If there is such a thing as a President's Day present, then Brian Moynihan just got one. Bank of America (NYSE:BAC) announced at the end of last week that its 57-year-old chairman and CEO got a 25% pay raise for his performance last year.

Moynihan is set to earn $20 million in total compensation for 2016. That consists of a $1.5 million annual salary and $18.5 million in restricted stock.

Bank of America chairman and CEO Brian Moynihan.

Bank of America chairman and CEO Brian Moynihan. Image source: Bank of America.

Bank of America cited five reasons for the bump:

  • The bank earned $17.9 billion last year, which was 13% higher than 2015 and the second highest earnings in Bank of America's history.
  • Revenue growth combined with expense decline increased operating leverage across the bank.
  • Bank of America also achieved historically low credit losses.
  • Total shareholder return was 33.3% in 2016, which beat its primary peer group on 1-, 3-, and 5-year bases.
  • And the bank also made progress on its long-term return on assets, return on tangible common equity, and efficiency goals.

There's no question that $20 million is a lot of money. That said, if you're going to pay a banker that much, then Moynihan certainly seems like a worthy recipient.

He navigated the nation's second largest bank by assets through the most challenging time in its 100-plus year history. After absorbing nearly $200 billion in crisis-related expenses, Bank of America turned the corner in 2015 and hasn't looked back since.

The Charlotte, North Carolina-based bank's profitability is improving and stabilizing, leaving the wild gyrations in the past. And most impressively, under Moynihan's watch, Bank of America has cut upwards of $20 billion worth of annual operating expenses.

Moynihan is now set on inoculating a culture of responsible growth throughout the bank. This will be a challenge because it goes against Bank of America's decades-long strategy to grow at all costs, but it's nevertheless the right message.

In order for the entire amount of Moynihan's restricted stock grant to vest -- which, again, accounts for the lion's share of his 2016 compensation -- Bank of America will need to continue heading in the right direction.

The grant kicks in over the next three years, but only if the bank exceeds two targets: exceeding a three-year average return on assets of 0.80% as well as a three-year average growth of adjusted tangible book value of 8.5%.

To put these figures in perspective, Bank of America's average return on assets over the past three years is only 60%, while it has grown its tangible book value per share by right around 8.5% each year.

The profitability goal in particular, in turn, ensures that Moynihan's interests overlap closely with the bank's shareholders.