Kelly Malafis
Founding Partner [email protected] 212-921-9357
Shaun Bisman
Principal [email protected] 212-921-9365
Chris Callegari
Associate [email protected] 646-486-9747


Compensation Advisory Partners (CAP) conducted a study of executive compensation trends in the regional banking industry. The study examined 2021 CEO compensation levels and pay practices among 40 regional banks across three groups based on FY’21 asset size: $1B – $5B in assets (“small banks”; n=13), $5B – $10B in assets (“medium banks”; n=13) and $10B – $20B in assets (“large banks”; n=14). This report compares both compensation levels and incentive plan design across the groups. We also highlight current issues facing the banking industry in 2022.



2021 Performance and Pay Outcomes

CEO compensation in 2021 increased 11 percent across all asset groups, primarily through higher annual incentive payouts vs. 2020. Increases in CEO pay were in line with strong 2021 earnings and profitability, benefiting from an improved credit environment, strong housing market, and releases of loan loss provisions taken in 2020. Stock price performance was also strong in 2021 (+34 percent) for all banks.


Total Pay Mix

As banks increase in size, a higher percentage of CEO total pay shifts from fixed compensation to at-risk or variable compensation and a larger emphasis is placed on long-term vs. annual incentives.


Annual Incentive Plan Metrics

For all banks, the most prevalent metrics generally include Asset Quality, Efficiency Ratio, Earnings metrics (e.g., Earnings Per Share [EPS], Net Income) and Return metrics (e.g., Return on Assets [ROA] and Return on Equity [ROE]) with smaller banks also considering Loan and Deposit levels more frequently. Individual performance is also prevalent in assessing performance.


Long-Term Incentive Plan Metrics

For all banks, relative Total Shareholder Return (TSR), ROE, EPS and ROA are frequently used together.


Use of Environmental, Social and Governance (ESG) Metrics in Incentive Plans

Among all banks in our study, including ESG metrics in incentive plan design continues to be a minority practice. In 2021, 13 percent (n=5) of the banks considered ESG as part of the annual incentive decision, compared to 3 percent (n=1) in 2020.


Looking Ahead

The performance outlook for 2022 is less certain given the economic and regulatory environment. Bank financial performance for the first half of 2022 is down compared to the first half of 2021 and stock price year to date is down in the low single digits.

2021 Performance and Pay Outcomes

Performance Results

Moderate loan demand and near-zero interest rates made 2021 a challenging operating environment for banks; however, a number of institutions attained above-average loan growth and profitability. The industry overall benefited from the hot housing market in 2021. Across all banks in the study, financial and stock price performance were strong in 2021, as reflected in double digit profitability growth and stock price appreciation and improved returns vs. 2020 as the credit environment improved, and banks reversed pandemic-related loan loss provisions from 2020. Excluding the impact of loan loss provisions, the banks still had a strong year as shown in Pre-Provision Net Revenue (PPNR) growth.

When comparing across all three groups, the large banks generally had the strongest performance year in 2021, as earnings metrics grew at higher rates as compared to the small and medium bank groups.


Median Percent Change – Year Ended December 31, 2021

$1B – $5B

$5B – $10B

$10B – $20B





Net Income




Pre-tax Operating Income




Pre-Provision Net Revenue




Return on Equity

133 (bps)

332 (bps)

281 (bps)

1-Year TSR at 12/31/21




1-Year TSR at 12/31/20




Note: bps – Basis points. Source: S&P Capital IQ Financial Database

CEO Annual Incentive Payouts

CEO annual incentive payouts were above target across all groups, which was supported by the strong performance in 2021; only five banks paid bonuses below target. Payouts at median were consistent among the groups, between 120 to 127 percent of target and reached its highest levels since 2018.

100%127%150%115%126%150%99%120%141%0%20%40%60%80%100%120%140%160%25th PercentileMedian75th PercentileCEO Payout as Percent of Target$1B - $5B$5B - $10B$10B - $20B

Total Pay Changes

Consistent with strong financial performance across the banking industry, and higher annual incentive payouts as a percent of target, CEO actual total compensation1 (base salary, annual incentive payouts, and long-term incentives) increased for all asset groups in 2021. Medium banks saw the largest increase in total compensation (+19 percent) and small and large banks CEO pay increased +8 percent and +10 percent, respectively. The 19 percent increase among the medium banks was primarily driven by annual incentive payouts (+49 percent). Increases for small and large banks were also led by annual incentive increases of +15 percent and +10 percent, respectively. The large increases in annual bonuses can be attributed to the strong performance in 2021 and the affect COVID had on payouts in 2020. For the medium asset group, several banks exercised negative discretion in 2020 compounding the increase in bonuses in 2021. Long-term incentive values were more consistent across the banks as increases ranged from 3 to 6 percent at median. Long-term incentive grant date values are driven less by company performance and generally determined by competitive market positioning resulting in less volatility year-over-year.

