Document:

Ex101Amended IPIP

FEDERAL HOME LOAN BANK OF DES MOINES
AMENDED INTEGRATION PERFORMANCE INCENTIVE PLAN

SECTION 1.PURPOSE
This Federal Home Loan Bank of Des Moines Amended Integration Performance Incentive Plan (the “Plan”) is made effective as of this 25th day of September, 2014 by Federal Home Loan Bank of Des Moines (the “Bank”), and supersedes any prior version of the Plan.  The purpose of the Plan is to provide cash incentive bonuses to eligible Participants (as defined below) identified as having a significant role in the merger integration with the FHLBank of Seattle (the “Merger”).  This incentive opportunity under this Plan recognizes the additional responsibilities, time and effort required for the Merger, and is intended to retain and incentivize Participants and to provide continuity in the operations of the Bank throughout the Merger process.
SECTION 2.    ADMINISTRATION
This Plan shall be approved by the Human Resources and Compensation Committee (“HRC”).  Except as otherwise expressly provided in this Plan, this Plan shall be administered by the CEO of the Bank (the "CEO") and any other individual or individuals to whom the CEO delegates authority to administer this Plan, subject to such limitations and requirements as the CEO may impose on such delegated authority (each, as applicable, the "Administrator").  The Audit Committee of the Board will administer the Plan for eligible employees in the Internal Audit Department.  Subject to the terms of this Plan, the Administrator shall have complete discretionary authority (a) to select the employees of the Bank who are eligible to participate in this Plan and the terms and conditions of their participation hereunder, including identification of incentive bonus opportunities applicable to individual Participants, (b) to construe and interpret the provisions of this Plan in good faith and in his reasonable judgment, and (c) to prescribe such rules, forms and procedures as the Administrator deems necessary or appropriate to administer this Plan.  Any determination by the Administrator acting in such capacity hereunder shall be final, binding and conclusive on all persons concerned, subject to FHFA review and non-objection if and to the extent required.  
SECTION 3.    PLAN ELIGIBILITY
Employees designated by the Administrator as Participants in this Plan shall be notified of their participation in writing for both Phases of the Plan.  The CEO, executive vice presidents, and senior vice presidents (collectively the “Senior Officers”) shall be eligible for Phase 1 and Phase 2 incentive bonuses, but will not be eligible for a payment of any incentive bonuses until the completion of Phase 2 as described below. 

Former FHLB Seattle employees who become a part of the continuing Bank may be eligible to participate in the Plan, provided that such employees do not also participate in any other retention or incentive plan based on similar integration activities, and that such employees are not expected to receive any change-in control benefits as a result of the Merger.
SECTION 4.    INCENTIVE PERFORMANCE PERIODS

Incentive bonuses shall be payable to Participants under this Plan with respect to the following performance periods:

		
	(a)
	Phase 1 - The period beginning with the date a definitive Merger agreement is executed between FHLBank Des Moines and FHLBank Seattle and ending on the day which is 30 days following the Effective Date of the Merger or November 30, 2015, whichever occurs first.

		
	(b)
	Phase 2 - The period beginning with the day which is the first day following the close of Phase 1 and ending on the date of final integration.  Final integration is defined as the date when all departmental goals have been completed, as determined by the HRC, or June 30, 2016, whichever occurs first. 

4.1    Nonoccurrence of the Merger

In the event that an agreement is reached prior to the close of Phase 1 that the Merger will not occur, the HRC, in its sole discretion, may terminate the Plan, and may, in its sole discretion, approve some portion of incentive payouts to Participants for their time and effort in the integration process based on achievement of department goals.  In the event that the Plan is terminated pursuant to this paragraph, any discretionary incentive payouts approved by the HRC shall be paid in lieu of the incentive payouts as set forth in Section 5 and Section 6 below, and all such discretionary payouts shall be paid in full no later than 30 days following the termination of the Plan.  

SECTION 5. PHASE 1 INCENTIVE BONUSES
Phase 1 incentive bonuses shall be calculated and determined based upon the specific department wide plans developed to merge FHLBank Des Moines and FHLBank Seattle.  Phase 1 payout opportunity for each eligible Participant, other than the Senior Officers, shall range from 5 percent to 20 percent of such Participant’s Base Pay.  

5.1    Phase 1 Incentive Bonus Eligibility

In order to be eligible to receive an incentive bonus for Phase 1, a Participant, other than the Senior Officers, must continue to be employed with the Bank through the payment date for Phase 1.  Except as provided in Section 7 below, a Participant who is not employed by the Bank as of the beginning of Phase 1 through the payment date for Phase 1 shall not be eligible to receive an incentive bonus for Phase 1.

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In order to be eligible to receive an incentive bonus for Phase 1, a Senior Officer must continue to be employed with the Bank through the payment date for Phase 2 as described below in subsection 6.4.  Except as provided in Section 7 below, a Senior Officer who is not employed by the Bank as of the payment date for Phase 2 shall not be eligible to receive an incentive bonus for Phase 1.

In addition, all Participants shall be subject to the conditions set forth under Section 7.5 below, and all Participants must be performing satisfactorily, as noted on their latest annual performance review, and not on a Performance Improvement Plan during the term of this plan. 

5.2    Time and Method of Phase 1 Payments

Senior Officers shall make recommendations to the CEO for the award opportunities for Participants of their department based on the responsibilities assigned and the amount of time and effort anticipated from the Participant.  The results of department objectives and individual performance as measured against the responsibilities assigned for Phase 1, and the recommended award payments, shall be assessed by the CEO and Senior Officers, with final approval by the CEO.  The Board’s Audit Committee shall assess results of department objectives and individual performance for the Internal Audit Department Participants.  
Each Phase 1 incentive bonus payable to a Participant, other than the Senior Officers, shall be paid in a lump sum cash amount no later than 30 days following the close of Phase 1.  In no event, however, shall any such Phase 1 incentive bonus be paid later than a date which is two and one-half months following the end of the year in which Phase 1 expires.    
Each Phase 1 incentive bonus payable to Senior Officers shall be paid in accordance with subsection 6.4 below.
Incentive bonuses shall be subject to withholding for all applicable federal, state, local or foreign taxes and any other legally-required withholding.  No interest shall be paid on an incentive bonus.
SECTION 6. PHASE 2 INCENTIVE BONUSES

Participation will include the Senior Officers and individuals who are actively involved in Phase 2.  Managers and individual contributor Participants will be determined after the completion of Phase 1.  Phase 2 payout opportunities for each eligible Participant other than Senior Officers shall range from 5 percent to 10 percent of such Participant’s Base Salary.

