











			
	Measure	  	Requirement
	 Retained Earnings
	  	Greater than $600 million
	 MVE/par
value of capital stock
	  	Greater than or equal to 100%
	 Capital to asset ratio
	  	Greater than or equal to 4.75%
	 Net
income
	  	Positive GAAP quarterly net income

 Accordingly, if as of the time any payment of your Deferred 2012 Incentive would otherwise be due under this Award
Letter, the board has made the good faith determination that the Bank does not have such capacity (or earlier determination of the same remains unchanged), the board may, in its sole discretion, elect to reduce or eliminate that payment of your
Deferred 2012 Incentive. 
  
 D.  Termination of Employment
and Other Terms and Conditions 
 Forfeiture on Termination. Except as expressly set forth below, if your employment with
the Bank terminates for any reason before you have received payment of all of your Earned Award for 2012, you will forfeit all remaining payments (including, for the avoidance of doubt, any unpaid Deferred 2012 Incentive). 

Death, Disability, and Permanent Retirement. If you die, become Disabled or Retire, in each case as determined by the Committee in good
faith, you will be eligible to receive payments under this Award Letter as follows. 
  

	 	1.	If you die, become Disabled or Retire during 2012, you will receive a prorated Earned Award for 2012 as soon as practicable in 2013 after it has been determined
(but in no event later than March 15, 2013). In this case, your prorated Earned Award for 2012 will not be subject to deferral beyond that time. 

  

	 	2.	If you die, become Disabled or Retire in 2013 or a later year, you will receive (a) your Current 2012 Incentive as scheduled and (b) a lump sum payment
of your unpaid Deferred 2012 Incentive, together with returns through the most recent date of determination, including the Board’s good faith estimates if applicable, as soon as practicable (but in no event later than 60 days thereafter or, if
earlier, the originally scheduled time). 

 For purposes of this Award, the following terms will have the meanings indicated.
“Disabled” means you are, by reason of any medically determined physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, either unable to
engage in any substantial gainful activity or receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank. “Retire” means you retire from
employment with a combination of age and years of service to the Bank totaling at least 70. 
 Other Terms and Conditions. Payment
of your Earned Award for 2012, if any, is subject in all respects to the provisions of the Plan, including those describing circumstances in which an Earned Award otherwise determined based on performance may be reduced or eliminated in the
discretion of the Committee or the Board. 
 No Effect on Future Awards. This Award Letter is applicable only to your Award for
2012. Awards under the Plan for any future year will be subject to the terms of a different Award Letter, not this Award Letter, unless the Bank specifically provides otherwise. 

  

			
		 	Page 8 of 12










  
 



 
 Annual Incentive Compensation Plan 

AWARD LETTER FOR 2012 – EXECUTIVE 
 Executive Management Committee – Senior Vice President 
  

			
	To:  

From:
  
 Re:
	 	 Executive Participants in the Annual Incentive Compensation Plan for 2012

 
 Bryan Delong, Director of Human Resources and Administrative Services

 
 Executive Performance Award for 2012


 You are receiving this Award Letter because you have been selected by the board of directors to be a Participant in the
Bank’s Annual Incentive Plan (the “Plan”) at the Executive level. This Award Letter describes your Performance Award for 2012. Capitalized terms that are used but not defined in this Award Letter will have the meanings given to
them in the Plan. In addition, this Award Letter is subject to the Plan in all respects. In the event of any inconsistency between this Award Letter and the Plan, the Plan will control. 
 You should read this Award Letter carefully. If you have any questions, please contact the human resources department. 
 A.  Executive Performance Measures for 2012 
 1. Risk Management:
Examination Performance (10% Weight) 
 The Bank will effectively manage a range of risks in 2012. The performance measures
are as follows: 
  

			
	Threshold  	  	No unsafe or unsound practice or condition and no repeat
findings on matters requiring board attention*.
	Target  	  	Develop action plans related to findings within 60 days of board presentation of report
of examination.
	Maximum  	  	No decline in composite examination rating and develop action plans related to findings
within 60 days of board presentation of report of examination**.

