Loan Officers in High Demand Across Banking Industry

6-13-14-Comp-survey.pngThe imperative to grow revenues, particularly in today’s highly competitive lending environment, has replaced regulatory compliance as the driving force behind board agendas and executive hiring decisions, according to the findings of Bank Director’s 2014 Compensation Survey. With many regulatory rules now long-established, banks are focusing again on the business of making money—and for most banks, that means making loans.

For many bank boards, particularly for larger institutions with more than $1 billion in assets, there are also indications that director compensation is rising. However, at a growing number of banks, director pay is shifting from per-meeting fees to annual retainers. And despite improved stock valuations across the industry, directors and executives alike express a clear preference for cash over equity.

More than 300 directors and senior executives of banks nationwide responded to the survey, sponsored by Meyer-Chatfield Compensation Advisors. The survey was conducted by email in March and April, and additional data on director pay was collected from the proxy filings of publicly traded banks for fiscal year 2013.

Key Findings:

  • Board pay is rising, and most directors, at 61 percent, feel that they are paid fairly. Almost half of the respondents have seen director pay increase within the last two years, and 40 percent expect director compensation to increase in 2015. However, 42 percent of respondents from the smaller banks, less than $500 million in assets, haven’t raised board pay since 2010 or prior.
  • Opinions are mixed on the value of equity. Fifty-five percent of respondents believe that equity is highly valued by executives, while only 43 percent feel that equity compensation is highly valued by directors. Forty-one percent of banks overall, and 65 percent of publicly traded institutions, report that the bank’s CEO receives equity grants.
  • Benefits are rising. Indicating a possible reversal of a trend in declining board benefits, 54 percent indicate that the board members of their bank receive some sort of benefit, an increase of almost 30 percent from 2013. Reimbursement of travel expenses, at 34 percent, is the most common benefit reported by participants, followed by deferred compensation at 28 percent.
  • Lending, compliance and risk executives were the focus of new hires and promotions in 2013. Loan officers, at 44 percent, are in strong demand at banks of all sizes, and an emphasis on top line growth drove almost 60 percent of all executive level hires. Executives with expertise in risk management accounted for 59 percent of hires at banks with more than $5 billion in assets, with a lesser demand for this skill set at smaller institutions.
  • Does culture and stability trump money when it comes to attracting new talent? Corporate culture, at 69 percent, and the stability of the company, at 53 percent, were cited as the top elements that make a bank attractive to potential hires. Just 13 percent cited the compensation program.

Tying compensation to performance remains a key challenge for bank boards as they work to develop compensation plans that will balance shareholder interests while still rewarding employees. As a renewed focus on growth makes loan officers even more desirable, the onus is on the board to stay on top of today’s compensation trends.

Download the summary results in PDF format.

The Compensation Puzzle: Results of the 2013 Compensation Survey

5-17-13_Comp_Research_Report.pngHow should bank boards properly compensate executives, under the watchful eye of regulators and the media, while still retaining key talent? That’s the question with which directors and chief executive officers continue to struggle.  Despite this, there is perhaps a touch of newfound optimism in the banking industry regarding the management and fairness of compensation programs.

Last March, more than 300 directors and senior executives of financial institutions across the U.S. responded to the 2013 Compensation Survey, conducted via email by Bank Director and sponsored by Compensation Advisors by Meyer-Chatfield. Almost half of the respondents were independent directors.  Response was almost evenly split from respondents representing privately-held and publicly-traded institutions.

Key Findings:

  • Bank boards continue to struggle with how to effectively tie compensation to performance.  Sixty-nine percent of respondents cited this as their top compensation challenge for 2013. Boards continue to struggle with regulatory compliance—41 percent indicated that this is a key concern. Rounding out the top three, retaining key people was selected by 40 percent of respondents as a top challenge.  
  • Talent retention could increasingly prove to be a concern for the industry. Forty-four percent of respondents reported the departure of a key executive within the last three years. Very few reported that these departures are due to promotional moves, for a better pay or position, or even lateral moves to other banks. Of those reporting an executive departure, 23 percent indicated that the officer left the banking industry. With increased scrutiny on the industry coupled with the departures of retiring baby boomer executives, could the banking industry find itself in the midst of a talent drain?
  • Thirty-five percent of directors expect to see a pay increase in 2014. Just two percent expect pay to decrease. Moreover, the majority, at 62 percent, believe that they are fairly compensated. Respondents also reported that the amount of time spent on bank board activities remains the same, at a median of 15 hours per month.  
  • The mood is a little lighter. Respondents indicating a positive or neutral feeling in the management of executive compensation rose 17 points from last year’s survey, to 92 percent. When it comes to management of director compensation, those indicating a positive or neutral feeling rose 10 points, to 90 percent.
  • Banks are increasingly tying executive compensation to performance metrics or strategic goals. Still, nearly one-third, or 32 percent of respondents, said they don’t tie executive pay to a strategic plan. 
  • Show me the money. Cash rules as the most valued form of compensation for executives, in the form of salary, and directors, in the form of annual retainer and meeting fees. Benefits for boards, such as retirement or health insurance plans, continue to decline, with 58 percent indicating that they receive no benefits at all as compensation for board service. This represents a drop of 19 percentage points since 2011. 

Download the summary results in PDF format.