EX-10.2






Approved December 20, 2011




Federal Home Loan Bank of Topeka

2012 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).




	A.	 	Total Base Opportunity 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.	 	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 weighted average daily Overnight Federal funds effective
rate (Fed Effective).






	•	 	Measure: Pre-ASC 815, AHP adjusted 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 0.84 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
	 	 	5.73	%
	Target
	 	 	9.84	%
	Optimum
	 	 	13.96	%






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	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 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
	 	$	26,631,425	 
	Target
	 	$	53,262,850	 
	Optimum
	 	$	79,894,275	 







	3.	 	Retained Earnings






Definition: The dollar amount of GAAP Retained Earnings as of 12/31/2012.




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






	•	 	Performance Ranges:





	 	 	 	 	 
	 	 	Annual Performance Range
	Threshold
	 	$	404,426,667	 
	Target
	 	$	445,961,018	 
	Optimum
	 	$	487,495,369	 







	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 Housing and Community Development Emergency Loan Program (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
	 	 	300	 
	Target
	 	 	350	 
	Optimum
	 	 	400	 







	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.	 	Deferred Incentive Goal Metrics.






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
	 	 	0.375	 	 	 	0.375	 	 	 	0.375	 	 	 	0.375	 
	Dollar Value (Deferred Incentive
x Performance Measure Percentage
x Weight)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	2/12 or 1/12
	Expense Growth(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
	 	 	0.25	 	 	 	0.25	 	 	 	0.25	 	 	 	0.25	 
	Dollar Value (Deferred Incentive
x Performance Measure Percentage
x Weight)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	Market Value of Equity (MVE) /
Total Regulatory Capital Stock
	 	 	 	 	 	 	 	 	 	 	 	 	 	2/12 or 1/12
	(TRCS)(3)
	 	>9/12 vs FHLBanks	 	9/12 vs FHLBanks	 	6/12 vs FHLBanks	 	vs FHLBanks
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Incentive
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance Measure Percentage
	 	 	0	%	 	 	75	%	 	 	100	%	 	 	125	%
	Weighting
	 	 	0.375	 	 	 	0.375	 	 	 	0.375	 	 	 	0.375	 
	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)
	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 
	Base Award Opportunity Percentage
Level I (40%)
Level II (32.5%)
Level III (25%)
	 	 	%	 	 	 	%	 	 	 	%	 	 	 	%	 
	Total Base Award (Total Value x
Base Award 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 12/31/11 to 12/31/14; 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 01/01/12 and ending 12/31/14. 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 12/31/11 to 12/31/14; and Average Capital is defined as
the average daily ending balance of all capital stock outstanding for dates starting with
01/01/12 and ending 12/31/14. 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) Expense Growth. Expense growth is the dollar amount of the change in operating
expenses (including salaries and benefits, costs of quarters and other operating expenses) at
FHLBank Topeka from calendar year 2011 to calendar year 2014. For performance comparison
purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the lowest increase
(or greatest decrease) being the best performance, and a 1st out of the 12 FHLBanks being the
highest ranking.




3) 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 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.



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	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 at 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%



	 	20%



	 	20%




	6. Risk Management- Compliance,

Business, Operations

	 	20%



	 	30%



	 	30%




	Total

	 	 	100	%	 	 	100	%	 	 	100	%







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