6.1    Phase 2 Incentive Bonus Eligibility

In order to be eligible to receive an incentive bonus for Phase 2, a Participant must continue to be employed with the Bank through the payment date for Phase 2.  Except as provided in Section 7 below, a Participant who is not employed by the Bank as of the beginning of Phase 2 through the payment date for Phase 2 shall not be eligible to receive an incentive bonus for Phase 2.

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In addition, all Participants shall be subject to the conditions set forth under Section 7.5 below, and all Participants must be performing satisfactorily, as noted on their latest annual performance review, and not on a Performance Improvement Plan during the term of this plan. 

6.2    Phase 2 Measures for Participants Other Than the Senior Officers

Department specific measures will be identified for Phase 2 that support the completion of the integration process of the two Banks.  Senior Officers shall make recommendations to the CEO for the award opportunities for Participants of their department based on the responsibilities assigned and the amount of time and effort anticipated from the Participant.  The results of department objectives and individual performance as measured against the responsibilities assigned for Phase 2, and the recommended award payments, shall be assessed by the CEO and Senior Officers, with final approval by the CEO.  The Board’s Audit Committee shall assess results of department objectives and individual performance for the Internal Audit Department Participants.

6.3    Plan Measures for the Senior Officers

Bank-wide measures that shall begin with Phase 1 and run through Phase 2 shall be identified that articulate the successful integration of the two Banks.  These goals shall be established by the CEO, after discussion with the Senior Officers, and approved by the HRC.

The weightings for department and bank-wide goals for the Senior Officers shall be as follows:  

	
			
	Participant
	Department Goals
	Bank-wide Goals

	CEO
	 
	100%

	 
	 
	 

	Executive Vice Presidents
	 
	100%

	Senior Vice Presidents
	30%
	70%

The CEO shall communicate to the HRC the departmental results and payouts.  The HRC shall determine success against the bank-wide measures.  The HRC shall have the ability to exercise negative discretion on individual payouts or payouts for the entire Participant group. The payout opportunities for the Senior Officers are as follows: 

	
			
	Participant
	Recommended Opportunity as a % of Base Pay
	Estimated Number of Participants

	CEO
	20-35%
	1

	 
	 
	 

	Executive Vice Presidents
	20-35%
	3

	Senior Vice Presidents
	10-35%
	8

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6.4    Time and Method of Phase 2 Payments and Senior Officer Payments

Each Phase 2 incentive bonus payable to a Participant and Senior Officer incentive bonus payable shall be paid in a lump sum cash amount no later than 30 days following the close of Phase 2.  In no event, however, shall any such Phase 2 or Senior Officer incentive bonus be paid later than a date which is two and one-half months following the end of the year in which Phase 2 expires.    
Incentive bonuses shall be subject to withholding for all applicable federal, state, local or foreign taxes and any other legally-required withholding.  No interest shall be paid on an incentive bonus.

SECTION 7. PARTICIPATION AND PAYMENT LIMITATIONS

7.1    Partial Year Pro-Rating

Employees may be designated to participate in the Plan after the start of either Phase 1 or Phase 2.  An employee who is designated to be a Participant for a period that is less than an entire Phase shall be eligible to receive a prorated incentive bonus for such Phase as described above multiplied by a fraction, the numerator of which shall be the number of full months of actual participation in the Plan during that Phase, and the denominator shall be the total number of full months elapsed during that Phase.  

7.2    Disability or Death 

If a Participant ceases employment with the Bank because of death or disability prior to the end of a Phase, the Participant or the Participant’s designated beneficiary shall be eligible to receive a prorated incentive bonus for that Phase as described above multiplied by a fraction, the numerator of which shall be the number of full months of actual participation in the Plan during a Phase, and the denominator shall be the total number of full months elapsed during that Phase.  Any incentive bonus payable under this subsection shall be calculated and paid to the Participant or beneficiary at the same time and in the same manner as set forth in subsections 5.2 or 6.4 above as applicable.

7.3    Leaves of Absence

Leaves of absence lasting longer than four weeks will result in a partial payment based on the period of the respective Phase for which the Participant was an active employee of the Bank.  In such case, the Participant shall be eligible to receive a prorated incentive bonus as described above multiplied by a fraction, the numerator of which shall be the number of full months of actual participation in the Plan during a Phase, and the denominator shall be the total number of full months elapsed during that Phase.  

7.4    Golden Parachute Limitation
The Bank acknowledges the intent that benefits under this Plan shall not constitute an “excess parachute payment” under § 280G of the Code, which would trigger an excise tax under Code 

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§ 4999.  To give effect to that intent, and notwithstanding any other provision of this Plan to the contrary, if the value of any compensation (in whatever form) provided pursuant to this Plan is counted as a “parachute payment” within the meaning of § 280G(b)(2) of the Code, and the value of all such parachute payments would exceed 299% of the “base amount” applicable under §280G of the Code, then the amount of any payment under this Plan shall be reduced to the extent necessary so that the sum of such parachute payments equals exactly 299% of the Participant’s base amount.

In addition, the Plan is subject to the requirements of part 1231 of subchapter B of title 12 CFR Chapter XII regarding golden parachute payments.  This Plan, and any payments made hereunder, shall comply with such regulations as applicable.

7.5    Additional Participant Payment Eligibility Requirements

In addition to the payment eligibility requirements as set forth under other Sections of this Plan, the HRC may determine that a Participant is not eligible to receive all or part of any benefit payments as described in this Plan in accordance with the following conditions:

(a)    A Participant’s failure to achieve a “meets expectations” or higher evaluation of overall job performance during the Phase 1 or Phase 2 performance periods;
(b)    A Participant becoming subject to disciplinary action or probationary status at the scheduled time of an incentive bonus payment; 
(c)    A Participant’s failure to comply with regulatory requirements or standards, internal control standards, the standards of his or her profession, any internal Bank standard, or failure to perform responsibilities assigned under the Bank’s Strategic Business Plan (SBP); or
(d)    The failure of a Participant to comply with any employee policies or rules established by the Bank.

