What’s Behind the Rise in CEO Bonuses?

Bank CEO pay rose last year, largely driven by higher cash bonuses.

Bank Director’s 2026 Compensation & Talent Survey, which tracks CEO compensation annually, found a 3% year-over-year uptick in overall CEO compensation in fiscal year 2025 to a median of $772,063. The median cash bonus rose 34% to $168,000. Executive recruiters and compensation advisers attribute the rise to a number of factors, including improved bank performance, market rate adjustments for new recruits and industry consolidation.

Though deal activity cooled off after the first quarter of 2026, the industry experienced a resurgence of M&A in 2025, with a total of 186 deals announced through the end of the year. “If the banks are getting bigger, the compensation opportunity usually tracks with that,” says Laura Hay, a partner with Meridian Compensation Partners. “You’re running a more complex organization, so your peer group is going to be different if you’re an acquirer.”

Increased M&A activity may have also removed sellers from the survey pool that may have been underperforming and less likely to pay a bonus, says Sean O’Neal, a partner with Chartwell Partners, which sponsored the survey. “For several reasons, it wouldn’t surprise me if some of the same banks that haven’t been paying bonuses over the past couple of years are the same ones that need or choose to sell the bank.” Cash bonuses were more prevalent among banks that participated in this year’s survey, with 91% reporting they paid their CEO a bonus in 2025, compared with 78% a year ago and 74% two years ago.

Matt Brei, president of Blanchard Consulting Group, also cites M&A as a partial driver behind rising bonuses. The firm performed a three-year analysis of CEO and CFO pay spanning 2023 through 2025, finding that cash bonus amounts were not strictly tied to return on assets or return on equity, common profitability metrics for the industry. “When we dug in a little deeper, what we saw was that the median asset size of the banks was changing,” says Brei. “Not only is it tied to performance, it’s also tied to asset size.”

Still, improved bank performance has contributed to the rise in CEO bonuses. Profitability commonly factors into CEO evaluations: More than half of respondents in the 2026 Compensation & Talent Survey tie CEO pay to return on assets, and 43% consider return on equity. According to the Federal Deposit Insurance Corp., industry ROA was 1.20% in 2025, up from 1.12% and 1.09% in 2024 and 2023, respectively.

Hay observes in her own practice that more chief executives have exceeded their incentive targets over the past two years, usually in the range of 120%. Most banks pay a cash bonus when an executive reaches a certain minimum percentage of the target goals set, and they can earn a higher bonus up to a maximum set percentage. A typical pay scorecard might have a cash bonus begin to pay out when an executive hits at least 50% of the target, with a cap at 150% of the target levels.

“We had a good above-target year in 2024 and then a slightly better year in 2025,” she says. “We saw a lot of banks in that 120% range. They weren’t maxing out, but they were definitely over their target by a reasonable amount.”

Pay trends may also be explained partly by straightforward supply and demand. The pool of qualified CEO candidates is fairly small, and banks in predominantly rural or low-growth areas may have to pay up to attract the right leader. Alan Kaplan, founder and CEO of the executive search firm Kaplan Partners, believes this dynamic is likely driving some of the pay increase. Banks in those markets may need to pay at or above expected compensation for the nearest metro area. Boards can also expect to pay up for a CEO who is capable of leading a larger organization.

“The best people have the most options,” Kaplan says.

O’Neal also sees organizations paying up for external recruits, and says every CEO search he’s done over the past five years has included targeted bonuses in the overall pay package. “Banks that are having to hire from the outside aren’t just paying market to meet the average,” he says. “They’re having to pay above market to land the limited board-ready CEOs available.”