Fulton Financial Corp. has given R. Scott Smith Jr. a million reasons to stick around for another year.

The Lancaster-based financial holding company has awarded Smith, its chairman and chief executive officer, a $1.3 million retention bonus.

If Smith stays at Fulton through 2012, the cash bonus will be paid to him in January 2013.

Fulton was able to pay the bonus because it has left the U.S. Treasury's Capital Purchase Program, which has restrictions on executive pay.

In a Securities and Exchange Commission filing, Fulton said it gave the bonus to the 64-year-old Smith for numerous purposes.

First, Fulton said it wants "to position (Smith) closer to the median compensation level among Fulton's peer companies."

And it wants to make sure Smith stays because Fulton sees Smith continuing "to play a critical role in Fulton's future success."

Smith "will be required to guide Fulton through unprecedented regulatory changes," Fulton said in the September filing with the SEC.

In addition, he will have to lead Fulton's "efforts to grow both organically through branch expansion and externally through (acquisitions)."

Furthermore, Fulton wants to give Smith "an incentive ... to arrange a smooth transition for his successor as he approaches retirement age."

Smith, of Holtwood, has been chairman and CEO since January 2006.

He leads a company that owns six community banks in five states, plus Fulton Financial Advisors and Fulton Mortgage.

Fulton has $16.3 billion in assets, employs 3,800 people and operates 272 branch offices.

That includes 29 branches in Lancaster County, where it has had the largest share of the market for at least 18 straight years.

According to Fulton's proxy statement, Smith earned $1.5 million in 2010, the most recent year for which pay figures are publicly available.

His pay included an $809,000 salary, $356,000 in restricted stock, $221,000 in performance-plan incentives and $127,000 in other compensation.

That total would have been higher, except for Capital Purchase Program restraints in effect at the time.

Fulton was enrolled in the lending-catalyst program from December 2008 to July 2010.

Capital Purchase Program rules include prohibiting participants from "paying or accruing any bonus, retention award or incentive compensation" to their top executives.

Since Fulton was in the program for 54 percent of 2010, the top executives (including Smith) forfeited 54 percent of their "Variable Plan" performance incentive pay.

So while the Variable Plan incentive formula called for Smith to get $480,000, he received $221,000 and forfeited $259,000, according to the Fulton proxy.

tmekeel@lnpnews.com