Banking execs get bonus only if they meet goals

Daily Record, The (Baltimore), Apr 16, 2002 by Todd Karpovich

If a bonus is truly performance-based, then one could deduce that First Mariner Bancorp had the best year as its chairman and chief executive officer reaped the largest bonus payout among his peers -- some of whom were denied bonus pay. First Mariner Chief Edwin F. Hale Sr. earned a $110,000 bonus to add to his $275,000 salary, according to the bank's proxy.

Of course, his bank's profits skyrocketed 260 percent to $2.3 million in 2001 compared to the previous year. Still, even though Mercantile Bankshares paid out no bonus to its new president and CEO, Edward J. Kelly III earned a salary of $768,300, nearly three times that paid to Hale, while Susan C. Keating, the chief executive officer of the scandal-ridden Allfirst Financial, received her $675,000 salary, but no bonus. Private banker and consultant Stuart Greenberg said Hale's bonus, which was only $10,000 more than he received in 2000, certainly will not raise any eyebrows in the industry. "Hale is not taking that much out of the bank," Greenberg said. "His base salary also is not as much as other bankers. That bonus is not unreasonable." Not far behind Hale in bonuses was Faye E. Cannon, president and chief executive officer of F&M Bancorp in Frederick, who received $103,250. But her salary outpaced Hale's by $20,000. In the previous year, Cannon's salary was $269,298 and she received a bonus of $85,637, according to documents filed with federal regulators. John M. Bond Jr., president and chief executive officer of The Columbia Bank, was given a $45,000 bonus last year, $20,000 less than the one he earned the previous year. His salary, however, was bumped from $250,000 to $275,000. Mercantile and Allfirst, meanwhile, were not the only large banks in Maryland to withhold bonuses. Provident Bankshares Corp. also held back the bonuses when executives failed to meet aggressive performance goals. "If you do not make the money, you do not take the money," Greenberg said. "These guys have to be very careful. Shareholders have every right to watch them. That is what they are supposed to do. If you have a good year, you get paid. It is very simple." Hale has spent the past two years trying to prove to federal regulators that he could raise both the earnings and the bank's capital ratio -- both of which suffered after an aggressive expansion plan. Hale said the bank achieved its strategy of generating stronger profits by drawing higher revenue while lowering overall expenses. "We have followed our plan all along," Hale said. "If you hit your marks, you get [the bonuses]." Arnold G. Danielson, chairman of Danielson Associates Inc., a Rockville-based consulting firm, said the major banks in Baltimore have performed well compared to others nationwide. Nevertheless, he said there is sometimes a stigma when company executives are rewarded while the rest of the economy is struggling. "Even though none of these companies are doing poorly, there are still a lot of headlines out there with firms that are not doing so well, so there is a tendency to be modest," Danielson said. Several analysts lauded the decision by both Mercantile and Provident not to pay bonuses, and reported that there were not any major concerns surrounding their earnings. Christopher Marinac, an analyst at SunTrust Robinson Humphrey in Atlanta, said Provident successfully recovered from a tough second quarter when earnings fell 11.3 percent to $8.04 million because of $3.4 million in losses and charges related to second- mortgage loans that were mostly bought from an out-of-state company. Marinac said 2002 is poised to be a "solid year" for Provident with those loans off the books. Mercantile recently finished its first year in decades without H. Furlong Baldwin at the helm and its earnings were essentially flat -- rising only 3.5 percent to $181.3 million. Nevertheless, Christopher M. Mutascio, a regional banking analyst for Legg Mason Wood Walker Inc., said the bank's asset quality still is among the best in the nation, and the bank will continue to be strong as the economy improves. In addition to his salary, Mercantile's Kelly was paid $14,500 for travel expenses and $54,500 for nonrecurring relocation expenses. Baldwin, who still serves as chairman of the board, earned $189,000 last year, compared to an $850,000 salary and a $306,000 bonus the previous year when he ran the daily operations of the bank. Baldwin also was paid an additional $416,700 in 2001 under a consulting agreement. "Mercantile has a changeover with the chief executive and he probably did not want to load himself up so early," Danielson said. "He might want to wait until he has been there a little longer."