SECTION 8. GENERAL
8.1    No Individual Rights; No Right to Continued Employment  
(a)    Other than as provided hereunder, no employee or other person shall have any claim or right to participate in this Plan, and the Bank shall have no obligation for uniformity of treatment of Participants under this Plan.  
(b)    Nothing in this Plan is to be construed as (i) giving any Participant or any other person rights to employment or continued employment or to any other engagement or relationship with the Bank, or (ii) limiting in any way the Bank's rights to terminate the employment or other engagement, or to modify the provisions of employment or other engagement, of any Participant or any other person.
8.2    Assignment; Binding on Successors  

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(c)    The rights of any Participant to any payments under this Plan may not be assigned, transferred, pledged or encumbered, either voluntarily or by operation of law, and shall not be subject to attachment, bankruptcy, garnishment, levy, execution or other legal or equitable process; provided, however, that in the event of a Participant's death, any incentive bonus for which the Participant was eligible to receive but shall inure to the benefit of the Participant's designated beneficiary, or if none, the Participant’s estate.  
(d)    This Plan shall be binding on any successors and assigns of the Bank, including without limitation any person, partnership, bank or corporation that may acquire the Bank or the assets of the Bank or with or into which the Bank may be liquidated, consolidated, merged or otherwise combined.  In such event, the Bank shall require any successor or assign expressly to assume and agree to perform the Bank's obligations under this Plan in the same manner and to the same extent that the Bank otherwise would be required to perform such obligations.
8.3    No Trust or Fund
This Plan is intended to constitute an "unfunded" plan.  Nothing contained herein or in any instrument provided under this Plan shall give any Participant rights to any assets of the Bank or any assets of any acquirer or successor to the Bank or to the Bank's assets that are greater than those of an unsecured general creditor of the Bank, nor shall anything in this Plan be construed as establishing a trust or as requiring the Bank to set aside funds to meet its obligations hereunder.
8.4    Section 409A 
This Plan and any payments provided hereunder are intended to be exempt from the requirements of Section 409A of the Code ("Section 409A") to the maximum extent possible pursuant to the short-term deferral exception described in Treas. Reg. Section 1.409A-1(b)(4).   Notwithstanding anything herein to the contrary, this Plan shall be interpreted, operated and administered in a manner consistent with such intentions; provided, however, that in no event shall the Bank or any of its subsidiaries or affiliates (or any of their successors) be liable for any additional tax, interest or penalty that may be imposed on a Participant pursuant to Section 409A or for any damages incurred by a Participant as a result of this Plan or the payments hereunder failing to comply with, or be exempt from, Section 409A.
8.5    Other Benefits
No payments under this Plan shall count toward, be substituted in lieu of, or be considered in determining payments or benefits due to a Participant under applicable law or under any other plan, program or agreement of the Bank or any of its subsidiaries or affiliates.
8.6    Termination and Amendment of Plan
The HRC may terminate this Plan at any time and may amend this Plan, including any appendix or schedule hereto, at any time and from time to time, subject to FHFA review and non-objection if and to the extent required; provided, however, that any proposed termination 

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or amendment of this Plan that would materially adversely affect a Participant's rights hereunder shall require such Participant's prior written consent before becoming effective with respect to such Participant (except that any amendment to this Plan made for the purpose of obtaining FHFA non-objection shall not be subject to the foregoing consent requirement).  Unless earlier terminated, this Plan shall terminate and be of no force or effect automatically upon the date of payment of all incentive bonuses payable hereunder.
8.7    Severability
If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Plan, and this Plan shall be construed and enforced as if such provision had not been included herein.
8.8    Requirements of Law
This Plan and any payments hereunder shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies as may be required.  The Bank shall have no liability to Participants in the event such approvals cannot be obtained.
8.9    Governing Law
This Plan, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Iowa without regard to the conflict of law provisions thereof, unless otherwise preempted by the laws of the United States.
SECTION 9. DEFINITIONS
9.1    “Base Pay” means the actual base salary in effect on the date the incentive is paid.
9.2    "Board" means the Board of Directors of the Bank.
9.3    "Code" means the Internal Revenue Code of 1986, as amended from time to time.
9.4    “Departmental Goals” means activities, responsibilities and milestones aligned with the identified workstreams that are needed in order to have a successful integration process. 
9.5    “Effective Date” shall have the meaning as set forth under the Agreement and Plan of Merger dated as of September 25, 2014 between The Federal Home Loan Bank of Des Moines and The Federal Home Loan Bank of Seattle

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9.6    “FHFA” means the Federal Housing Finance Agency.
9.7    "HRC" means the Human Resources and Compensation Committee of the Board.
9.8    "Participant" means an employee of the Bank selected for participation in this Plan by the Administrator.

9Ex102 Revised Incentive Plan Document

Federal Home Loan Bank of Des Moines
2015 Incentive Plan Document

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CONTENTS

		
	I.
	Purpose

		
	II.
	Eligibility

		
	III.
	Plan Design

		
	IV.
	Administration of the Plan

		
	V.
	Miscellaneous Provisions

		
	VI.
	Definitions

Exhibit 1

Exhibit 2

Exhibit 3
    
Exhibit 4

Exhibit 5

Exhibit 6

    

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	I.
	Purpose

The Federal Home Loan Bank of Des Moines (“Bank”) strives to attract, retain and motivate employees of the Bank, and to focus its employees’ efforts on fulfilling the Bank’s mission and vision within a safe and sound framework and in a manner consistent with the Bank’s shared values. This 2015 Incentive Plan (“Plan”) is designed to compensate Bank employees in a manner consistent with these goals by: 

		
	•
	Recognizing Bank employees for their individual and/or team contributions to the Bank’s achievement of the Strategic Imperatives listed in the 2015-2017 Strategic Business Plan (“SBP”); and

		
	•
	Providing incentive awards that when combined with base salaries provide competitive total cash compensation to Bank employees. 

The Plan is effective for the calendar year beginning January 1, 2015.  Awards earned during the Performance Period under the Plan (“Plan Awards”) fall into two separate subcategories: “Annual Awards” and “Deferred Awards.” (See Section VI., Definitions, for a description of these terms).  

