One of the more confusing areas of the loan officer compensation rules involves branch managers. Neither the rule nor its guidance made any mention of branch managers.
Moreover, in one of the many flip-flops by the Federal Reserve concerning LO compensation, the FRB changed its interpretation. At first, the FRB only prohibited the branch manager's personal production from counting toward the manager's revenue share. Later, however, the FRB revised its stance and prohibited any revenue share by a producing branch manager.
To be clear, the FRB's position is that a producing branch manager-one who originates loans, negotiates terms, or assists a consumer in financing residential real estate-cannot be paid any percentage of the actual profit of branch operations. It does not matter how compensation is paid-whether it be by a flexible salary or by a bonus-if the producing manager is ultimately and actually being paid the branch profit, the compensation structure violates the LO comp rules.
Of course, as many have noted, the above reflects only what the FRB has stated in its verbal non-binding opinions. There has yet to be a written binding pronouncement on branch manager compensation. Until that happens, companies will continue to struggle with branch manager compensation, balancing competitive needs against a desire for compliance.
