SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 7, 2012
FEDERAL HOME LOAN BANK OF BOSTON
(Exact name of registrant as specified in its charter)
800 Boylston Street
Boston, MA 02199
(Address of principal executive offices, including zip code)
(Registrant's telephone number, including area code)
(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 (see General Instruction A.2. below):
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
2012 Executive Incentive Plan
On May 9, 2012, the Federal Home Loan Bank of Boston's (the “Bank's”) board of directors (the “Board”) approved a 2012 Executive Incentive Plan (the “EIP”), an incentive compensation plan for certain Bank officers, which became effective on that same day. The Bank's principal executive officer, principal financial officer, and other named executive officers as identified in the Bank's Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2012, (the “2011 Annual Report”) are participants in the EIP.
Named Executive Officers' Incentive Goals
As EIP participants, each named executive officer has an incentive award opportunity that combines short- and long-term incentives providing for the award of bonuses based on performance over one- and three-year periods calculated using weighted performance goals.
Short-Term Goals under the EIP
The following table sets forth the short-term goals and related weighting for each of the named executive officers, excluding the senior vice president/chief risk officer.
(1) “Pre-assessment, Pre-OTTI Core Net Income” means net income for fiscal year 2012 reported in accordance with United States Generally Accepted Accounting Principles excluding the effects of prepayment fees in excess of certain historical prepayment fees, certain net fair-value adjustments based on unrealized gains and losses from hedging activities and trading securities, debt retirement costs in excess of certain historical debt retirement costs, the credit portion of losses attributable to the other-than-
temporary-impairment of investment securities, and certain required assessments in connection with the Bank's Affordable Housing Program. Such required assessments are discussed in Item 1— Business — Assessments — AHP Assessment in the 2011 Annual Report.
(2) Achievement of the goal is subject to compliance with the Bank's value at risk and duration of equity limits for at least 10 of the 12 months of the year. These limits are discussed in Item 7A - Quantitative and Qualitative Disclosure About Market Risk - Measurement of Market and Interest-Rate Risk in the 2011 Annual Report. If this requirement is not met, the Board may use its discretion to reduce or eliminate payouts for this goal.
(3) Each of the performance levels will be adjusted up or down by $300,000 for every basis point by which the average daily federal funds rate deviates from the 0.1% assumed average daily federal funds rate in the Bank's 2012 strategic business plan.
The following table sets forth the short-term goals and related weighting for the senior vice president/chief risk officer.
Long-Term Goal under the EIP
The EIP includes a long-term goal based on the Bank's actual retained earnings at December 31, 2014. The following table sets forth such goal.
Named Executive Officers' Incentive Award Opportunities under the EIP
Named executive officers are assigned an incentive award opportunity that combines short- and long-term incentives and is expressed in the following table as a percentage of the participant's 2012 base salary at December 31, 2012 (“Incentive Salary”).
Each EIP participant's short-term goal achievement and resulting short-term award will be determined based on results as of December 31, 2012. The EIP's short-term incentive opportunities for the named executive officers are set forth in the following table in each case expressed as percentage of Incentive Salary.
Awards based on the short-term goals are subject to:
The remaining forty (40) percent of the combined award, to be calculated after December 31, 2012, is the target long-term incentive opportunity, with threshold and excess incentive opportunities tied to threshold and excess levels of achievement of the long-term goal, as set forth in the following table.
Awards based on the long-term goal are subject to:
Additionally, at the discretion of the Board, long-term awards may be reduced or eliminated for some or all EIP participants, if, during calendar years 2013 and/or 2014, any of the following occur such that if it
had occurred prior to the year-end 2012 calculations, it would have negatively impacted the goal results and reduced the associated payout-calculation:
The EIP is administered by the Board's Personnel Committee (the “Personnel Committee”), which has full power and binding authority to construe, interpret, and administer the EIP, and to adjust it for extraordinary circumstances. The Personnel Committee has the right at any time to amend, suspend, or terminate the EIP in whole or in part, for any reason, and without the consent of any EIP participant. Subject to certain limited exceptions in the case of termination of employment by reason of death or disability or in certain instances of retirement, an EIP participant whose employment terminates before the applicable award payment date will not be entitled to any award, except as otherwise determined by the Bank's president/chief executive officer, with the concurrence of the Personnel Committee, in its sole discretion and subject to the review of the Finance Agency, if required.
The foregoing description of the EIP is qualified in its entirety by reference to a copy of the EIP included herein as Exhibit 99.1 to this Form 8-K.
On May 7, 2012, the Board awarded Earl W. Baucom, the Bank's chief operations officer, a $28,000 bonus in recognition of his significant contributions to the Bank in 2012 and his willingness to postpone his retirement and continue to lead the Bank's information technology and information security teams while the Bank commenced its search for the hire of a chief information officer. Mr. Baucom will retire from the Bank on May 15, 2012, as previously reported on Form 8-K/A filed with the SEC on February 28, 2012 (the “Amended Form 8-K”). The Amended Form 8-K disclosed that Mr. Baucom and the Bank had agreed to change the effective date of Mr. Baucom's retirement from the end of March 2012 to May 15, 2012. The 2011 Annual Report identifies Mr. Baucom as one of the Bank's “named executive officers.”
The information being furnished pursuant to Item 5.02 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
Exhibit 99.1 2012 Executive Incentive Plan
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.