NAFCU Executive Compensation & Benefits Survey – Initial 2011 Findings (Credit Union Conference Presentation)

1

2011 NAFCU-BFB Survey
of Federal Credit Union
Executive Benefits and Compensation

Presented by

Jack E. Clark
Clark & Chase Research, Inc.

June 30, 2011

2
Sponsored by:

NAFCU

NAFCU Services

Burns-Fazzi, Brock

3
• How we did the survey
• Select Findings
– Top Executive
• Base Salary
• Bonus
• Total Compensation
• Percent Change in Base Salary
• Percent of 2010 Bonus Achieved
– Reviewing Executive Compensation
Plans
– Nonqualified Benefit Plans for Top
Executives
– Cars and Car Allowances

4
Things to consider when
looking at survey results
• What a survey is ... and what it is not
• What makes a good survey
– Sample Size
– Representative
• Relationship between Asset Size and
Compensation
• Using more than one source of survey
information – why it makes sense &
things to consider when comparing
them

6
• In 2011, all Federal Credit Unions
were invited to participate
• Survey Completed April 13 - May 5
• 353 Credit Unions participated
• Information about 930 Executives
• 353 Top Executives
• 227 #2 Executives

7
Population vs. Sample by U.S. Region

FCUs* Survey

Northeast 33% 28%
Southeast 19% 22%
Midwest 31% 31%
West 17% 20%

*Source: NCUA Data Query, May 23, 2011

8
Population vs. Sample by Asset Size
Federal CUs*
CU’s Sample
4,590 353
<$10M 41% 14%
$10M – <20M 15% 14%
$20M – <40M 14% 14%
$40M – <75M 10% 15%
$75M – <150M 8% 12%
$150M – <335M 6% 14%
$335M – <750M 4% 9%
$750M+ 3% 8%


9
In addition,
Data is weighted based on
– Total Assets*
– Number of Employees*
– Region*
– NAFCU Membership
Result: Sample representing
Federal Credit Unions


10
Definitions What is a Percentile?

Lowest Highest
Value 25th 75th Value
Percentile Percentile
50th
Percentile
(Median)

11
Asset Groups
We will review results by asset size
Sample Fed CUs
Asset Group Size Represented
<$10M 48 1,868
$10M – <20M 51 705
$20M – <40M 49 625
$40M – <75M 54 474
$75M – <150M 42 373
$150M – <335M 49 269
$335M – <750M 32 161
$750M+ 28 115

12
Federal CU Asset Size Asset Percentiles

Expressed in Millions($)
$10M $20M $40M $75M $150M $335M $750M
CU Assets: <$10M <20M <40M <75M <150M <335M <750M Plus
Percentile

90TH 9 18 36 66 135 289 643 2,550
75TH 8 17 32 58 116 271 609 1,544
60TH 6 15 29 51 109 237 467 1,266
50TH 5 13 29 49 101 225 425 1,030
40TH 5 12 26 44 92 207 420 889
25TH 4 12 24 44 88 188 396 833
10TH 2 11 22 43 78 158 370 803

14

2011 Base Salary
for Top Executive

15
Top Executive
2011 Base Salary
Salary Expressed in Thousands($)
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 65 78 103 120 201 230 274 573
75TH 55 67 86 107 161 213 267 416
60TH 52 64 82 100 131 185 247 361
50TH 47 60 80 98 125 175 230 361
40TH 42 57 76 95 125 170 216 350
25TH 37 51 69 90 110 150 202 308
10TH 29 49 63 84 70 140 184 277

17

2011
Potential Bonus
for Top Executive

18
Top Executive 2011 Bonus Plans

Percent of Top Execs Who Have a Bonus Plan

All FCUs 47%
<$10M 48%
$10M – <20M 30%
$20M – <40M 35%
$40M – <75M 49%
$75M – <150M 61%
$150M – <335M 62%
$335M – <750M 69%
$750M+ 83%

19
Top Executive 2011 Bonus Percent
60

Although bonus percentages tend to increase as
50 total assets increase, the relationship is not that
strong – the portion of compensation that is at
risk can vary quite a lot even among credit unions
40
Bonus Percentage

of similar size.

