EXHIBIT 10.6
FHLBANK San
Francisco
2008 Executive Performance Unit
Plan
Summary
Description
PLAN
PURPOSE
To optimize the Bank’s
performance in accomplishing Board-approved goals.
PLAN
OBJECTIVES
To motivate key executives to
position the Bank to exceed specified long-term Bank goals that
directly support the business plan and long-term strategic plan. To
attract and retain outstanding executives by providing a
competitive total compensation program, including a cash-based
long-term incentive reward opportunity tied to the performance of
the Bank against specified performance measures.
PARTICIPANTS
Participants are key executives
whose performance has a major impact on the Bank’s success.
Participants are the incumbents in the Bank’s Executive
Committee officer positions, including:
President
Executive Vice President
Senior Vice Presidents (excluding the Senior
Vice President, Director of Internal Audit – participates in
the Audit Performance Unit Plant)
PERFORMANCE
PERIOD
The Performance Unit Plan (PUP) pays
incentive awards related to the achievement of Bank performance
over a three-year performance period. The 2008 Plan is effective
January 1, 2008, and is based on performance from
January 1, 2008 through December 31, 2010.
PERFORMANCE
METRICS
Performance metrics balance
financial, member, and community interests, focusing on achievement
of Potential Dividend Spread and market share goals. Potential
Dividend Spread will be weighted 60% and market share will be
weighted 40%. Target performance levels reflect long-term
performance expectations. Unlike the Executive Incentive Plan
(EIP), participants do not have an individual goal.
|
1.
|
3-Year
Average Potential Dividend Spread : Potential Dividend Spread is the primary
measure the Bank uses to determine total rate of return to
shareholders. The target Potential Dividend Spread has been set at
1.12% and represents the projected average for the performance
period (January 1, 2008 through December 31, 2010). The target
Potential Dividend Spread is consistent with the Bank’s
Strategic Plan forecast, and reflects the Bank’s continued
mission-consistent focus on member’s mortgage finance
business. Threshold (75% of plan) Potential Dividend Spread has
been set at 0.87%, 150% of target has been set at 1.62% and 200% of
target has been set at 2.12%.
|
|
2.
|
3-Year
Average Market Share :
Market share is based on the 3-year average of member credit as a
percentage of the members’ total wholesale borrowings over
the performance period measured by the average of the actual
achievement levels under the 2008, 2009, and 2010 annual incentive
plans, and will be set at the end of the performance
period.
|
Actual achievement of performance
metrics one (1) and two (2) is 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 for
which management should not receive credit or be held
accountable.
Page 1
PUP ACHIEVEMENT MEASURES
The Performance Unit Plan rewards
four levels of performance achievement, as follows:
|
|
|
|
|
|
|
|
Threshold
(75%)
|
|
Performance
that is considered a threshold level of successful achievement.
This is the minimum level of performance which must be achieved for
awards to be paid.
|
|
|
|
Target
(100%)
|
|
Performance
that is expected under the Bank’s Strategic Plan forecast.
Incentive payments are made at the target (100%) level found in the
award ranges scale on the following page.
|
|
|