 *Matters requiring board attention include items noted as unsafe or unsound practice or conditions, violations, or
weaknesses. Items noted as recommendations or referrals are excluded from this list. 
 **Performance level was established with the
understanding that the FHFA will introduce a revised examination rating scale during 2012. This change is expected to make year-over-year comparions, and achivement of maximum performance, more challenging. 

 
 2. Risk Management: Return on Equity as a Spread to 3-Month LIBOR (40% Weight)

 The Bank will achieve target ROE spread to 3-month LIBOR. ROE Spread to LIBOR measured as the spread between GAAP ROE and
3-month LIBOR excluding the impact of OTTI, with a sliding scale to recognize changes in spread and net income due to changes in 3-month LIBOR. The board of directors may reduce incentive awards for this goal by as much as 100% if the GAAP ROE
spread to LIBOR including OTTI is less than 150 bps. Spreads will increase by 25 bps if average leverage ratio is greater than 22 times. If LIBOR index is not available, management will present a recommendation for a successor index and associated
spreads. The performance measures are as follows: 

  

			
		 	Page 9 of 12











					
	  	  	
3-Month LIBOR

< .75 %
	  	 3-Month LIBOR
 = to or > .75 %

	  	 GAAP ROE spread to 3-month LIBOR

	Threshold  	  	300 bps	  	275 bps
	Target  	  	325 bps	  	300 bps
	Maximum  	  	350 bps	  	325 bps

 3. Risk Management: Market Value of Equity (20% Weight) 

The Bank will produce the following MVE/Capital Stock ratios during 2012. The 5 year swap rate as of December 30, 2011, was 1.22%.

  

							
	  	  	 5 Year Swap
Rate
 < 1.00%
	  	
5 Year Swap Rate
 1.01% to 1.50%
	  	 5 Year Swap Rate
 > 1.50%

	
Threshold  
	  	>105	  	>105	  	>105
	 Target  
	  	>109	  	>108	  	>107
	 Maximum  
	  	>111	  	>110	  	>109

 4. Housing Mission: Disbursement of Affordable Housing Funds (15% Weight) 

The Bank will disburse the 2012 Affordable Housing Program (AHP) allocation according to the following schedule: 

 

			
	    Threshold  	  	Document commitment of full 10% of AHP allocation by
December 31, 2012.
	Target  	  	Document commitment of full 10% of AHP allocation by December 31, 2012, and document
commitment of at least 50% of returned funds received through September 30, 2012, by December 31, 2012.
	Maximum  	  	Document commitment of full 10% of AHP allocation by
December 31, 2012, and document commitment of at least 75% of returned funds received through September 30, 2012, by December 31, 2012.

 5. Shareholder Focus: Trusted Advisor (15% Weight) 

The Bank will increase the average number of products and services utilized by shareholders during 2012 as follows: 

 

			
	    Threshold  	  	Increase average product utilization by
6%.
	Target  	  	Increase average product utilization by 10%.
	Maximum  	  	Increase average product utilization by
14%.

 Performance is calculated as a ratio where the numerator represents total number of discrete product
and service utilizations and the denominator represents the eligible shareholder universe. Eligible products and services include advances, letters of credit, safekeeping services, CIS programs, and shareholder educational events. The final universe
of eligible shareholders with credit scores 1-9 will be frozen as of December 31, 2012, and will utilize the most recent credit scores available. New members joining prior to July 1, 2012, will be added to the universe. In the case of
mergers, dissolutions, downgrades to credit score 10, withdrawals from membership and requests for membership withdrawals, the disappearing/downgraded shareholder will be removed from the universe unless the shareholder utilized a product or service
prior to the status change.