30

20

10

0
0 5 9 13 18 23 32 43 51 72 109 151 225 300 454 1,030
Total Assets in Millions

20
Top Executive 2011 Bonus Percent

Expressed as Percent of Base Salary
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 3% 10% 10% 16% 10% 30% 25% 50%
75TH 1% 2% 3% 6% 10% 20% 20% 50%
60TH 1% 0% 0% 4% 5% 10% 15% 28%
50TH 0% 0% 0% 0% 5% 9% 10% 20%
40TH 0% 0% 0% 0% 1% 5% 5% 18%
25TH 0% 0% 0% 0% 0% 0% 0% 7%
10TH 0% 0% 0% 0% 0% 0% 0% 0%

21

2011
Potential Total
Compensation
(Base & Bonus)
for
Top Executive

2011 Potential 22
Top Executive
Total Compensation

Base Salary & Bonus
Compensation Expressed in Thousands($)
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 65 78 108 129 201 264 315 785
75TH 56 70 87 110 164 237 296 541
60TH 52 64 84 106 142 213 280 528
50TH 47 63 80 104 138 193 259 477
40TH 43 58 78 98 125 175 240 390
25TH 37 51 71 92 116 165 215 350
10TH 30 49 65 86 74 145 198 316

2011 Potential 23
Top Executive
Total Compensation

Base Salary & Bonus
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 65 78 108 129 201 264 315 785
75TH 56 70 87 110 164 237 296 541
60TH 52 64 84 106 142 213 280 528
50TH 47 63 80 104 138 193 259 477
40TH 43 58 78 98 125 175 240 390
25TH 37 51 71 92 116 165 215 350
10TH 30 49 65 86 74 145 198 316

2011 Potential 24
Top Executive
Total Compensation

Base Salary & Bonus
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 65 78 108 129 201 264 315 785
75TH 56 70 87 110 164 237 296 541
60TH 52 64 84 106 142 213 280 528
50TH 47 63 80 104 138 193 259 477
40TH 43 58 78 98 125 175 240 390
25TH 37 51 71 92 116 165 215 350
10TH 30 49 65 86 74 145 198 316

Inter-quartile Range (IQR)

25

2010 to 2011
Percent Change in
Base Salary
for Top Executive

2010 to 2011 Change 26
Top Executive
in Base Salary

Percent Change from 2010 to 2011
$10M $20M $40M $75M $150M $335M $750M
Percentile

90TH 3% 8% 5% 8% 21% 15% 13% 7%
75TH 3% 5% 4% 5% 5% 5% 4% 5%
60TH 2% 3% 2% 4% 3% 5% 3% 5%
50TH 2% 2% 1% 3% 1% 4% 3% 4%
40TH 0% 2% 0% 2% 0% 4% 2% 3%
25TH 0% 0% 0% 0% 0% 2% 0% 3%
10TH 0% 0% 0% 0% 0% 0% 0% 0%

28

Last Year’s (‘10) Bonus
for Top Executive

Actual as a Percent
of Potential Bonus

Top Executive
29
2010 % of Bonus Plan Received

Percentile 2010
90th 151%
75th 114%
60th 100%
50th 100%
40th 96%
25th 80%
10th 27%
Average 107%

Top Executive
30
2010 vs. 2009 % of Bonus Plan Received

Percentile 2010 2009
90th 151% 109%
75th 114% 100%
60th 100% 97%
50th 100% 91%
40th 96% 87%
25th 80% 63%
10th 27% 0%
Average 107% 79%

31

Reviewing
Executive
Compensation
Plans

Executive 32
Review of Compensation Plan
Compensation

“Is your credit union planning to review your
overall executive compensation plan?”

Yes, currently reviewing 4%

Yes, planning to review 14%

Executive 33
Review of Compensation Plan
Compensation

“Is your credit union planning to review your
overall executive compensation plan?”
$10M $20M $40M $75M $150M $335M $750M

Yes, currently reviewing
1% 4% 2% 7% 1% 17% 11% 31%
Yes, planning to review
9% 8% 17% 20% 23% 27% 18% 12%

34

How many Federal credit
unions have executives with
Nonqualified benefits plans?

35
Definitions Nonqualified Plan?

457(b) SERP
• Section of the IRS Code
• Government & tax-exempt executives
• Defer income up to a maximum amount
• Employee contributes in addition to qualified
plans such as a 401(k)
457(f) SERP
• For select execs of tax-exempt organizations
• No limits on contributions
• Both corporation and employee can contribute

36
Definitions Nonqualified Plan?

Split-dollar Insurance
• Way of paying for Life Insurance
• Arranged between Employer and Executive
• Split premium, cash values, policy
ownership and death benefits
• Cash value can be used as supplemental
retirement income and death benefit paid to
beneficiary
• Upon death, employer receives total premiums
paid and beneficiary receives the balance
Severance Plan