The Plan shall remain in effect until the Board’s Human Resources and Compensation Committee (“HRC”) terminates, replaces or amends the Plan. 

		
	II.
	Eligibility

All regular full-time and part-time (working at least 20 hours/week) employees are eligible to participate in the Plan, with the exception of the Internal Audit Department employees who may be eligible to participate in a separate annual incentive plan as approved by the Board’s Audit Committee. Temporary employees, interns or independent contractors are not eligible to participate in the Plan.  

III.    Plan Design

The Plan includes two components:

		
	•
	Bank-wide business performance goals aligned with the Bank’s SBP Strategic Imperatives of Strengthen Partnership with Members, Disciplined Pursuit of Long-term Business Performance, Stewardship of our Public Mission and Merger Integration.

		
	•
	Individual and/or team goals for achievement of other objectives aimed at improving the Bank’s service to the shareholding members and operational effectiveness that are linked to the SBP, whenever possible, and support the Bank’s mission. 

The Plan is designed to emphasize overall Bank performance for officers and certain other professionals and more specific operationally-focused goals related to particular areas of responsibility for other employees that provide a “line of sight incentive.”  

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Each calendar year the HRC shall establish one or more Bank-wide performance goals, consistent with the SBP in effect during the Performance Period. To the extent the HRC establishes more than one goal, each goal will be weighted. Each goal shall have a threshold, target, and maximum level of performance, as appropriate.  

Each calendar year, employees and their managers will develop individual and/or team goals in alignment with the strategic imperatives and strategies included in the SBP.  

Recognizing that circumstances and priorities may change, management may submit to the HRC recommended revisions to Bank-wide performance goals.  The HRC will evaluate the submission and determine whether the Bank-wide performance goals should be amended. Management may authorize changes to individual and/or team goals throughout the Performance Period as priorities and circumstances dictate.

Bank-wide performance goal achievement levels that discretely fall in between threshold, target and maximum performance levels will be interpolated, unless otherwise directed in the design of a particular performance goal.

The total incentive target is a weighted average of the Bank-wide performance goals and individual and/or team goals. 

The following chart provides the threshold, target and maximum Plan Award percentage payout opportunities for each level in the Bank, and associated weights for Bank-wide performance goals and individual and/or team goals. The chart also provides the portion of each Plan Award, if any, that is a Deferred Award. 

	
								
	

Classification
	2015 Threshold/ Target/ Max
Plan Award as a % of Base Salary
	Bank-wide Performance Goal
% of Total Plan Award
	Bank-wide Performance Goal based on SBP 
Focus Areas
% of Total Plan Award
	Individual and/or Team Goal
% of Total Plan Award
	% of 2015 Plan Award   Paid Annually
	% of 2015 Plan Award  Deferred

	Tier 1 (CEO)

	50.0 / 75.0 / 100.0
	90%
	N/A
	10%
	50%
	50%

	Tier 2 (EVPs)

	40.0 / 60.0 / 80.0
	70%
	20%
	10%
	50%
	50%

	Tier 3 (SVPs)
           (VPs)
	20.0 / 40.0 / 60.0
17.5 / 35.0 / 52.5

	60%
	N/A
	40%
	65%
	35%

	Tier 4 (VPs)
           (VPs)
	15.0 / 30.0 / 45.0
12.5 / 25.0 / 37.5

	60%
	N/A
	40%
	65%
	35%

	Tier 5
	10 / 20 / 30

	60%
	N/A
	40%
	65
	%
	35%

	Tier 6 

	7.5 / 15 / 22.5
	50%
	N/A
	50%
	100%
	N/A

	Tier 7 

	5 / 10 / 15
	50%
	N/A
	50%
	100%
	N/A

	Tier 8 

	4 / 8 / 12
	40%
	N/A
	60%
	100%
	N/A

	Tier 9 

	3 / 6 / 9
	30%
	N/A
	70%
	100%
	N/A

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The actual threshold, target, and maximum achievement levels for the Bank-wide performance goals in the Plan are presented in Exhibit 1 (attached). 

Bank-wide performance goals for the executives are weighted at 90% and include 70% based on the Bank-wide goals in Exhibit 1 and 20% based on certain Bank-wide goals related to the strategic imperative and strategies each executive is focused on in 2015. See Exhibit 2 (attached) for the Strategic Imperative Bank-wide weightings for each executive.

As noted above, for employees classified in Tiers 1-4, a portion of the Plan Award will be paid as an Annual Award in the year following the Performance Period and the Deferred Award will be paid at the end of the Deferral Period.  The Deferred Award is designed to ensure that Bank management does not take short-term measures in 2015 to secure incentive compensation that could be detrimental to the long-term value of the Bank.  This will ensure that management continues to operate the Bank in a profitable and prudent manner for the long-term value of its members.  

For the 2015 Performance Period, the 2015 Deferred Award is to be paid in 2019.  The Deferred Award earned during the Performance Period will be impacted by the achievement level of economic value of capital stock (EVCS) in future periods.  See Exhibit 3 (attached) for more information on the final determination of the Deferred Award.

Bank-wide Performance Goals

Bank-wide performance goals focus staff’s efforts on the Bank’s Strategic Imperatives of Strengthen Partnership with Members, Disciplined Pursuit of Long-term Business Performance, Stewardship of our Public Mission and Merger Integration. These imperatives are outlined in the SBP.

The strategies underlying the Bank’s Strategic Imperatives reflect the Bank’s cooperative structure whereby the Bank needs to satisfy the expectations of members as both shareholders and customers. Fulfilling that cooperative mission must be done in a prudent manner so as to preserve the par value of capital stock, which is the rationale for the risk management measures including the preservation of the enterprise value and the quality of the Bank’s risk management practices and results. All employees should have a portion of their incentive potential tied to Bank-wide performance so that everyone in the Bank, regardless of their role or level in the organization, thinks about delivering value to the members, managing the Bank effectively and efficiently, and doing so within an appropriate risk and mission framework.

Given the environment in which the Bank operates, the HRC will periodically review achievement on the incentive goals and consider changes to the goals as appropriate and subject to the review and non-objection of the FHFA.  Structural changes in the financial services sector driven by factors largely outside the Bank’s control (such as legislative changes) may necessitate wholesale changes in how the Bank’s executives and other employees are rewarded.

The following provides additional detail on each of the goals and the weightings for each.

