One banker’s nearly $600,000 pay included perks such as 40 hours of free use of a company jet.

Another top lending officer made nearly $850,000, including $261,255 in commissions on loans.

When another banker resigned, he got $845,932 in severance pay, boosting his compensation that year to more than $1.1 million.

What do these bankers have in common? They all ran small Georgia banks that failed, in some cases less than a year after they collected fat paychecks.

But it’s unclear whether the executives at Omni Financial Services in Atlanta, Integrity Bank in Alpharetta and Security Bank in Macon — if the banks existed today — would still be collecting the same perks, commissions and severance payments under new pay guidelines the Federal Reserve is considering.

Some industry experts say the majority of Georgia’s 300-plus banks — mostly small community institutions — will be relatively unaffected as federal regulators focus on the multimillion-dollar pay and exotic incentive packages at the nation’s largest financial institutions.

“The Wall Street principles just don’t apply,” Atlanta banking attorney Robert Klingler said of the Federal Reserve’s proposed pay “guidance” plan, announced a little over a month ago.

“It’s hard to see how these rules for Wall Street are going to be applied to the banks in Georgia, which for the most part have very simple and reasonable compensation structures,” said Klingler, with Bryan Cave Powell Goldstein.

More scrutiny expected

However, he and other experts said regulators are likely to push banks of all sizes to pay more attention to bonuses and other incentive pay that could encourage employees to take too many risks with the bank’s money.

It has been “common practice” at many banks in Georgia and elsewhere to pay commissions and bonuses to loan officers based on volume rather than the quality of the loans, said Jim Verbrugge, a finance professor emeritus at the University of Georgia.

Bartow Morgan, CEO at Brand Bank in Lawrenceville, credits paying his loan officers straight salaries for helping the 100-plus-year-old bank to so far avoid the worst of the real estate crash.

“We feel that lending money takes care of itself, and the hardest part of lending is getting it back,” said Morgan.

But while he says he’s “all for good banking practices” that take account of risk, he’s leery of additional government rules. “When the economy enters a recessionary period, everybody runs to extra regulation,” he said.

Other experts say regulators may discourage community banks from rewarding executives with big-bank-style perks such as company jets and large severance payments.

Steve Bridges, with the Community Bankers Association of Georgia, is no fan of more regulations either. But he expects heightened scrutiny of most aspects of bankers’ pay in the wake of the financial meltdown.

“The regulators have always looked at this kind of stuff, but I think without a doubt it has raised the bar,” said Bridges. He fears that the Fed policy could make it difficult to retain talented employees and could burden small banks with extra paperwork and regulatory scrutiny while doing little to improve the financial stability of the industry.

“I don’t think it’s unreasonable,” he said of the proposed rules, but “this is just one more thing that [banks] have got to add to the stack. The stack’s pretty large already.”

Linking pay to risk

To reign in “excessive risk-taking,” the Federal Reserve said it plans to give the nation’s 28 largest banks extra scrutiny while looking separately at compensation practices of the rest during its regular bank examinations.

It hasn’t identified the 28 large banks, but the group likely includes the largest recipients of federal bailout money, such as Georgia’s largest bank, Atlanta-based SunTrust Banks.

About two-thirds of Georgia’s roughly 300 banks also would be subject to the Fed’s scrutiny. Industry players say the Federal Deposit Insurance Corp. and other regulators could eventually adopt similar pay review policies, extending such scrutiny to Georgia’s other banks.

The Federal Reserve closed the public comment period for the proposal last Friday, and could issue final guidelines within weeks.

In its proposal, the Fed said it is avoiding specific limits on bonus pay or other incentives in favor of broad guidelines to link pay and risk, such as paying out bonuses over longer periods to take account of losses that could materialize later.

The Fed said the rules will apply to executives, loan officers and traders whose decisions could “expose the firm to material amounts of risk.”

Other guidelines would require a bank’s board of directors to “actively oversee” the institution’s employee pay practices.

Impact on Integrity?

Those guidelines would likely have come into play for Integrity Bank, had it not already failed almost 15 months ago. More than two dozen Georgia banks have failed since, making the state the nation’s leader in closed banks during that period.

In its 2007 proxy statement, Integrity Bank disclosed that almost half of the $847,222 annual pay of its senior lender, Douglas Ballard II, was from a bonus and commissions on loan business.

Ballard was the bank’s second-highest-paid executive, after Chief Executive Steven Skow, whose $1.8 million included a $275,000 bonus and more than $1 million in stock options.

Under the new Fed guidelines, banks will need to adjust commissions downward for more risky loans or pay part of commissions and bonuses over an extended period based on how well the loans perform, said Verbrugge, the retired finance professor.

Also, under the new rules, he said, banks are likely to award to executives restricted stock rather than stock options.

Owning restricted shares that can’t be sold immediately “creates an incentive not to do something ... that in the long run might be damaging,” he said.

Striking a balance

It’s unclear what the Fed’s bank examiners might have said about the $845,932 severance package that Security Bank’s former CEO, H. Averett Walker, got when he resigned in September 2008 amid mounting losses.

State and federal regulators closed Security Bank’s six bank subsidiaries, which had $2.8 billion in assets, on July 24.

Klingler, the attorney, noted that the federal TARP bailout program included “clawback” provisions allowing the FDIC to demand that executives repay bonuses if they’d been paid based on financial reports that materially overstated the company’s profits. The Fed could follow a similar policy.

However, Bridges said it could be difficult to avoid such payouts when a bank wants to shed an executive who still has a multiyear employment contract. “I think [regulators are] going to be scrutinizing those contracts, but they’re going to have to strike some sort of balance,” he said.

The Fed pay guidelines also may not have had anything to say directly about the corporate jet that Omni National Bank allowed its CEO, Stephen M. Klein, to use up to 40 hours a year, tax-free.

But Bridges, noting that he knows of only one other small Georgia bank (also failed) that had such a jet, said he can’t imagine that such perks won’t raise bank regulators’ eyebrows now.

“I don’t think there’s a question that there will be scrutiny of unusual types of perks,” he said.

Klein, who had owned the Cessna Citation jet, sold it to Omni in 2004 for $2.6 million. Omni sold it in 2006 for $2.45 million and used the money to get a new aircraft in early 2007, according to the company’s 2006 annual report to the U.S. Securities and Exchange Commission.

It’s unclear what happened to that aircraft, because Omni didn’t file any more annual reports. Federal regulators seized the bank on March 27.