37
Federal Credit Unions Percent with Nonqualified
Plans (Including Severance)

94%
By Asset Size 83%
71%
% of Federal CUs

49%

31%
20% 20% 21%

<$10M $10M - $20M - $40M - $75M - $150M - $335M - $750M+
<$20M <$40M <$75M <$150M <$335M <$750M

38
Federal Credit Unions Percent with Nonqualified
Plans (Excluding Severance)

94%
By Asset Size
74%
% of Federal CUs

53%
45%

19%
14% 11% 10%

<$10M $10M - $20M - $40M - $75M - $150M - $335M - $750M+
<$20M <$40M <$75M <$150M <$335M <$750M

39
Federal Credit Unions How Many Executives Have
NQ Plans? (Excl. Severance)

By Asset Size
% of Federal CUs

59%
2+
60%
One 10%
42%
4%
<.5% 35% 35%
<.5% 1%
14% 10% 16% 11% 14%
9%
<$10M $10M - $20M - $40M - $75M - $150M - $335M - $750M+
<$20M <$40M <$75M <$150M <$335M <$750M

40
Top Executive Types of Nonqualified Plans
$10M $20M $40M $75M $150M $335M $750M

SERP 457(b) 5% 4% 7% 12% 14% 38% 44% 75%
SERP 457(f) <.5% 3% <.5% 15% 16% 15% 41% 40%
Split-Dollar <.5% <.5% <.5% 2% 15% 10% 6% 5%
Severance 6% 10% 17% 25% *8% 47% *34% *36%

Have, but none
of the above 10% 7% <.5% <.5% 1% 2% <.5% <.5%

Do not have
NQ plans 80% 80% 79% 69% 51% 29% 17% 6%
Base: All Federal Credit Unions

* Several of those completing the survey (15% of the overall sample) did not know whether or not the
sample)
top executive had a severance plan in place. This was especially true for these asset groups.
especially

43
Nonqualified Plans Reviewing/Considering Them?

“Is your credit union reviewing your current Nonqualified benefit
plans for executives or considering offering them in the future?”

$10M $20M $40M $75M $150M $335M $750M

Yes, reviewing existing NQ Plans
4% 2% 1% 4% 2% 19% 8% 7%
Yes, considering offering NQ Plans
3% <.5% 3% 7% 4% 11% 14% 3%

44

Cars and Car
Allowance
for
Federal Credit
Union Top
Executives

45
Top Executive Car/ Car Allowance

$10M $20M $40M $75M $150M $335M $750M

Car * 1% 4% 13% 32% 31% 34% 28%
Allowance * 3% 10% 15% 19% 17% 34% 44%
Both * 3% 6% 2% 2% 5% 17% 7%
Neither 99%+ 94% 79% 70% 47% 47% 14% 22%

* Less than .5%

46
Car/Car Allowance Top Executives

Percentile Monthly Yearly
90th $1,000 $12,000
75th $850 $10,200
60th $700 $8,400
50th $542 $6,504
40th $500 $6,000
25th $325 $3,900
10th $200 $2,400

Base: Those with a car or car allowance (n=122)

48

Looking at

Survey Results

49
When Looking at Survey Data

Surveys are estimates of the larger
population (Federal Credit Unions)
• Otherwise – guessing or
anecdotal information

How good these estimates are is
based on a few things . . .

50

Is the sample representative?
• All Federal CUs have an equal
chance of being included?
• Random vs. subjective selection?
• Self-selection – Are those who
participate markedly different from
those who don’t participate?
True for most salary surveys
If how the sample was selected is
not in survey’s methodology, ask.

51
Sample Size
The sample size of the overall study is
not the only sample size of concern
• When looking at results for FCUs
within a certain group (those with
$40M-$75M in assets, for example)
the size of that sample is what
matters.
Very small samples provide very
unreliable results

52
Lower Margin of Error Higher Effect of Sample Size on Margin of Error

Whether the population of interest is all 4,590 FCUs
or the 115 FCUs with $750M+ in assets, the margin
of error for very small samples is similarly very high.

FCUs w/Assets $750M+ (n=115)
FCUs w/Assets $40M to <$75M (n=474)
FCUs w/Assets <$10M (n=1,868)
All FCUs (N=4,590)

5 50 100 150 200 250 300 350 400 450 500
Sample Size

53

Total Assets
# of Employees
# of Members
Total Loans/Leases
Years as Exec
Education
U.S. Region

Top Executive 54
Total Compensation (Base+Bonus)
$900,000

$800,000

$700,000 Asset size and total compensation are
highly correlated. Therefore, as asset
Total Compensation

$600,000
size increases, total compensation
$500,000 also tends to increase.
$400,000

$300,000

$200,000

$100,000

$0
0 5 9 13 18 23 32 43 51 72 109 151 225 300 454 1,030
Total Assets in Millions

55
Relationship Between Total
Compensation and Other Variables
Correlation to
Top Executive’s
Total
Compensation*
Total Assets .86 Highly related
to each other
# of Members .83 – all measure of
Total Loans .82 credit union’s
# of Employees .81 size
Education .36
Years as an Exec .14

* Correlations based on analysis of 2011 NAFCU/BFB Survey
of Federal Credit Union Executive Benefits & Compensation

56

How valuable is it to
compare compensation
by region?