  

			
		 	Page 10 of 12










 B.  Executive Base Award Opportunities 

Your Base Award Opportunity will correspond to the percentage of your Actual Earnings for 2012, as set forth below: 

 

							
	 	  	Threshold	 	Target	 	Maximum
	 Senior Vice President
	  	22%	 	43%	 	65%

 C.  Determination and Payment of Earned Award 

The Committee will evaluate 2012 performance against the Performance Measures above and determine your Earned Award based on that performance and your
Base Award Opportunity. 
 Subject to Section D below, your Earned Award for 2012, if any, will be divided into a “Current 2012
Incentive” and a “Deferred 2012 Incentive” as follows: 
  

			
	Payment	  	Description
	 Current
2012 Incentive
	  	50% of Earned Award for 2012
	
Deferred 2012 Incentive    
	  	50% of Earned Award for 2012

 Current 2012 Incentive. Your Current 2012 Incentive will be paid promptly after it has been determined (but
in no event later than March 15, 2013). 
 Deferred 2012 Incentive. Your Deferred 2012 Incentive will be deferred and paid,
together with positive or negative returns as described in the following paragraph, on the following schedule: 
  

			
	Payment Year(1)  	  	Payment
	
2014
	  	1/3 of balance (+/- 1-year return)
	
2015
	  	1/2 of balance (+/- 2-year return)
	
2016
	  	All remaining balance (+/- 3-year return)
	  
     (1) Payment will be made no
later than March 15 in the year indicated.


 Return on Deferred 2012 Incentive. The balance of your unpaid Deferred 2012 Incentive will earn an annual
rate of return (which may be positive or negative) for each full calendar year of deferral during 2013, 2014, and 2015 equal to the Bank’s return on equity for the applicable year, as determined for financial statement reporting purposes in
accordance with GAAP. 
 Condition to Payment of Deferred 2012 Incentive. Without limitation on Sections 8.1 or 8.2 of the Plan,
it is intended to be a condition to payment of your Deferred 2012 Incentive that the Bank have the financial capacity to repurchase excess stock. The board has established the governing measures listed below when considering the Bank’s
financial capacity to repurchase excess stock. 
  

			
	Measure	  	Requirement
	 Retained
Earnings
	  	Greater than $600 million
	 MVE/par
value of capital stock
	  	Greater than or equal to 100%
	 Capital
to asset ratio
	  	Greater than or equal to 4.75%
	 Net
income
	  	Positive GAAP quarterly net income


  

			
		 	Page 11 of 12










 Accordingly, if as of the time any payment of your Deferred 2012 Incentive would otherwise be due under this
Award Letter, the board has made the good faith determination that the Bank does not have such capacity (or earlier determination of the same remains unchanged), the board may, in its sole discretion, elect to reduce or eliminate that payment of
your Deferred 2012 Incentive. 
 D.  Termination of Employment and Other Terms and Conditions 

Forfeiture on Termination. Except as expressly set forth below, if your employment with the Bank terminates for any reason before you have
received payment of all of your Earned Award for 2012, you will forfeit all remaining payments (including, for the avoidance of doubt, any unpaid Deferred 2012 Incentive). 
 Death, Disability, and Permanent Retirement. If you die, become Disabled or Retire, in each case as determined by the Committee in good faith, you will be eligible to receive payments under
this Award Letter as follows. 
  

	 	1.	If you die, become Disabled or Retire during 2012, you will receive a prorated Earned Award for 2012 as soon as practicable in 2013 after it has been determined
(but in no event later than March 15, 2013). In this case, your prorated Earned Award for 2012 will not be subject to deferral beyond that time. 

  

	 	2.	If you die, become Disabled or Retire in 2013 or a later year, you will receive (a) your Current 2012 Incentive as scheduled and (b) a lump sum payment
of your unpaid Deferred 2012 Incentive, together with returns through the most recent date of determination, including the Board’s good faith estimates if applicable, as soon as practicable (but in no event later than 60 days thereafter or, if
earlier, the originally scheduled time). 

 For purposes of this Award, the following terms will have the meanings indicated.
“Disabled” means you are, by reason of any medically determined physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, either unable to
engage in any substantial gainful activity or receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank. “Retire” means you retire from
employment with a combination of age and years of service to the Bank totaling at least 70. 
 Other Terms and Conditions. Payment
of your Earned Award for 2012, if any, is subject in all respects to the provisions of the Plan, including those describing circumstances in which an Earned Award otherwise determined based on performance may be reduced or eliminated in the
discretion of the Committee or the Board. 
 No Effect on Future Awards. This Award Letter is applicable only to your Award for
2012. Awards under the Plan for any future year will be subject to the terms of a different Award Letter, not this Award Letter, unless the Bank specifically provides otherwise. 

  

			
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