Since 2007, NAFCU, NAFCU Services Corporation and Burns-Fazzi, Brock have co-sponsored a survey of federal credit union CEOs and senior executives to assess compensation and benefits. In this 2011 NAFCU Annual Conference presentation you get a sneak peak at this year’s initial findings, and see how you stack up against other federal credit unions in your region.
Presented by Jack Clark, PhD, Principal, Clark and Chase Research
For a video of this session and more information visit http://www.nafcu.org/bfb
1. 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
3. 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. 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. 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
• 160 #3 Executives
• 114 #4 Executives
• 76 #5 Executives
7. 7
2011 NAFCU-BFB Survey
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. 8
2011 NAFCU-BFB Survey
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%
*Source: NCUA Data Query, May 23, 2011
9. 9
In addition,
Data is weighted based on
– Total Assets*
– Number of Employees*
– Region*
– NAFCU Membership
Result: Sample representing
Federal Credit Unions
*Source: NCUA Data Query, May 23, 2011
10. 10
Definitions What is a Percentile?
Lowest Highest
Value 25th 75th Value
Percentile Percentile
50th
Percentile
(Median)
17. 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%
18. 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
30. 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%
31. 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
CU Assets: <$10M <20M <40M <75M <150M <335M <750M Plus
Yes, currently reviewing
1% 4% 2% 7% 1% 17% 11% 31%
Yes, planning to review
9% 8% 17% 20% 23% 27% 18% 12%
32. 34
How many Federal credit
unions have executives with
Nonqualified benefits plans?
33. 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
34. 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
35. 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
36. 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
37. 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
38. 40
Top Executive Types of Nonqualified Plans
$10M $20M $40M $75M $150M $335M $750M
CU Assets: <$10M <20M <40M <75M <150M <335M <750M Plus
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
39. 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
CU Assets: <$10M <20M <40M <75M <150M <335M <750M Plus
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%
40. 44
Cars and Car
Allowance
for
Federal Credit
Union Top
Executives
41. 45
Top Executive Car/ Car Allowance
$10M $20M $40M $75M $150M $335M $750M
CU Assets: <$10M <20M <40M <75M <150M <335M <750M Plus
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%
42. 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)
44. 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 . . .
45. 50
When Looking at Survey Data
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.
46. 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
47. 52
When Looking at Survey Data
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
48. 53
Total Assets
# of Employees
# of Members
Total Loans/Leases
Years as Exec
Education
U.S. Region
49. 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
50. 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
52. 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
53. 58
Is the Cost-of-living Index
for a market considered
when making decisions
regarding compensation?
http://www.kiplinger.com/tools/bestcities_sort/
54. 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
56. 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
57. 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
58. 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
59. 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
60. 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.
61. 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
62. 67
Example BFB Report . . .
Top Executive
• Base, Bonus
Percent and Total
Compensation
• Direct
Responsibilities
• Fringe Benefits
• Nonqualified Plans
63. 68
Example BFB Report . . .
Executives #2-5
• Same Information
as Top Executive
• Provided For Each
Executive
64. 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
65. 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