FHLBank San Francisco 2007 EXECUTIVE INCENTIVE PLAN

EX-10.5 4 dex105.htm 2007 EXECUTIVE INCENTIVE PLAN 2007 Executive Incentive Plan

EXHIBIT 10.5

FHLBank San Francisco

2007 EXECUTIVE INCENTIVE PLAN

PLAN PURPOSE

To optimize the Bank’s performance in accomplishing Board approved goals and objectives.

PLAN OBJECTIVES

To motivate key executives to exceed Bank and individual goals and objectives which directly support the business plan and long-term strategic plan. Attract and retain outstanding executives by providing a competitive total compensation program, including incentive award opportunity.

ELIGIBILITY

Participants are key executives whose performance has a major impact on the Bank’s success. 2007 Participants are the incumbents in the Bank’s officer positions, including:

 

Executive Vice President   Senior Vice President    
Vice President   Assistant Vice President    

Participants must be employed by the Bank when payment is disbursed to be eligible for an incentive award for the current plan year. Employees who participate in other incentive plans are not eligible to participate in this plan. Participants hired, promoted, or who have a leave of absence during the plan year are eligible to participate on a pro-rata basis. Participants hired or promoted on or after October 1st will not be eligible to participate during the current plan year.

INCENTIVE GOALS, WEIGHTS, AND MEASURES

Incentive Goals

The incentive goals are based on the primary objectives set forth in the Bank’s 2007 plan. For each participant there are two Bank goals, and one to three individual goals. The individual goals directly support the Bank-wide goals.

The two Bank goals for 2007 are as follows:

 

1. 2007 Potential Dividend Spread: Dividend potential before any provision for retained earnings or accounting impacts of FAS 133 is at least 93.0 basis points over the benchmark yield on invested capital.

 

2. 2007 Market Penetration: Achieve a target market penetration of wholesale borrowings and convert non-borrowing members into borrowing members.

 

  - Market penetration is divided into sub-categories of members found on the following page. [*]
  - Convert [*] non-borrowing member institutions into borrowing members. This is consistent with the Bank’s strategic objective to increase diversification of its core credit business and maximize the value of membership among all members.

The Board of Directors determines whether or not to apply a discretionary component to the incentive compensation payments representing achievements that are not necessarily measured or identified under the Plan.

Actual achievement of Bank goals one (1) and two (2) are subject to adjustment for changes resulting from movements in interest rates, changes in financial strategies or policies, any significant change in Bank membership, as well as other factors determined by the Board.

 

  

 

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portion.


Incentive Goal Weights

The Bank and individual goals are weighted. For the Executive Vice President and Senior Vice Presidents, greater weight is given to the Bank goals, since these officers have a greater impact on total Bank performance.

Incentive Goal Achievement Measures

The plan rewards levels of goal achievement, as follows:

 

Achievement Level    Measure Definition
200% of target    The most optimistic achievement level based on reasonable business assumptions and conditions.
150% of target    An optimistic achievement level based on expected business.
Target (100%)    Performance that is considered a target level of successful plan achievement. Incentive payments are made at the target (100%) level found in the award ranges scale on the following page.
Threshold (75% of target)    A threshold level of performance.

The 2007 goals/discretionary pool weights and measures are:

 

Weights

  

Measures

2007

Bank Goals &

BOD
Discretion

   EVP    SVP    VP    AVP         

(75%)

Threshold

  

(100%)

Target

  

(150%)

Exceeds

Target

  

(200%)

Far Exceeds

Target

Potential

Div. Spread

   28%    25%    18%    14%        

Benchmark

+ 68.0 bps

  

Benchmark

+ 93.0 bps

  

Benchmark

+ 143.0 bps

  

Benchmark

+ 193.0 bps

Market

Penetration

   32%    28%    20%    16%   

Customer

Segment

  

% of

Wholesale

Borrowings

  

% of

Wholesale

Borrowings

  

% of

Wholesale

Borrowings

  

% of

Wholesale

Borrowings

               [*]    [*]    [*]    [*]    [*]
                  Average Balance    Average Balance    Average Balance    Average Balance
                                  
               [*]    [*]    [*]    [*]    [*]
                  Average Balance    Average Balance    Average Balance    Average Balance
                                  
                         [*]    [*]    [*]    [*]    [*]

Discretionary

   20%    17%    12%    10%         BOD Determines    BOD Determines    BOD Determines    BOD Determines

Individual

Goals

   20%    30%    50%    60%               
Total    100%    100%    100%    100%               

Achievement levels can not exceed 250% for each market penetration goal segment or for the participant’s individual goals. And, the aggregate achievement levels for each plan goal/objective (dividend potential, market penetration, overall bank-wide performance, and individual goals) can not exceed 200%.

 

  
[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portion.


Award Determination

Awards will be based on success in achieving the key business goals. In the case of the three Bank goals and objectives, the same achievement measures apply to all participants. At yearend, accomplishments will be assessed and a percent of achievement will be determined for each goal and objective.

 

Percent of Achievement Scale   

Achievement Levels

0% - 200%

   200 %   =    Far Exceeds Target
   150 %   =    Exceeds Target
   100 %   =    Target
   75-99 %   =    Threshold

For each goal and objective, the percent of achievement (subject to limits) will be multiplied by the appropriate weights. The weighted achievements will then be added to determine the total weighted achievement. The basis for award opportunity is total weighted achievement that can not exceed 200%. Performance from 75-99% (threshold level) is below the target achievement level and therefore will result in an award less than the target award. No awards will be paid for performance between 0-74%.

Award Opportunity

The Board of Directors has the discretion to approve awards for achievement below 75% total weighted achievement. And, the President and the Board of Directors have full discretion to modify any and all incentive payments.

Award Ranges as a Percent of Base Salary

 

Total Weighted
Achievement
   EVP    SVP    VP    AVP
             200%         55%         50%         35%         20%
      150-199%    40-54%    37-49%    27-34%    15-19%
      100-149%    27-39%    25-36%    18-26%    10-14%
          75-99%    14-26%    12-24%      9-17%         5-9%
            0-74%    Award at the discretion of the Board of Directors

Example of how award is calculated for a Vice President

 

Goal   

Goal

Weight

        

Percent of

Achievement

         Total Weighted   
Achievement   

2007 Potential Dividend Spread

   18%    X    125%    =    22.5%

2007 Market Penetration

   20%    X    175%    =    35.0%

Board Discretionary Award

   12%    X    150%    =    18.0%

Individual Goal(s)

   50%    X    145%    =    72.5%
                  
   100%             148.0%

 

Total Weighted

Achievement

  

Award as a %

of 2007 Base Salary

148%    26.6%

APPROVAL OF INCENTIVE AWARDS

All recommended incentive awards must be approved by the President and the Board of Directors prior to payment. Award recommendations are presented to the Board of Directors at the January 2008 Board meeting.

PLAN ADMINISTRATION AND IMPLEMENTATION

The President is responsible for overseeing the administration and interpretation of the Plan.