Financial Institution CEOs See 4.2 Percent Decrease in Annual Compensation

OAK BROOK, Ill., Sept. 28 /PRNewswire/ -- As the financial performance of financial institutions has declined in recent years, so has the compensation of their CEOs. According to Crowe Horwath LLP's 2010 Comprehensive Financial Institution Compensation Survey, financial institution CEOs saw a 4.2 percent decrease in total compensation in the past year.

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The survey, which compiled data from 340 U.S. financial institutions, is conducted annually by Crowe, one of the largest public accounting and consulting firms in the U.S. Now in its 29th year, the survey found that while total compensation, which includes base salary and discretionary pay, for many positions decreased, median base salaries for officers increased slightly, at 2.4 percent, with non-officers seeing a similar increase of 2.2 percent.

Among all positions, heads of personal investment sales showed the largest decrease in median base salary at 10.7 percent. However, this position saw a double-digit gain of 16.4 percent in total compensation for the same time period. According to Timothy Reimink, a senior consultant in Crowe's Performance group, this is a result of more activity in the stock market. "This year was better than last year for the stock market, so this activity spurred a corresponding increase in bonus pay."

Also seeing a large increase, 17 percent in total compensation, were residential mortgage loan officers. "In the past year, mortgage activity was up, in part from the first-time homebuyers' tax credit and low prices prompting sales, but also in part from a significant uptick in mortgage refinancing. Even though the tax credit expired, rates are still at historic lows, so it's likely the mortgage activity will continue into the next year," Reimink said.

Even with new regulatory requirements on compensation, few of the financial institutions surveyed made changes to their compensation practices this year. In response to the requirements, only 17.3 percent of respondents made changes to their compensation practices, while another 41 percent conducted reviews of their practices but didn't find a need for a change. "When you look at the broad spectrum of financial institutions, pay practices have not been out of line," said Reimink. "Compensation problems have primarily been a 'big bank' issue. This survey indicates that most banks haven't made changes because they don't feel they have a problem."

Regardless of whether institutions need to change their compensation practices to reflect new regulations, all institutions' boards need to be involved in the annual compensation review. While current regulations require that all financial institution boards review compensation plans, only 51.8 percent of those surveyed report that their board compensation committees have done so, with only 32.9 percent doing so annually. "Regulators expect the boards of directors to review compensation annually. Just because there isn't a problem yet, that doesn't mean that boards shouldn't review pay practices regularly," Reimink added.

Additional survey findings include:

• Banks expect to offer personnel 2.6 percent salary increases in 2011, compared to forecasted increases of 2 percent this year.
• Marketing directors received large increases in median base salary in the past year of 9 percent. According to Reimink, as banks focus more on attracting new customers, marketing is gaining importance.
• Large increases in median base salary were also received by trust investment officers (9.2 percent) and personal trust officers (8.5 percent). Reimink noted that high net-worth individuals will likely be a source of revenue over the next few years, which is why larger incentives are being paid to trust officers.
• The top human resource priorities were retaining employees, motivating better performance and containing costs. Finding and hiring the right employees was ranked as the least important priority this year.

The survey also shows that banks are trying to contain healthcare benefit costs with approximately 70 percent of institutions planning to increase deductibles, premiums and co-payments. "As a result of the recently passed healthcare legislation, there is a renewed focus on passing some of the benefit costs onto employees as a way to maintain benefits while reducing costs," said Pat Cole, a senior manager in Crowe's Audit and Financial Advisory practice, who specializes in human resources consulting for financial institutions. "More than half of the institutions plan to switch providers this year to reduce costs."

In addition to the national survey, Crowe prepared regional compensation reports for the East Coast, Midwest and Southeast, as well as state reports for Florida, Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, Pennsylvania and West Virginia. To purchase the survey results, please visit www.crowehorwath.com/compsurvey.

About the 2010 Crowe Financial Institution Compensation Survey

The 2010 Crowe Financial Institution Compensation Survey was completed by 340 financial institutions. Using data from June 1, 2010, the participant breakdown is as follows: 40 percent had less than $250 million in total assets, 26 percent had between $250 million and $500 million in total assets, 17 percent had between $500 million and $1 billion in total assets and 17 percent had more than $1 billion in total assets. Of the participants, 251 of the financial institutions were located in towns with populations of less than 100,000, while 89 were located in cities of more than 100,000.

About Crowe Horwath

Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe assists public and private company clients in reaching their goals through audit, tax, advisory, risk and performance services. With 26 offices and 2,400 personnel, Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest networks in the world, consisting of more than 140 independent accounting and management consulting firms with offices in more than 400 cities around the world.

SOURCE Crowe Horwath LLP