What’s New With Director Compensation?

The world of community and regional bank directors has certainly evolved over the last five years.  While the economic downturn in 2009 triggered some changes, a good number of these were already underway.  The role of bank directors has been evolving for years, but changes in the compensation structure for directors has shifted more gradually.

Setting the Stage

The first big shift for bank directors was focused around the level of engagement required.  The days where a bank director simply showed up for a monthly meeting, listened to management, collected their fees, and vanished until the next meeting are long gone.  Like many businesses, tough times required extra work and banking was not immune.  Directors suddenly had to deal with things like TARP, poor company performance, management changes, etc.  An increased understanding of banking, credits, regulation, and director liability became high priorities.  Director expectations increased significantly and you were either up for the challenge or chose to end your tenure on the board.  Unfortunately, what we didn’t see at this time was an increase in director compensation.  Poor bank performance seemed to influence a general “flat line” in director compensation from 2009 – 2012.  Therefore, directors were working harder and longer, but the resulting pay was not increasing.

The Shift Begins                            

We finally saw an increase in director compensation levels around 2012 and this trend has continued.  Blanchard Consulting Group’s director compensation survey of 107 community banks (completed in early 2017) showed that 32% of banks increased director compensation in 2016 and 31% planned to increase director compensation in 2017.  The median increase in total director compensation for 2016 was 16%, up from 10% in 2014.  This clearly shows that director compensation has started to catch up to the increase in work-load and expertise required.  In fact, 90% of our survey participants feel that they were fairly compensated for the time they spend on board activities.

The biggest movement in director compensation has come in the form of increased retainers and fees for committees and chair positions.  An average community bank director’s total compensation levels now range from approximately $15,000 to $55,000 or more depending on the asset size and classification (public vs. private).  The general philosophy surrounding director compensation focuses on paying directors appropriately for the time and expertise provided.  Basing director compensation on bank performance is discouraged, because directors need to be focused on making the correct long-term decisions for the bank and shareholders.  Short-sighted decisions focused on short-term performance are discouraged.

Why an Increased Emphasis on Retainers?

The shift in the type of director required to serve on the board has created a shift in the format of pay for directors.  Instead of focusing on per meeting fees and requiring attendance to receive the fee, many boards have moved to paying a large portion of director compensation through retainers.  The per meeting fees still exist, but the amounts generally range from $500 to $1,000 depending on the size of institution and other variables.  Today, directors are expected to be engaged, put time in reviewing materials, receive outside education, and provide their insights even if they miss a meeting.  As such, the emphasis has moved to paying an appropriate amount for board service as a whole.  If you have the right directors, attendance/participation will not be an issue and each director will clearly “earn their keep”.  Paying a retainer is much easier to administer and provides a clear link between the amount of pay that is provided for director service.  Retainers are frequently provided in cash, but are also a great way to provide equity to directors.  Equity grants (if used) are typically provided in the form of full-value shares (not stock options) with very short or immediate vesting provisions.

Committee and Chair Fees

The other big change in director compensation surrounds increased fees for service on committees and for chair positions.  Once again, the reasoning for such changes is simple.  Serving on the committee requires additional time and expertise and these directors deserve to be paid appropriately for this additional work.  Chair positions add an extra expectation and expertise, so they should receive a “bump up” in pay as well.  The Blanchard Consulting survey found that committee fees range from $200 to $600 per meeting depending on size of institution and the type of committee.  The additional chair fees vary by asset size and type of committee, but generally fall in the range of $2,000 to $3,000.

Summary and What’s Next?

Bank director compensation is far from rocket science.  At the end of the day, a bank needs to determine a fair total compensation level for directors and structure the pay program accordingly.  Whether you pay via retainers, equity grants, per meeting fees, chair fees, etc. doesn’t matter.  Just be sure you model out projections (per director and in total) and differentiate each director’s compensation based on work-load and expertise required.  Market data is available via the Blanchard Consulting Group (BCG) Director Compensation survey and other industry sources.  Our firm can help your bank analyze the data and determine where to position the board of directors’ compensation package in order to meet the goals of the bank and shareholders.

By Kristen Kostner, Senior Compensation Consultant, Blanchard Consulting GroupKristen can be reached at (314) 394-3374 or kristen@blanchardc.com.


About the Firm:  Blanchard Consulting Group is a national compensation consulting firm with offices in Atlanta, GA; Minneapolis, MN, and St. Louis MO.  Our mission is to deliver independent compensation guidance to community and regional banks to help them attract, motivate, and retain key employees and directors.  With an exclusive focus on the banking marketplace since 2000, our lead consultants have a unique industry perspective and expertise to offer our clients.  We work directly with Board of Directors, Executive Management, and Human Resource departments on all facets of director, executive, and staff compensation programs.  More information can be found at www.blanchardc.com.

New Associate Member – Redhawk Network Security

We, at Redhawk Network Security, are excited to be part of this thriving organization!

