FEDERAL HOME LOAN BANK OF SEATTLE Bank Incentive Compensation Plan

1.0

Plan Objectives

1.1

The purpose of the Federal Home Loan Bank of Seattle’s Incentive Compensation Plan (Plan) is to achieve four objectives:

1.1.1

Promote the achievement of the Seattle Bank’s business goals in accordance with the business plan;

1.1.2

Link compensation to specific bankwide and individual performance measures;

1.1.3

Provide a competitive reward structure for officers and other exempt employees; and

1.1.4

Provide a vehicle for closer Board involvement and communication with management regarding Seattle Bank strategic plans.

1.2

The Plan is a cash-based, annual incentive plan that establishes individual award opportunities related to achievement of Seattle Bank and individual performance.

1.3

The award opportunity, Performance Measures, and other relevant information for a Plan Year are set forth in Appendix A.

2.0

Definitions

2.1

When used in this Plan, the following words and phrases shall have the following meaning:

2.1.1

Bank means the Federal Home Loan Bank of Seattle.

2.1.2

Base Salary is defined as the Participant’s normal rate of pay, including overtime, before any other add-ons (i.e. Bonuses, incentive pay, etc.) and after any adjustments (i.e. Leave w/o pay).

2.1.3

Board means the Seattle Bank’s Board of Directors.

2.1.4

Committee means the Governance, Budget and Compensation Committee of the Board.

2.1.5

Disability means the Participant is receiving benefits under the Federal Home Loan Bank of Seattle’s Long Term Disability Plan.

2.1.6

Participant means an employee of the Seattle Bank who, at the discretion of the Board, is eligible to take part in the Plan for a designated Plan Year, and who has been named as a Participant for that Plan Year by the President, with the concurrence of the Committee. Student interns, temporary employees, contract employees, and part-time employees are not eligible to participate in the plan.

2.1.7

Plan means the Bank Incentive Compensation Plan – Annual Plan.

2.1.8

Plan Year means the calendar year, January 1 through December 31, over which both Seattle Bank and Participant performance is measured.

2.1.9

President means the President of the Seattle Bank.

3.0

Eligibility

3.1

All Participants must be employed by the Seattle Bank prior to October 1 ^st in the Plan Year. Employees employed on or after October 1 ^st will be allowed participation in the Plan if nominated by the President and approved by the Committee.

3.2

Eligibility shall normally be limited to exempt level staff (grade 12 and above) and officer positions.

3.3

Employees that are participants in the Sales Incentive Compensation Plan, the Bank Incentive Compensation Plan—Internal Audit Department or any other Incentive Compensation Plan of the Seattle Bank (excluding the Executive Long Term Incentive Plan) will not be eligible to participate in this Plan.

3.4

The President (Level I) will not be included as an eligible participant under this Plan, but will be eligible for a separate similar plan administered by the Executive Committee of the Board.

4.0

Incentive Award Opportunity

4.1

Each Plan Year, the Seattle Bank will determine an award opportunity for Participants. The award opportunity shall be a percentage of each Participant’s annual base salary as described in Appendix A Table 1 – Incentive Award Opportunity. Certain executive positions have a greater and more direct impact than others on the annual success of the Seattle Bank; therefore, these differences are recognized by varying award opportunities for each Participant level.

4.2

Subject to Committee approval, the President may recommend a separate add-on incentive plan for certain key positions. The participating key positions, specific criteria and award opportunity will be identified in Appendix 3 – Table 3.

4.3

There will be five levels of award opportunities:

Level I:

  President and Chief Executive Officer*

Level II:

  Senior Executive Officers (SVP and above)

Level III:

  Grades 22

Level IV:

  Grades 18-21

Level V:

  Grades 14-17

Level VI:

  Grades 12/E-13

*

Level I is under a separate plan (see Section 3.4).

5.0

Performance Measures

5.1

Bankwide and individual performance measures will be established with respect to each Plan Year as described in Appendix A and Appendix B. Three achievement levels will be set for each bankwide performance measure:

5.2

Bankwide measures will be reviewed by the Committee and approved by the Board.

5.3

Participants incentive awards will be based on bankwide performance objectives first and secondly on the individual performance goals, and will vary by Participant level.

5.3.1

Participants will typically have two to four major goals established that reflect the priorities of the Participant for the Plan Year.

5.3.2

Participants will work with their managers to develop individual goals. Individual goals must be agreed upon and approved by the manager and Human Resources in order to be eligible to receive an incentive award based on individual performance.

5.3.3

All performance goals are to remain