UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of Earliest Event Reported): |
| January 2, 2019 |
Federal Home Loan Bank of Topeka
(Exact name of registrant as specified in its charter)
Federally Chartered Corporation | 000-52004 | 48-0561319 | ||||||||||||
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(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
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500 SW Wanamaker Road, Topeka, Kansas |
| 66606 | ||||||||||||
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: |
| 785.233.0507 | ||||||||||||
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 2, 2019, the Federal Housing Finance Agency (Finance Agency) informed Federal Home Loan Bank of Topeka (FHLBank) of its non-objection to FHLBank’s revised Executive Incentive Compensation Plan (EICP) and associated 2019 Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights (the Target Document) adopted by the board of directors of FHLBank (Board) on December 14, 2018. The EICP includes amendments to align the policy with updates to the Target Document regarding an interest rate calculation to be applied to deferred incentives. The 2019 Target Document includes new goals related to Generally Accepted Accounting Principles (GAAP) Return Spread on Total Regulatory Capital, GAAP Net Income after Capital Charge, Member Product Utilization, and Diversity and Inclusion. The 2019 Target Document also includes eligibility requirements for the Deferred Incentive.
EICP
The EICP establishes two performance periods. Participants may earn a “Cash Incentive” during the “Base Performance Period” and may also earn a “Deferred Incentive” during the “Deferral Performance Period.” For each Base Performance Period, the Board establishes a “Total Base Opportunity” for participants in the EICP. The Total Base Opportunity is equal to a percentage of a participant’s salary at the beginning of the Base Performance Period that may be awarded to a participant as incentive compensation for FHLBank achieving performance levels under each performance measure identified in the Target Document during the Base Performance Period. The EICP was amended primarily to allow for the use of an Interest Rate Credit to be applied to the Deferred Incentive, which will be used to calculate the Final Deferred Incentive Award.
The foregoing summary of the EICP is qualified in its entirety by reference to the EICP attached hereto as Exhibit 10.1 and incorporated herein by reference.
2019 EICP Targets
Annually, the Board is responsible for establishing performance measures by approving targets that set forth the Total Base Opportunity, the performance measures, and other applicable terms and conditions for the operation of the EICP for the applicable fiscal year. The Target Document covers the 2019 “Base Performance Period” (January 1, 2019 through December 31, 2019) and the 2020 - 2022 “Deferral Performance Period” (January 1, 2020 through December 31, 2022). The Target Document defines three achievement levels for each Performance Measure: Threshold, Target and Optimum. Performance between Threshold-Target and Target-Optimum is calculated by linear interpolation.
Eligibility for the EICP is limited to a select group of key management or other highly-compensated employees. The Target Document establishes three levels of participation by participants based on the participant’s position and responsibility as set forth in the Target Document. The Total Base Opportunity for the three levels of participation is as follows:
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Participant | Total Base Opportunity | ||
| Threshold | Target | Optimum |
Level 1 |
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CEO | 37.5 | 75 | 112.5 |
Level 2 |
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General Counsel | 27.5 | 55 | 82.5 |
Chief Financial Officer (CFO) | 27.5 | 55 | 82.5 |
Chief Administrative Officer (CAO) | 27.5 | 55 | 82.5 |
Level 3 |
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Chief Information Officer (CIO) | 25 | 50 | 75 |
In the event FHLBank’s performance during the Base Performance Period results in the achievement of a Total Base Opportunity that exceeds 100% of a participant’s base salary at the start of the Base Performance Period, the Target Document provides that the Total Base Opportunity is capped at 100% of the participant’s base salary.
The Target Document establishes separate metrics for the Base Performance Period and the Deferral Performance Period. The Base Performance Period Metrics are measured by the results achieved by FHLBank in attaining specified performance levels in the following eight areas:
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• | Adjusted Return Spread on Total Regulatory Capital; |
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• | GAAP Return Spread on Total Regulatory Capital; |
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• | Adjusted Net Income after Capital Charge; |
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• | GAAP Net Income after Capital Charge; |
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• | Member Product Utilization; |
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• | Diversity and Inclusion; |
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• | Risk Management – Market, Credit and Liquidity Risks; and |
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• | Risk Management – Compliance, Business and Operations Risks. |
The targets are measured by the results achieved by FHLBank in attaining specified performance levels in the eight areas, which are weighted as follows:
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Objective |
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1.Adjusted Return Spread on Total Regulatory Capital | 15% |
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2.GAAP Return Spread on Total Regulatory Capital | 5% |
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3.Adjusted Net Income after Capital Charge | 15% |
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4.GAAP Net Income after Capital Charge | 5% |
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5.Member Product Utilization | 10% |
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6.Diversity and Inclusion | 10% |
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7.Risk Management - Market, Credit, Liquidity | 20% |
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8.Risk Management - Compliance, Business, Operations | 20% |
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Total | 100% |
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The Deferral Performance Period is the three-year period directly following the Base Performance Period. The Deferred Incentive means 50% of the Total Base Opportunity, which is deferred for the Deferral Performance Period and is subject to adjustment. Participants are eligible to receive a Deferred Incentive for the 2020-2022 Deferral Performance Period if FHLBank has a Market Value of Equity of not less than 100% of FHLBank’s Total Regulatory Capital Stock outstanding as of the last day of the Deferral Performance Period. Upon determining FHLBank has achieved this minimum requirement, the Deferred Incentive shall be calculated by applying a six percent interest credit, compounded annually, to the Deferred Incentive.
Total awards payable under the Target Document are not determinable at this time.
The foregoing summary of the Target Document is qualified in its entirety by reference to the Target Document attached hereto as Exhibit 10.2 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 Executive Incentive Compensation Plan, dated December 14, 2018.
10.2 2019 Executive Incentive Compensation Plan Targets, dated December 14, 2018.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| Federal Home Loan Bank of Topeka | ||
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January 8, 2019 |
| By: |
| /s/ Patrick C. Doran |
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| Name: Patrick C. Doran |
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| Title: Executive Vice President, Chief Compliance and Ethics Officer and General Counsel |