57
Federal Credit Union
Asset Size Varies by Region

Region: NE SE Mid W
Total Assets 100% 100% 100% 100%
<$10M 45% 40% 43% 29%
$10M – <20M 15% 15% 16% 16%
$20M – <40M 13% 14% 14% 14%
$40M – <75M 10% 9% 10% 14%
$75M – <150M 7% 8% 8% 11%
$150M – <335M 6% 7% 5% 7%
$335M – <750M 2% 4% 3% 6%
$750M+ 2% 4% 2% 4%
FCU Median $12M $18M $12M $30M
FCU Average $73M $108M $60M $131M

Source: NCUA Data Query, May 23, 2011

58

Is the Cost-of-living Index
for a market considered
when making decisions
regarding compensation?

http://www.kiplinger.com/tools/bestcities_sort/

59
Overall Survey Results
• Most of the time - Results by more
specific groups (by asset size, for
example) are going to be more useful
than the overall results.
• However, when looking at overall
results - important there is an
adjustment (weighting) for asset groups
that are over-or-underrepresented
• Otherwise - end up with overstated
figures
– Over-represented group unfairly influences the
results

60

Comparing the Results From
Two or More Surveys

61
Comparing Two+ Sources
• More than one resource can strengthen
your position and the decision
– If both are valid, reliable & similar in focus
• What are differences? How might that
affect the results?
• Even then - difficult to do an apples-to-
apples comparison

62
Comparing Two+ Sources
Even if both surveys are good sources,
comparison can be difficult . . . .
• Each likely uses different asset ranges
– Example: CU with $400M in Assets – One survey
shows compensation figures for credit unions in
the $300M-$500M range and other shows them for
those in the $400M-$600M range
– Considering relationship between asset size and
compensation, you have to adjust
• As estimates, figures are often similar
but not the same

63
Keeping Your Perspective
Our goal is to give you a good sense
of what other Federal credit
unions do, as a group, re:
compensation and benefits
– Not tell you what to do in your situation
Every specific situation is unique
and many factors will also affect
your executive compensation plan

* Correlations based on analysis of 2011 NAFCU/BFB Survey
of Federal Credit Union Executive Benefits & Compensation

64
In Conclusion
When looking at survey results . . .
• Is the survey representative?
• Is there an adequate sample size for subgroup
of interest?
• Strong relationship between asset size and
compensation
• When using two+ survey sources . . .
– Make adjustment for differences in asset ranges
– Estimates should be similar, not the same
• Survey’s intent is to give a sense of what other
credit unions do – cannot make the decision re:
your specific situation
– Other factors have to be accounted for

65
In Conclusion
• Surveyed the top five executives
• Additional information in written report
– Executives #2 thru #5
– Estimate release in late July
• Information specific to your credit
union – similar asset size, etc. – is
valuable
– Burns-Fazzi, Brock (BFB) for 15-15 Report
– Puts your credit union in the middle by
looking at 15 CUs just above and 15 CUs
just below your credit union based on asset
size.

66
BFB 15-15 Report . . .

Summary of
Comparison Credit
Unions
• Size - Assets, Loans/
Leases, Members, # of
Employees
• Regions represented
• Qualified Plans for
Employees
• Field of Membership
• Board Member Benefits
• Review of Exec Compen-
sation & Nonqualified
Benefits

67
Example BFB Report . . .

Top Executive
• Base, Bonus
Percent and Total
Compensation
• Direct
Responsibilities
• Fringe Benefits
• Nonqualified Plans

68
Example BFB Report . . .

Executives #2-5
• Same Information
as Top Executive
• Provided For Each
Executive

69
For More Information . . .

Pilar Perotti
Assoc. Director of Marketing
Burns-Fazzi, Brock
704 332-2265 Ext. 206
pperotti@bfbbenefit.com

David Frankil
President
NAFCU Services Corporation
800 336-4644 • 703 842-2226
dfrankil@nafcu.org

70
Thank You

Jack E. Clark, PhD
Clark & Chase Research, Inc.
4600 Lebanon Road – Suite A
Charlotte, NC 28227
704-998-9661
jclark@clarkandchase.com

NAFCU Executive Compensation & Benefits Survey – Initial 2011 Findings (Credit Union Conference Presentation)

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