EX-10.3






February 24, 2011




Federal Home Loan Bank of Topeka

2011 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-ASC 815 (formerly referred to as 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-ASC 815, 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 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
	 	 	5.53	%
	Target
	 	 	9.87	%
	Optimum
	 	 	14.21	%






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	2.	 	Net Income after Capital Charge






	•	 	Definition: The dollar amount of core income as defined in the above metric, but
Post-AHP/REFCORP, which exceed the cost of the required return on capital.






	•	 	Measure: Core income as defined in the Net Income after Capital Charge Definition
above, less required return on all capital. If REFCORP obligations are fulfilled during the
Plan year, this metric shall be calculated as if FHLBank is still obligated to pay REFCORP
obligations for the entire Plan year. 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 Range:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	$	26,100,000	 
	Target
	 	$	52,200,000	 
	Optimum
	 	$	78,300,000	 







	3.	 	Retained Earnings






Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2011. If REFCORP
obligations are fulfilled during the Plan year, this metric shall be calculated as if FHLBank
is still obligated to pay REFCORP obligations for the entire Plan year.




	•	 	Measure: Retained earnings as defined above as reported on the 12/31/11 balance
sheet.






	•	 	Performance Ranges:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	$	358,520,000	 
	Target
	 	$	395,416,000	 
	Optimum
	 	$	432,312,000	 







	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); CHP Plus; Community Development Program
(CDP); and HELP






	 	•	 	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 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 (RFHP or TOP) — Agreements submitted.






	 	•	 	JOBS — Applications submitted.






	•	 	Performance Range:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	 	350	 
	Target
	 	 	425	 
	Optimum
	 	 	500	 







	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. General
risk categories are market, credit, and liquidity 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
	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. General
risk categories are compliance, business and operations 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
	Compliance Risk

	 	 	30	%
	Business Risk

	 	 	40	%
	Operations Risk

	 	 	30	%
	Total

	 	 	100	%






B. Shareholder Safeguard. The shareholder safeguard metrics are meeting Risk Based Capital
requirements and receiving a composite examination rating of “3” or better. If these threshold
levels of performance are not met, no incentive will be paid under this plan.



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



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Andy Jetter	 	Mark Yardley	 	 
	Objective	 	Dave Fisher	 	Denise Cauthon	 	Pat Doran
	1. Core 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%



	 	20%



	 	20%




	6. Risk Management- Compliance,

Business, Operations

	 	20%



	 	30%



	 	30%




	Total

	 	 	100	%	 	 	100	%	 	 	100	%







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