Survey finds bank CEOs’ annual compensation decreased slightly

Crowe Horwath LLP releases findings from its 2014 Financial Institutions Compensation Survey

9/17/2014

CHICAGO (Sept. 17, 2014) Average base salaries for bank CEOs and presidents dropped 4.3 percent, but total compensation, which includes incentive and bonus pay, dropped only 0.4 percent in the past year, as reported in the Crowe Horwath LLP 2014 Financial Institutions Compensation Survey. Crowe, one of the largest public accounting and consulting firms in the U.S., conducts the annual survey, now in its 33rd year. The survey, which compiled data from 196 financial institutions, also shows salary benchmarks for 235 job positions.

(Related information, including survey highlights and infographic: www.crowehorwath.com/compsurvey-nr)

“CEO pay is directly tied to profit growth, so the small drop in average CEO pay indicates the banking industry is still under some stress and is struggling to achieve much revenue growth,” said Tim Reimink, a director in Crowe Performance Services. “After the recession ended, profitability spiked as activity returned to normal levels, but now that growth has tapered off. Since banks are only growing modestly, so too is CEO pay.”

This year, the survey also compared average compensation to the size of the bank. According to Reimink, the larger an organization is, the larger the compensation of the CEO. Conversely, as an organization increases in size, the median compensation for all employees decreases. “The larger the bank is, the more branches it has. So larger banks have a bigger pool of lower-paid employees, such as tellers and customer service representatives, than smaller banks, which causes the median compensation level to decrease,” he added.

Last year, banks projected nonofficer salaries would increase an average of 2.75 percent for the upcoming year, which was almost identical to the actual average increase of 2.8 percent. Survey respondents also predicted officer pay would increase an average of 2.9 percent, which again was almost the actual increase of 3 percent. “For the third year in a row, average salary increases matched the increases that were projected, indicating market stability,” Reimink said.

Additional survey findings include:

  • A larger number of smaller banks pursued an above-market compensation strategy this year. Slightly more than 19 percent of smaller banks (those with less than $1 billion in assets) used an above-market compensation strategy, compared to 13.6 percent of larger banks (those with more than $1 billion in assets). “Smaller banks are realizing they need talent to compete, so they have changed their mindset and now are more willing to pay above market to secure and retain that talent,” Reimink said.
  • Smaller banks gave bigger salary increases to their top performing employees compared to larger banks. Smaller banks gave above-average performers a nearly 5 percent salary increase, while larger banks gave above-average performers an average increase of almost 4 percent. Similarly, the average salary increase for average performers was 3.5 percent at smaller banks compared to 2.6 percent at larger banks.
  • Compliance specialists had high one-year increases in average base salary, reported at 18.4 percent with total compensation at 18.5 percent. Reimink noted the upward trend for this position implies banks realize they need more people who understand compliance in such a highly regulated industry. 
  • Residential mortgage loan officers saw their one-year total compensation drop by 4.3 percent as mortgage refinancing activity dissipated.
  • Total compensation for chief credit officers grew 12.2 percent since last year. “There is a lot of competition for good loans out there, and banks need someone who can sort through them and approve the right ones,” Reimink said.
  • Of all positions, personal bankers had the highest one-year increase in total compensation at 29 percent. However, Reimink pointed out this was more of a statistical correction this year, since the average four-year change in total compensation for this position has actually decreased by slightly more than 5 percent.

 

In addition to compensation trends, the survey also looked at human resource practices, including employee benefit costs. Total benefit costs as a percentage of total base salary decreased slightly in 2014 to 18.8 percent of base salary. The decrease is from retirement costs dropping from 7 percent to 5 percent, although life insurance costs nearly doubled from 0.6 percent to 1.1 percent.

“Benefit cost containment efforts continue to be a major focus for banks. More than 65 percent of banks are planning to contain benefit costs by increasing employee costs such as deductibles, premiums and copayments,” said Pat Cole, a senior manager in the Crowe Tax group who specializes in human resource consulting.

Finding, hiring, retaining and motivating the right employees have consistently been reported as the top human resource concerns for financial institutions for the past few years.

In addition to the national survey, Crowe prepared a regional compensation report for the Midwest, as well as state reports for Illinois, Indiana, New Jersey and Ohio.

About the 2014 Crowe Horwath Financial Institutions Compensation Survey
The 2014 Crowe Horwath Financial Institutions Compensation Survey was completed by 196 financial institutions. Using data as of March 31, 2014, the participant breakdown is as follows: 66 institutions had less than $250 million in total assets; 59 had between $250 million and $500 million in total assets; 42 had between $500 million and $1 billion in total assets; 19 had between $1 billion and $2.5 billion in total assets; and 10 had more than $2.5 billion in total assets.

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 uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe and its subsidiaries have offices coast to coast with more than 3,000 personnel. The firm 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 global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.

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