Strengthen Partnership with Members (35% Total Weight)

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The Strengthen Partnership with Members goal is focused on building strong relationships and providing valuable products and services to members.  Success in achieving this goal is measured in three different ways, with each metric having a weight of 10% or 15%:

		
	1)
	Member Product and Service Usage (10% weighting): Index of 7 products, services and activities with members: advance participation, letter of credit (LOCs) participation, daily time deposits, safekeeping, MPF, advances via eAdvantage, and education (regional meetings, product and MPF workshops, fall FHLBDM conference). 

		
	2)
	Overall Member Satisfaction (15% weighting): Maintain or improve overall member satisfaction with the Bank as determined by a survey of the Bank’s members conducted by Barlow Research Associates. 

		
	3)
	Member Product and Service Satisfaction (10% weighting): Improve member satisfaction in (i) advance products, (ii) collateral reporting requirements, and (iii) credit scoring methodology and transparency. Results will be determined by a survey of the Bank’s members conducted by Barlow Research Associates. 

Disciplined Pursuit of Long-term Business Performance (35% Total Weight)

Success in achieving this goal is measured in four different ways, with each metric having a weight of 5%-10%.  

		
	1)
	Preservation of Enterprise Value: This will be measured by the quarterly average of Market Value of Capital Stock (MVCS) computed using quarter-end balances for 2015. This measure is widely used within the Bank System and is a good indicator of short-term performance and value of the Bank’s capital stock. 

 
		
	2)
	Quality of Risk Management: This will be determined at year-end by the Board’s Risk Committee (RC). Management will provide the RC with criteria that could be used to differentiate threshold from target from maximum level of achievement on this goal.  See Exhibit 4 (attached) for more information.

		
	3)
	Operational Excellence:  As reflected in the Bank’s SBP, the Bank has determined to place significant focus on its major systems and business processes. Therefore, a Bank-wide goal was added to the SBP that takes into consideration people, processes and technology. This goal will include two subcategories that relate to the following: (i) satisfactory progress on the core banking system phase 2 project plan, and (ii) successful progress on the Project Ulysses (AHP System) based on the detailed project plan to be completed by June 30, 2015. The final outcome of this goal will be determined by objective achievement measurements for each subcategory. See Exhibit 5 (attached) for more information.

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	4)
	Profitability:  This goal will be measured by Adjusted Return on Capital Stock (AROCS). This is a comprehensive measure of the Bank’s profitability and is most meaningful to the Bank’s shareholders.  It represents, on an adjusted earnings basis, the dividend percentage that could be paid to members if 100% of earnings were to be paid as a dividend. The outcome of this goal will be determined by a matrix of achievement tied to the Bank’s SBP financial projections.  

Stewardship of our Public Mission (15% Total Weight)

This category aligns with the third strategic imperative in the Bank’s SBP. Success in achieving this goal will be measured in two ways, with both goals weighted at 7.5%. 

		
	1)
	Mission related assets (7.5% weighting)– This goal is based on the in-depth analysis completed by the Bank on its mission related assets ratio, including (i) advances and AMA, plus (ii) other on-balance sheet core mission activity assets as defined under FHFA regulations, relative to its outstanding consolidated obligations.

		
	2)
	Community Impact (7.5% weighting) – This goal will measure AHP and Homeownership Fund applications. Affordable housing is a critical component of the Bank’s mission. The final outcome of this goal will be determined by an objective achievement matrix.

Merger Integration (15% Total Weight)

As a result of the contemplated merger between the Bank and Federal Home Loan Bank of Seattle (FHLB Seattle), a fourth imperative has been added to the 2015-2017 SBP that is intended to provide strategic direction to the Bank with regard to its plan to merge with the FHLB Seattle. This goal will be measured based on the merger effective date of May 31, 2015 and achieving a successful merger (15%). See Exhibit 6 (attached) for more information. 

Achievement Levels of Bank-wide Performance Goals in the 2015 Plan

The threshold, target, and maximum achievements levels for the Bank-wide performance goals listed in the attached Exhibit 1 are calibrated based on results from previous years and projections in the Bank’s 2015 SBP. 

 2015 Individual and/or Team Performance Goals

Individual and/or team goals in the Plan are generally linked to the Bank’s 2015 SBP.  The nature of individual and/or team goals varies depending on the individual’s role and level in the organization. For example, an individual in the Enterprise Risk Management department might have individual and/or team goals focused on improving the Bank’s risk management infrastructure, while an employee in the 

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Credit Sales department might be focused on developing new or enhanced products for the members. 

For the executives, individual and/or team goals account for 10% of the incentive opportunity, and awards will be based upon a performance evaluation assessing completion of role responsibilities, personal development plans, and demonstrating the Bank’s shared values. 

Payout Determination

Annual and Deferred Awards earned during the Performance Period are payable in 2016 and 2019, respectively, and are subject to HRC approval. Notwithstanding the formulaic computations of the Plan payouts based on incentive goal achievement levels, actual payouts under the Plan are subject to the HRC’s review and approval and are made at the HRC’s discretion subject to prior review and non-objection by the Federal Housing Finance Agency (“FHFA”) for the Bank’s Named Executive Officers (“NEOs”). 

The HRC may consider a variety of objective and subjective factors to decide on the appropriate payouts including but not limited to: (i) operational errors or omissions that result in material revisions to the financial results, information submitted to the FHFA or data used to determine incentive payouts; (ii) untimely submission of information to the Securities and Exchange Commission (“SEC”), Office of Finance (“OF”), or the FHFA, or; (iii) failure to make sufficient progress, as determined by the FHFA, in the timely remediation of examination, monitoring, and other supervisory findings and matters requiring attention.  

The HRC shall consider the relevant facts and circumstances and reduce incentive awards commensurate with the materiality of the exception relative to the Bank’s financial and operational performance and financial reporting responsibilities.

The HRC also may determine a participant is not eligible to receive part or all of any Plan Award payouts.  Events that may justify such HRC action may include, but are not limited to, the following:  

		
	•
	a participant’s failure to achieve a “meets expectations” or higher evaluation of overall job performance during a Performance Period;

		
	•
	a participant becomes subject to disciplinary action or probationary status at the scheduled time of a Plan Award payout; or

		
	•
	a participant’s failure to comply with regulatory requirements or standards, internal control standards, the standards of his or her profession, any internal Bank standard, or failure to perform responsibilities assigned under the Bank’s SBP. 

