Central to the ongoing dispute over the failed conversion of Columbia CU to mutual savings bank was managers' and directors' motives in the proposed switch.
While the embattled board at Columbia continues to deny a profit motive, it's clear that executives and directors could have enriched themselves significantly if they had succeeded in converting to a mutual, then stock form of bank, as has occurred at at least seven other credit unions.
The closest example to Columbia is another Washington institution and former credit union, Rainier Pacific Financial Group, the parent of Rainier Pacific Savings Bank. On Feb. 17, directors of the Fife, Wash.-based bank, known until 2000 as Rainier Pacific CU, approved a lucrative post-conversion compensation for both themselves and managers.
Under the plan, disclosed in documents filed with the Securities and Exchange Commission, top executives and directors of Rainier Pacific will be granted a total of 288,500 shares of stock valued at almost $5 million, to be vested over the next five years. The largest recipients will be President and CEO John Hall, who will receive 60,000 shares valued at almost $1 million, and Senior Vice President Victor Toy, who will receive 40,000 shares valued at more than $650,000.
But directors also voted themselves a share in the so-called management recognition stock plan, with each of the eight non-employee directors in line for 10,000 shares valued at $165,000 over the next five years. That's on top of the $13,750 each of the once-volunteer directors now earn each year to serve on the board.
But that's not all. The group, as well as other employees will share in a pool of options to buy 680,000 bank shares at a discount over the next five years. Officials of Rainier Pacific did not return phone calls last week to comment.
A Credit Union Journal analysis of SEC filings has found that directors and officers of other credit union converts are also enjoying lucrative paydays.
At Synergy Bank, once known as Synergy FCU, CEO John Fiore, was granted 155,628 Synergy Financial shares on Jan. 20 worth $1.6 million, and stock options worth another $750,000, over the next five years. The stock grants included 52,532 shares under the bank's restricted stock plan worth $550,000; and 73,635 shares worth $772,000 for his 401 (k) plan, among other grants, according to documents filed with the Securities and Exchange Commission. The stock and options grants are likely to put the former credit union executive's 2004 pay at close to $3 million, once salary, bonuses and other compensation are added in.
At Pacific Trust Bank, the Chula Vista, Calif., bank once known as Pacific Trust FCU, stock and option grants have significantly boosted the compensation levels for top executives. Hans Ganz, the president and CEO, who earned $205,000 in salary and an $85,000 bonus last year, was granted 100,000 stock options exercisable over the next five years at $17.39 a share.
Additional Profits
With the stock trading last week at more than $22.50, Ganz stands to gain at least $528,000 in profits on the options. The ex-credit union CEO was also granted another 45,000 shares, valued at more than $1 million, which vest in five equal installments over the next five years.
That's on top of the more than $600,000 in profits Ganz earned on the 50,000 shares he bought in the 2002 IPO.
In addition, five non-employee directors of the $650 million bank will each receive 10,000 stock grants valued at $225,000 and another 20,000 stock options over the next five years, under the bank's executive compensation plan.
Ganz makes no excuses for his compensation package. "I am very proud of what I did last year and how hard I worked for my $300,000," said Ganz. "Everybody here knows how much I make. It's no secret."
Furthermore, Ganz suggested that his compensation is not much greater than the compensation being earned by executives at credit unions or banks of similar sizes in the San Diego, area. That includes retirement benefits and other perks regularly awarded credit union executives. Of course, as Ganz points out, there is no way to find out what credit union executives earn as there is no requirement for public disclosure.