3.0%14.5%8.6%2.5%8.3%0.0%49.4%21.5%5.0%18.9%2.0%10.3%11.2%5.8%10.4%0%10%20%30%40%50%60%Base SalaryActual Annual IncentiveActual Total CashCompensationLong Term IncentivesActual Total DirectCompensationMedian Change in CEO Actual Compensation by Element(2020 vs. 2021)$1B - $5B$5B - $10B$10B - $20B

Note: Excludes companies where there was a change in CEO

Chief Executive Officer Pay Mix

Similar to our findings in prior year studies, CEOs at the larger banks have higher pay levels and more of their total pay delivered in at-risk or variable compensation such as annual or long-term incentives. Conversely, CEOs at smaller banks are often paid more fixed compensation or base salary.

31%42%53%32%35%29%37%23%18%0%20%40%60%80%100%$10B - $20B$5B - $10B$1B - $5BCEO Actual Pay Mix by Asset SizeBaseBonusLTIAt-risk Compensation: 47% At-risk Compensation: 58% At-risk Compensation: 69%

Pay Practices

Annual Incentive Plans

The most common annual incentive plan approach is a “goal attainment” plan where actual financial achievement is compared to pre-established goals made at the beginning of the fiscal year. The banks in our sample typically utilize several corporate metrics when determining their annual incentive payout. Approximately 75 percent of the small, medium, and large banks use three or more weighted financial metrics. Asset Quality (i.e., non-performing assets, non-performing loan ratio), Efficiency Ratio, EPS, ROA and Net Income are the most prevalent metrics used at these banks. Returns (ROA or ROE), Earnings (EPS and Net Income) were typically weighted more (approximately 30 to 50 percent of the total plan) than Efficiency Ratio and Asset Quality metrics (approximately 15 to 20 percent of the total plan). The small and medium banks differ from the large banks in that they more frequently use Loan or Deposit measures in their plans, with these metrics accounting for no more than 20 percent of the total plan.

38%38%15%54%62%8%38%38%46%15%38%62%54%23%38%38%31%46%46%38%43%43%57%36%0%36%0%14%57%21%0%10%20%30%40%50%60%70%AssetQualityEfficiencyRatioEPSReturn onAssetsNet IncomeReturn onEquityDepositsLoansIndividualGoalsStrategicGoalsAnnual Incentive Metric Prevalence by Asset Size$1B - $5B$5B - $10B$10B - $20B

Individual goals are prevalent among all asset groups. The small and medium banks tend to incorporate individual performance as a standalone weighted metric (less than 20 percent weighting), while the large banks measure individual performance based on a discretionary assessment. The medium and large banks are more likely to incorporate strategic goals such as customer satisfaction, risk management, technology initiatives and community presence.

Long-term Incentive (LTI) Plans

The most typical long-term incentives used across industries, including the banking industry, include stock options, time-vested stock (restricted stock [RS] or restricted stock units [RSUs]) and performance-vested stock. Similar to the broader market, the banks in our sample use a portfolio approach in their LTI plan, with approximately 70 percent of these banks granting two or three LTI vehicles. The small and medium banks more frequently use a single LTI vehicle (38 percent) and only two banks in the entire sample do not grant LTI. The LTI mix seen between the three groupings is fairly consistent, with stock options continuing to be the least utilized LTI vehicle, on average about 3 to 6 percent of the overall LTI mix. Time-vested RS typically makes up about 30 to 50 percent of the LTI mix among these banks, with performance plans making up the bulk (about 50 to 60 percent) of LTIs in the total sample.

4%6%3%39%33%47%57%61%50%0%20%40%60%80%100%$10B - $20B$5B - $10B$1B - $5BCEO LTI Mix byAsset SizeStock OptionsRS/RSUsPerformance Plans

Performance plans are typically granted annually and have overlapping 3-year performance periods. Payouts can fluctuate based on achievement of performance measures, and the upside is normally limited to 150 to 200 percent of the target level. Approximately three-quarters of companies in each asset grouping (that utilize performance plans) measure performance against two to four metrics. The most prevalent metrics used are relative TSR, Returns and EPS for all three groupings, and it is common that two of these measures are paired together to determine all, or the majority of, the payout.

TSR is almost exclusively measured on a relative basis, often measured against either the company-defined peer group or an industry index. In our sample of banks, relative TSR is more commonly installed as a weighted metric and only 5 percent of all banks use it as a modifier of the calculated payout. Other common relative metrics include Returns and EPS growth. Among the total sample, about 50 percent of banks use a relative measure other than TSR.