As soon as feasible after the conclusion of each Performance Period, the HRC shall review the Bank’s performance against its Bank-wide performance goals, and if appropriate, shall approve the payout, if any.  

As soon as feasible after conclusion of each Performance Period, the responsible manager will determine the achievement and performance levels of individual and/or 

8

team goals for participants.  Executive Management of the Bank will review, approve and submit to Human Resources the Plan Awards for their areas of responsibility. Executive Management and Human Resources will together calibrate the individual and/or team payouts across the Bank.  Human Resources, after considering each participant’s performance against individual’s goals, shall recommend to the HRC the payout levels for approval. 

Plan Awards are determined based on the participant’s actual earned base salary or wages for hours worked, including overtime and hours paid under the Bank’s paid time off policies, as applicable, but in any case excludes any bonus, incentive compensation, severance payments, or long-term disability insurance payments paid for the current or a prior year.  In the event a participant receives a raise during a calendar year, the participant’s compensation for the year will reflect the actual wages paid to the participant for the year. A participant who has a hire date prior to the beginning of the Performance Period is eligible to receive a full Plan Award.  A participant who has a hire date after the beginning of the Performance Period is eligible to receive a prorated Plan Award based on the number of work days completed in the Performance Period.  A participant hired on or after October 1 of the Performance Period is not eligible to receive a Plan Award for the Performance Period in which they were hired.

Unless otherwise directed by the HRC, Plan Award payouts shall be made in a lump sum through regular payroll distribution, as soon as possible after payout approval but in no case more than 75 days after the end of the Performance Period (in the case of an Annual Award) or Deferral Period (in the case of the Deferred Award). All payments under the Plan shall in any event be made by the end of the calendar year following the Performance Period or Deferral Period, as applicable, for which payout approval has been received. Appropriate provisions shall be made for any taxes that the Bank determines are required to be withheld from any payment under applicable laws or other regulations of any governmental authority, whether federal, state or local.  

Employees whose employment ends before any Plan Award payout will not be eligible for award payouts under the Plan unless otherwise provided for herein or in any Executive Employment Agreement. The HRC has the sole discretion to determine whether a payout is made to the participant, and the amount of any such payout.  

Employees whose termination occurs as the result of death or Disability shall be eligible to receive a prorated Plan Award for the Performance Period in which the termination occurs in an amount based upon the number of days worked in the Performance Period.  The prorated Plan Award for the Performance Period will be determined based upon actual achievement levels for Bank-wide performance goals and Target achievement levels for individual and/or team goals, and will not be subject to an EVCS modifier. Such employees will also be eligible to receive deferred awards earned but not yet approved for payout from periods occurring prior to the Performance Period.  All payouts of deferred awards from prior periods will be based on actual achievement levels attained during such periods, and will not be subject to an EVCS modifier. All awards will be payable in a single lump sum within 75 days following the end of the Performance Period that the death or Disability occurred.  

Employees whose termination occurs as the result of a Retirement or Reduction in Force are eligible to receive a prorated Plan Award for the Performance Period in which the termination occurs in an amount based upon the number of days worked  in the Performance Period unless otherwise provided for herein or in any Executive 

9

Employment Agreement.  The prorated Plan Award will be determined based upon actual achievement levels for Bank-wide performance goals and Target achievement levels for individual and/or team goals, and will not be subject to an EVCS modifier. Such employees will also be eligible to receive deferred awards earned but not yet approved for payout from periods occurring prior to the Performance Period. The amount of payouts on deferred awards from prior periods, as well as any portion of the prorated Plan Award that constitutes Deferred Awards, will be determined in accordance with the terms of the Plan unless otherwise provided for herein or in any Executive Employment Agreement.  All payments shall be made during the calendar year following the Performance Period or Deferral Period, as applicable.

A participant who is transferred, promoted, or demoted during a Performance Period may receive a prorated Plan Award based on the actual time in each position during the Performance Period.  

IV.    Administration of the Plan

The Bank’s Board of Directors is ultimately responsible for the Plan, including its amendment, replacement or termination. The HRC has the full power and authority of the Board to construe, interpret and administer the Plan. Any decision arising out of or in connection with the construction, interpretation or administration of the Plan lies within the HRC’s absolute discretion and is binding on all parties.  

The HRC shall:

		
	•
	Approve Bank-wide performance goals.

		
	•
	Approve the range of potential payout opportunities for Plan participants.

		
	•
	After the end of a Performance Period, approve any Annual Awards.

		
	•
	After the end of the Deferral Period, approve any Deferred Awards for qualifying eligible officers.

		
	•
	Render any decisions necessary with regard to the interpretation of the Plan.

Day-to-day administration of the Plan is delegated to those in the Bank responsible for Human Resources functions.  

V.     Miscellaneous Provisions

The Plan, in whole or in part, may at any time or from time to time be amended, suspended or reinstated and may at any time be terminated by the HRC.

No amendment, suspension or termination of the Plan shall, without the consent of the participants, affect the rights of the participants to any payout previously approved by the HRC.

No participant has the right to alienate, assign, encumber, or pledge his or her interest in any payout under the Plan, voluntarily or involuntarily, and any attempt to do so is void.

10

This document is a complete statement of the Plan and supersedes all prior plans, representations and proposals written or oral relating to its subject matter.  The Bank is not bound by or liable to any participant for any representation, promise or inducement made by any person which is not expressed in this document. 

This Plan shall not be considered a contract of employment and nothing in the Plan shall be construed as providing participants any assurance of continued employment for any definite period of time, nor any assurance of current or future compensation.  This Plan shall not, in any manner, limit the Bank’s right to terminate compensation and employment at its will, with or without cause.

Participation in the Plan and the right to receive awards under the Plan shall not give a participant any proprietary interest in the Bank or any of its assets.  Nothing contained in the Plan shall be construed as a guarantee that the assets of the Bank shall be sufficient to pay any benefits to any person.  A participant shall for all purposes be a general creditor of the Bank.  Each payment shall be from the general assets of the Bank.

The Plan shall be construed in accordance with and governed by the State of Iowa except to the extent superseded by federal law.