Based in Bend, Oregon, we are an information security, network infrastructure, and managed security services provider. What does this mean? When it comes to cybersecurity, we integrate, assess, build, manage, discover, design, deploy, detect, and respond. But mostly, we care. We care about your security needs. We want to help you.

We are trusted experts in information security, threat detection, and regulatory issues facing financial organizations. For more than 15 years, we have been working hand-in-hand with banks and credit unions of all sizes to develop their security infrastructures and programs to secure their assets, brands, and reputation.

Let’s face it. In our evolving threat landscape, a strong security foundation is critical. The banking industry is under attack. Security threats—malware, phishing, ransomware, even lost laptops and aging computers—can put your organization and your customers’ sensitive information at risk for being breached.

Security has grown up. It’s no longer simply installing anti-virus software and hiding your network behind a firewall. Consider this. You may not have the security expertise on staff and may need help. You need a partner you can trust—an extension of your team—with extensive security expertise, best-of-breed tools, and industry certifications. You need a partner who can see your blind spots and security holes, a partner that will work to ensure that security is interwoven throughout your entire organization. We not only have backgrounds in security and engineering, but several of us are former bankers. We know regulated industries inside and out.

At Redhawk Network Security, we offer risk assessments, managed security services, including managed threat detection and response services, security training, and network infrastructure services. We can help you with a project or we can conduct full-service, around-the-clock management of your network activity. We can build and upgrade your network and ensure that it’s monitored continuously for threats including Security Information and Event Management (SIEM) managed services. We are available and on alert 24x7x365.

For more information, please contact our Senior Relationship Manager, Cynthia Aceves at CAceves@redhawksecurity.com, 541-382-4360 ext. 2007, and/or visit www.redhawksecurity.com.

We look forward to chatting.

Thank you,

Kerri Fry, president, Redhawk Network Security


Early Bird Registration & Hotel Room Discount End TODAY!

Early Bird Registration & Hotel Room Discount End TODAY!


Idaho Community Bankers Association


The ICBA Management & Directors’ Leadership Conference is scheduled to be held on January 29-30, 2018 at the Grove  Hotel in Boise, Idaho. This event is tailored to bank management and directors, as well as emerging bank leaders. We encourage you to forward this announcement to your directors! In addition to great speakers presenting on the latest community banking hot topics, the conference will provide the opportunity to attend the popular Legislative Reception and Dinner which will offer outstanding entertainment and a chance to visit with your legislative representatives.

Register Here


Idaho Community Bankers Association


$2.1 million in Housing Grants to Benefit Idaho Families

250 families and individuals will benefit from the funds

 (Des Moines, Iowa) – This holiday season, 250 Idaho families will receive the gift of affordable housing, thanks to a collaborative effort between community housing providers, financial institutions and the Federal Home Loan Bank of Des Moines (FHLB Des Moines or the Bank).

FHLB Des Moines recently awarded $1 million in grants from its Competitive Affordable Housing Program to provide housing for low-income families, seniors, persons with disabilities, homeless and at-risk youth in the state of Idaho. The Bank also contributed over $1.1 million throughout the year to assist Idaho families with down payment and closing cost expenses.

“FHLB Des Moines is honored to provide the opportunity for families in the state of Idaho to have a home,” said Mike Wilson, President and CEO of FHLB Des Moines. “We believe each and every individual should have access to safe and affordable housing. These projects inspire us every day to continue our mission of providing funding to lenders so the needs of communities are met.”

Every year, FHLB Des Moines returns 10 percent of its net income throughout communities in its district, consisting of 13 states and three U.S. Pacific territories.

The Competitive Affordable Housing Program encourages partnerships between FHLB Des Moines member institutions and local housing providers to construct new and restore existing homes to ensure housing for the community. Beyond housing, the program works to generate jobs by employing local businesses to complete projects. In 2017, the Bank awarded $44.5 million in Competitive Affordable Housing Program grants to fund housing for 2,636 families across the district.

FHLB Des Moines also offers down payment and closing cost assistance through its Home$tart®, Home$tart Plus and Native American Homeownership Initiative programs to help families realize their dream of homeownership. The Bank distributed $15.2 million in down payment funding in 2017 to support 2,100 families with the purchase of a home.

For a complete listing of 2017 Competitive Affordable Housing program grant recipients, please visit the FHLB Des Moines website. For more information, contact the Bank’s Community Investment Department by calling 800.544.3452, ext. 1173.

# # #

The Federal Home Loan Bank of Des Moines is a member-owned cooperative that provides funding solutions and liquidity to nearly 1,500 financial institutions to support mortgage lending, economic development and affordable housing in their communities. Serving 13 states and three U.S. Pacific territories, FHLB Des Moines is one of 11 regional Banks that make up the Federal Home Loan Bank System. Members include community and commercial banks, credit unions, insurance companies, thrifts and community development financial institutions. The Des Moines Bank is wholly owned by its members and receives no taxpayer funding. For additional information about FHLB Des Moines, please visit www.fhlbdm.com.

Mitch Fastenau
Marketing Communications Strategist