38%38%38%25%0%0%13%0%33%50%42%50%8%17%8%17%85%77%15%15%0%8%0%0%0%15%30%45%60%75%90%TSRReturn on EquityEPSReturn onAssetsEfficiencyRatioAsset QualityDepositsCharge OffsPerformance Plan Metric Prevalence by Asset Size$1B - $5B$5B - $10B$10B - $20B

ESG in Incentive Plans

In an attempt to motivate action and progress, many large banks have begun to link compensation to measurable ESG initiatives such as Diversity, Equity & Inclusion (DE&I). Among the banks in our sample, while still a minority practice, we have seen a slight uptick in the use of ESG metrics in incentive plans. In 2020, only 1 bank included ESG and in 2021, 5 banks included ESG goals. These banks all measure performance on a qualitative basis in the annual incentive plan as part of a standalone weighted metric (10 to 20 percent weight) within their weighted strategic goals. One bank (Evans Bancorp) weighted 20 percent of their CEO’s annual incentive on “Inclusion, Diversity, Equity & Awareness”, while this measure was qualitative, it is unique to have sole weighted component in the annual incentive plan tied to ESG. The inclusion of these goals continues to evolve, as Compensation Committees are discussing ESG objectives in the boardroom today. While larger banks tend to be the trendsetters, we expect smaller regional banks to slowly follow suit, as there will be increased pressure from shareholders, employees, and the public.

Looking Ahead

The banking industry’s strong performance in 2021 has slowed in the first half of 2022 due to record inflation and normalized credit trends (i.e., elimination of pandemic relief efforts and rising operating expenses). In order to combat inflation, the Federal Reserve raised interest rates five times (from 0-0.25 percent to 3.00-3.25 percent) through September 2022. Rates are expected to increase as inflation remains high, which will have an influence on bank performance for the remainder of 2022 and beyond.

The higher interest rates generally benefit banks’ lending profitability; however, investors are concerned that the Federal Reserve’s actions could push the economy into a recession. Historically, when rates have risen quickly, investment and spending has dropped, causing economic downturns. For banks, recessions often curb loan demand and increase banks’ credit loss. In 2021, much of these concerns did not exist as consumers used stimulus and larger savings to pay their credit card and auto bills and some benefited from forbearance programs; however, delinquencies have started to return to more normal levels in 2022.

In light of the economic uncertainty, the impact of the Inflation Reduction Act of 2022 on jobs and inflation, and a potential recession looming, many question marks remain on bank’s 2022 financial performance. For the first half of 2022 vs. the first half of 2021, among our sample of banks, EPS is down 11 percent and ROE is down nearly 50 basis points. Stock price year to date is also down in the low single digits; however, has bounced back since June which has coincided with signs that the economy is improving as evidenced by U.S. companies continuing to add jobs in July, inflation dropping and gas prices falling.

As we approach the end of 2022, banks will need to balance aligning pay with 2022 performance results and shareholder returns, which may be down versus 2021, with the need to attract and retain critical talent.

For questions or more information, please contact:

Kelly Malafis
[email protected]

Shaun Bisman
[email protected]

Chris Callegari
[email protected]

Theo Allen, Felipe Cambeiro and Thomas Brown provided research assistance for this report.

Regional Banks in CAP’s Study (n=40)

Small Banks

($1B – $5B in assets)

  • Bar Harbor Bankshares
  • Capital City Bank Group, Inc.
  • Central Valley Community Bancorp
  • Enterprise Bancorp, Inc.
  • Evans Bancorp, Inc.
  • Farmers National Banc Corp.
  • First Business Financial Services, Inc.
  • First Financial Northwest, Inc.
  • Independent Bank Corporation
  • LCNB Corp.
  • National Bankshares, Inc.
  • Oak Valley Bancorp
  • Sierra Bancorp

Medium Banks

($5B – $10B in assets)

  • 1st Source Corporation
  • Amerant Bancorp Inc.
  • Banc of California, Inc.
  • Brookline Bancorp, Inc.
  • Camden National Corporation
  • CNB Financial Corporation
  • First Commonwealth Financial Corporation
  • German American Bancorp, Inc.
  • Heritage Commerce Corp.
  • Park National Corporation
  • Stock Yards Bancorp, Inc.
  • Univest Financial Corporation
  • Westamerica Bancorporation

Large Banks

($10B – $20B in assets)

  • Atlantic Union Bankshares Corporation
  • Banner Corporation
  • Berkshire Hills Bancorp, Inc.
  • Community Bank System, Inc.
  • Enterprise Financial Services Corp.
  • First Busey Corporation
  • First Foundation Inc,
  • First Merchants Corporation
  • Heartland Financial USA, Inc.
  • Lakeland Bancorp, Inc.
  • Renasant Corporation
  • Seacoast Banking Corporation of Florida
  • Trustmark Corporation
  • WesBanco, Inc.

1 For 2021, includes 2021 base salary, annual incentive payout based on 2021 performance and 2022 long-term incentive grants. For 2020, includes 2020 base salary, annual incentive payout based on 2020 performance and 2021 long-term incentive grants.