It is intended that the awarding, vesting and payment of any award will comply with Section 409A of the Internal Revenue Code of 1986, as amended, and Treasury regulations relating thereto (“Section 409A”), so as not to subject any participant to the payment of any interest or tax penalty, provided, however, that neither the Bank, the HRC, the Board, or any directors, officers, employees, consultants or other agents shall be liable to a participant or otherwise responsible for any such interest and tax penalties.  Neither the Bank nor the employee may accelerate a payment into a calendar year not specified in the Plan nor defer or postpone a payment into a year following the calendar year specified in the Plan, except as may be permitted by Section 409A. 

VI.    Definitions. 

As used in this document, the following definitions apply: 
		
	(a) 
	“Annual Award” is the portion of the Plan Award that can be earned during the Performance Period and paid in the calendar year following the Performance Period. 

		
	(b)
	 “Deferral Period” is the three calendar year period after which the Deferred Award can be paid.  The Deferral Period begins January 1 immediately following the Performance Period (January 1, 2015 – December 31, 2017).     

		
	(c)
	“Deferred Award” is the portion of the Plan Award that can be earned during the Performance Period and paid in the calendar year following the Deferral Period subject to the applicable EVCS modifier. 

		
	(d)
	“Fall Forward approach” means that Seattle data is converted to Des Moines systems during the merger weekend but not validated to an acceptable level of cleanliness based on the reconciliation control framework; provided, however, that the Seattle data can be subsequently fixed to an acceptable 

11

level of cleanliness within 30 days of the merger by any means the business unit determines to be reasonable.  

		
	(e)
	“Disability” shall mean that an employee is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, and which has rendered the employee incapable of performing his or her duties to the Bank, receiving benefits under a disability plan sponsored by the Bank, for a period of not less than three (3) months.

		
	(f)
	“Performance Period” is the one calendar year period during which a Plan Award can be earned (January 1 – December 31, 2014).  

		
	(g)
	“Plan Award” is the award that can be earned during the Performance Period.

		
	(h)
	“Reduction in Force” is a decision by the Bank to reduce the number of Bank employees, which results in the involuntary termination of one or more Bank employees for reasons unrelated or not exclusively related to the performance of such employee or employees. 

		
	(i)
	“Retirement” means an employee’s voluntary termination of his/her employment based on the attainment of at least age 55 and completion of at least 5 years of service with the Bank or as permitted under Section 409A of the Internal Revenue Code of 1986, as amended.  With respect to a Plan participant who is eligible to receive a Deferred Award, the date of such employee’s retirement as well as other terms and conditions that provide for an orderly transition must be mutually agreed to by the employee and the Bank in order for the employee to meet the definition of Retirement as provided herein.

12

Exhibit 1	
				
	Bank-wide Goals and Weightings
	2015
Threshold
	2015
Target
	2015
Maximum

	SBP Imperative – Strengthen Partnership with Members (35% Weight)

	Member Product and Service Usage (10% Weight)

	1.3
	1.7
	2.1

	Member Overall Satisfaction Survey - Percentage of Members “Very Satisfied” and “Satisfied” (15% Weight) 

	

92%

	

95%

	

98%

	Member Product and Service Satisfaction Survey – Results of questions on advance products, collateral reporting requirements and credit scoring methodology (10% Weight)

	

82  
71  
77    

	

88  
77  
83  

	

94  
83  
89  

	SBP Imperative – Disciplined Pursuit of Long-Term Business Performance (35% Weight)

	Preservation of Enterprise Value as measured by the quarterly average of Market Value of Capital Stock (MVCS) (10% Weight)

	

$100 or ranking in the upper half of Bank System

	

$120

	

$130

	Quality of Risk Management as measured by the Board’s qualitative assessment covering the following areas (10% Weight):

Credit Risk (2.5%)
Market Risk (2.5%)
Operational Risk (1.0%)
Internal Controls - SOX 404 (1.0%)
IT Risk (1.0%)
Model Risk (1.0%)
Remediation of Exam Findings (1.0%)
  
	 

	

See Exhibit 4

	

	 Operational Excellence (5% Weight) –
•    Satisfactory progress on the Core Banking Phase 2 project plan (2.5%)
•    Satisfactory progress on the Project Ulysses (AHP system) based on the detailed project plan to be completed by June 30, 2015
	 
	

See Exhibit 5
	 

	Profitability - Adjusted Return on Capital Stock (AROCS)* – Earned Dividend (10% Weight)

	

3.00%

	

4.50%

	

6.0%

13

	
				
	SBP Imperative – Stewardship of our Public Mission (15% Weight)

	Mission Related Assets Ratio (7.5% Weight)*

	

	

60%-80%

	 

	Community Impact (7.5% Weight)
•    AHP Applications
•    Homeownership Fund Applications

	

45
110

	

60
135 

	

75
160 

	**SBP Imperative – Merger Integration (15% Weight)

	Merger Effective Date and achieving a successful Merger (15% Weight)

	 
	

See Exhibit 6
	 

*The HRC will have discretion to adjust above or below target based on specific management actions that would warrant consideration above or below target performance.  With such adjustment target achievement will be earned for a ratio within the SBP defined acceptable range of 60% to 80%.
**This imperative and goals are applicable only if the merger is approved.

14

Exhibit 2
Executive 2015 Bank-Wide Strategic Imperative Focus (20% Weighting)

	
		
	Executive
	Strategic Imperative

	CFO
	Disciplined Pursuit of Long-Term Business Performance and Merger Integration

	CBO
	Strengthen Partnership with Members, Stewardship of our Public Mission and Merger Integration

	CRO
	Disciplined Pursuit of Long-Term Business Performance (Quality of Risk Management and Preservation of Enterprise Value sub goals) and Merger Integration

15

Exhibit 3

Deferred Award Payout Determination

The Deferred Award earned in 2015 will be paid in 2019.  The actual amount of the award paid in 2019 will depend principally on the Bank’s performance in 2015, modified by the average EVCS in the year 2018 as provided below. Modifying the amount of award paid using the level of the Bank’s EVCS over the final year ensures that over the interim period, management continues to operate the Bank in a profitable and prudent manner. It also ensures that management does not take short-term measures in 2015 to secure a long-term incentive award in 2017 that would be detrimental to the Bank over the long-term.

