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The Farm Credit System
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Executive Compensation
Market Data Package
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Supplemental Report from SNL
Executive Compensation Review:
Banks and Thrifts
Prepared by:
FCCServices, Inc.
November 22, 2004
Contents
Page
About this Material 3
Study Results 5
Study Methodology 10
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The Farm Credit System
Executive Compensation Market Data
Supplemental Report Package
About This Material
This report was prepared as a supplement to the Executive Compensation
Market Data Package that has been prepared by FCCServices for a number of
years. We prepared this supplement because we have a number of concerns
about the methodology and data developed for the regular report. These
include:
The information from the report is developed from several surveys; base
salary information is from the Watson Wyatt Financial Institutions
Compensation Survey, bonus information is from the Watson Wyatt
survey, plus Bank Administration Institute’s Bank Cash Compensation
Survey (BAI) and Watson Wyatt’s Top Management Report (TMR) and
the long-term incentive compensation is developed from 15 large money
center banks in Hewitt Associates’ proprietary data base.
The long-term incentive information is developed by Hewitt for Farm
Credit asset sizes as low as $500 million to $1 billion; however, the
average asset size of the comparator organizations is $34.1 million and the
smallest is $5.9 million. The percentages are derived from salary ranges
approximating the base salaries from the Watson Wyatt survey and not on
the basis of matching the duties and responsibilities of positions.
The number of banks in each asset size of the Watson Wyatt survey
continues to decline. This year the survey contained only four CEO
matches in the $10 billion to $24.9 billion range and 6 for $25 billion and
over. There were no matches for Chief Credit Officer in the $10 billion to
$24.9 billion category and no matches for Chief Operating Officer in the
$25 billion and over category.
The asset size categories for the BAI and TMR surveys do not match the
asset size categories of the Watson Wyatt survey used for base salaries.
The methodology used by Hewitt results in a larger long-term incentive
for CEOs in the $10 billion - $24.9 billion asset size category than for the
$25 billion and over category.
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For these reasons, we have included the charts on the following pages that are
developed from SNL Financial’s Executive Compensation Review of Banks and
Thrifts. The SNL data was obtained from proxy statements, offering circulars and
10Ks from 910 publicly traded financial organizations. Since this data was based
on 2003 compensation information, all numbers were aged 3.7% to approximate
the current market. The number of banks and thrifts and median asset size for
each category follow:
Asset Category Number Median Assets
$5B 106 13,129,317
Information is provided for the following positions:
President and Chief Executive Officer;
Executive Vice President and Chief Operating Officer;
Senior Vice President and Chief Financial Officer; and
Senior Vice President and Chief Credit Officer
In reviewing the information on these charts, keep the following definitions in
mind:
Base Salary: As reported in the proxy for the fiscal year. Includes
compensation earned but deferred at the officer’s election.
Bonus Percent: The annual bonus as a percentage of base salary. It also
includes bonuses earned but deferred at the officer’s discretion.
Bonus Amount: The bonus percentage times the base salary.
Other Compensation: Miscellaneous compensation and perquisites not
included in salary or bonuses.
Annual Compensation: Base salary plus annual bonus and other
compensation.
Total Compensation: Annual Compensation plus long-term compensation,
but excluding bonuses.
Option-Adjusted Compensation: Total Compensation plus estimated value
of options awarded during the year.
4
Study Results
This section presents a summary of the estimated market value of base
salaries, annual bonus, total annual compensation, total long-term
compensation, and total option-adjusted compensation for four Farm Credit
System positions, based on five asset ranges.
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President and Chief Executive Officer
(SNL Position: CEO)
Option
Base Bonus Bonus Other Annual Total Adjusted
Asset Size Quartile Salary Percent Amount Comp. Comp. Comp. Comp.
$5B Average $1,013,155 81.1% $821,669 $368,118 $2,202,943 $3,156,784 $5,258,830
Median $625,209 81.1% $507,045 $181,772 $1,314,026 $1,746,080 $2,596,748
3rd $954,742 81.1% $774,295 $377,599 $2,106,636 $3,326,823 $5,394,278
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Executive Vice President and Chief Operating Officer
(SNL Position: COO)
Option
Base Bonus Bonus Other Annual Total Adjusted
Asset Size Quartile Salary Percent Amount Comp. Comp. Comp. Comp.
$5B Average $617,148 40.0% $246,859 $168,729 $1,032,737 $1,701,497 $2,410,414
Median $400,734 40.0% $160,294 $86,781 $647,809 $857,732 $1,239,731
3rd $515,182 40.0% $206,073 $136,477 $857,732 $1,191,434 $1,949,676
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Senior Vice President and Chief Financial
Officer
(SNL Position: CFO)
Option
Base Bonus Bonus Other Annual Total Adjusted
Asset Size Quartile Salary Percent Amount Comp. Comp. Comp. Comp.
$5B Average $488,740 61.7% $301,553 $136,222 $926,515 $1,262,946 $1,946,028
Median $297,003 61.7% $183,251 $76,553 $556,807 $706,929 $1,093,608
3rd $450,607 61.7% $278,024 $157,322 $885,954 $1,198,399 $2,247,462
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Senior Vice President and Chief Credit Officer
(SNL Position: CCO)
Option
Base Bonus Bonus Other Annual Total Adjusted
Asset Size Quartile Salary Percent Amount Comp. Comp. Comp. Comp.
$5B Average $286,567 44.4% $127,236 $58,509 $472,312 $601,560 $835,850
Median $226,478 44.4% $100,556 $44,122 $371,156 $455,748 $630,310
3rd $338,029 44.4% $150,085 $82,236 $570,350 $628,929 $1,174,804
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Study Methodology
This section defines the terms and methodology used in collecting the market
information.
Survey Positions
The Market Data Package was developed by matching the Farm Credit
positions with those included in the SNL survey. The matches were
established on the basis of the duties and responsibilities of the positions.
Development of Compensation Data
The average, median and 75th percentile information was taken directly from
the SNL survey for Annual Compensation, Total Compensation and Option-
Adjusted Compensation. The survey values were increased by 3.7% to
approximate the 2004 compensation levels.
The survey provides information on Other Compensation as a percentage of
Option-Adjusted Compensation by position. The average is approximately
7% and this was used to develop the Other Compensation data.
Bonuses as a percentage of Base Salary were provided for each position by
asset size category. To derive base salary, Other Compensation was
subtracted from Total Annual Compensation and the result divided by 1 + the
Annual Bonus Percentage. The Bonus Percentage was then multiplied by
Base Salary to derive the Bonus Amount.
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