The EVCS modifier for the Deferred Award is as follows:

		
	◦
	If the average quarterly EVCS for 2018 is less than $90 per share, the modifier would be zero, resulting in no Deferred Award. 

		
	◦
	If the average quarterly EVCS for 2018 is $90 per share, the modifier would equal 90%, meaning that actual awards would equal 90% of the potential award.

		
	◦
	For every dollar that the average quarterly EVCS for 2018 exceeds $90 per share, one percentage point would be added to the multiplier of 90% up to a maximum multiplier of 110%.

For example, if the Bank were to achieve maximum on the 2015 Bank-wide business performance goals and individual/team goals and if EVCS were to average $110 per share or more in 2017, then the absolute maximum Deferred Award payouts under the Plan would be as follows:
 
	
					
	 
	Payout As a % of Base Salary at Excess/Maximum Achievement Level
	

	Maximum Payout with Multiplier at 110%
	

	 
	 
	 

	Tier 1
	50.00
	%
	55.00
	%

	Tier 2
	40.00
	%
	44.00
	%

	Tier 3
	21.00
	%
	23.10
	%

	 
	18.40
	%
	20.24
	%

	Tier 4
	15.70
	%
	17.27
	%

	 
	13.10
	%
	14.41
	%

	 
	 
	 

In addition to the modifier described above, the HRC may consider other factors, including:

		
	1.
	Operational errors or omissions that result in material revisions to the financial results, information submitted to the FHFA, or data used to determine incentive payouts;

		
	2.
	Untimely submission of information to the SEC, OF and/or FHFA; or 

		
	3.
	The Bank fails to make sufficient progress, as determined by the FHFA, in the timely remediation of examination, monitoring and other supervisory findings and matters requiring attention.

The HRC shall consider the relevant facts and circumstances and reduce incentive awards commensurate with the materiality of the exception relative to the Bank’s financial and operational performance and financial reporting responsibilities.

16

Exhibit 4

The table below provides additional information on the quality of risk management goal and what the Risk Committee will utilize to evaluate and score each element of risk.  
  

	
				
	

Quality of Risk Management (10% Total Weight) as measured by the Board’s qualitative assessment covering the following areas:
	

 Score: (Threshold = 5 Target = 10 Maximum = 15)
	

 Weight
	

Weighted Score: (Score times Weight)

	

	 
	25%
	 

	Market Risk 
· Stability of adjusted MVCS (MVCS, changes net of OAS and funding spread movements) 
· Timely upgrades and updates to QRM/Intex/LPS, Principia (Target) 
· Enhancements to market risk measurement and reporting 
· Number of limit breaches during the year 
· No high-rated internal audit issues and timely remediation of findings (Target) 
· No high-rated model validation issues and timely remediation of findings (Target) 
· Regulatory assessment of market risk and successful remediation of any exam findings 

	 
	25%
	 

	Operational Risk 
· Exception reporting process is well defined and reflects consistency, relevance, completeness, and transparency. (Target) 
· Annual risk assessment process is effectively and efficiently administered resulting in informative report which appropriately escalates the Bank’s most significant risks. (Target) 
· Timely and successful remediation of all high-risk Internal Audit and Model Risk issues. (Target) 
• Regulatory assessment of operational risk and successful remediation of any exam findings 

	 
	10%
	 

17

	
				
	

Quality of Risk Management (10% Total Weight) as measured by the Board’s qualitative assessment covering the following areas:
	

 Score: (Threshold = 5 Target = 10 Maximum = 15)
	

 Weight
	

Weighted Score: (Score times Weight)

	Internal Controls - SOX 404
· Annual SOX 404 process is efficiently managed enabling management to assert that control over financial reporting is effective. (Target) 
· External and internal auditors’ assessment of SOX 404 process and compliance 
• Zero material weaknesses and low significant deficiencies (Target) 
	 
	10%
	 

	IT Risk
· Successful implementation of the information security program 
· Successful implementation of the business continuity program 
· Compliance with IT risk monitoring and control 
	 
	10%
	 

	Model Risk 
• Successful completion of the model validation plan (Target) 
• Successful remediation of issues identified through the validation process (Target) 
• Regulatory and Internal Audit’s assessment of the function and successful remediation of any findings 
	 
	10%
	 

	Exam Remediation 
Timely remediation of FHFA safety and soundness exam findings as assessed by Internal Audit 
	 
	10%
	 

	Overall Quality of Risk Management
	 
	100%
	 

18

Exhibit 5

19

Exhibit 6  

Management will provide an assessment on achieving a successful merger to the Board’s Human Resources and Compensation Committee (HRC). The HRC will utilize the following table to evaluate and score each element. . 

Threshold = 5 
Target = 10 
Maximum = 15

The HRC has the discretion to award above or below the achievement level based on facts and circumstances surrounding the accomplishment.

Threshold = Merger Effective date of May 31, 2015 is achieved– Score of 5

20

	
		
	Merger Integration (15% Total Weight) as measured by the Board’s qualitative assessment covering the following areas:
	Aggregate Score Range for level of Performance:
0=Did Not Achieve
5=Successfully Achieved

	

Target = Threshold plus achieving a successful merger. Success is defined as:

•    Members of the Combined Bank have uninterrupted access to liquidity following the merger effective date of May 31, 2015. Seattle members can get a new advance on Day 1.

•    The Combined Bank is able to effectively conduct business following the merger. To effectively conduct business means:

o    Advances, borrowings, investments and derivatives were converted with a fall forward approach (see definitions section of plan document) 
o    We can estimate the risk position of the Bank
o    We have a market risk profile by June 30, 2015
o    We can properly operate, manage and account for business

	 

	Maximum is defined as achieving Target plus other Day 1  items in a seamless manner as follows:

•    Seattle advances have been converted to the Combined Bank systems on Day 1

•    Seattle consolidated obligation debt has been converted to the Combined Bank systems through a transfer of data from the Office of Finance on Day 1

•    Seattle investments have been converted to the Combined Bank systems on Day 1

•    Seattle derivatives have been converted to the Combined Bank systems on Day 1

•    The Combined Bank has the ability to assess aggregate market risk exposure of the Combined Bank through normal reporting within the first week

•    Cash and liquidity management processes are in place and functioning within two days of Day 1

	 

	Overall Merger Integration Achievement

	 

21

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