For Massachusetts community banks, the gulf between billions and millions in assets also comes with an eye-popping difference in benefits and pay costs for employees – a gap that’s gotten wider over the years.
In 2010, Massachusetts’ largest local banks spent, on average, $37,628 more per employee in salaries and benefits than their smaller peers. That’s compared to a roughly $22,000 difference in 2003.
And while U.S. banks of all sizes have increased pay and benefits expenses in recent years, Massachusetts banks of $1 billion in assets or more made much bigger increases than both their smaller Bay State peers as well as similarly sized banks across the country.
Interestingly, Massachusetts’ $1 billion-or-less crowd mostly kept in lock-step with national benefits increases over the past eight years, staying within a few percentage points in most cases.
Dallas-based researcher BankRegData compiled the figures at Banker & Tradesman’s request, using its database of nationwide financial filings. The researcher used the lump sum each locally based institution spent on combined salaries and benefits, divided by its full-time employee tally.
Strong Position
Bigger banks’ largesse may be an indication that they’re in a stronger position compared to their smaller Bay State banking brethren, who frequently complain that outsized compliance and operational expenses are hampering their growth compared to larger banks.
Julieann Thurlow, president and CEO of $330.9 million-asset Reading Co-Operative Bank, acknowledged that larger banks pay more per employee, often for the same position. Entry-level positions start out comparable, but senior-level employees quickly rise in pay at the bigger banks, she said.
Susan O’Donnell, Southborough-based partner with compensation consultant Pearl Meyer & Partners, pointed out that the employee makeup is often different for larger banks, with more wealth management and commercial lenders instead of smaller retail banks’ more teller-focused operations. Those higher-paying positions could easily drive up averages, she said.
Meanwhile, the speed of Massachusetts’ growth compared to peer institutions across the U.S. could have several causes, she said. The state has been a veritable safe haven for banks compared to hard-hit areas around the country, affected as they are by crippling loan trouble. With fewer problem loans, local banks have more to spend on salaries and benefits.
But in her experience, she said, banks overall are keeping salary increases conservative. Typically, salaries will rise a modest 3 percent to 5 percent, with banks favoring incentive programs for individuals’ particularly strong performances. The major burden right now is for benefits such as health care, which account by far for the biggest per-employee cost increases.
So while expenditures are increasing, O’Donnell cautioned that not all expenses mean more money in employees’ pockets.
A Pricey Place
One finding that is perhaps unsurprising: Massachusetts’ bankers average pay and benefits is much higher than the U.S. average, largely attributable to the state’s higher cost of living.
The state’s smallest banks, those with less than $100 million in assets, spent $70,741 per employee in 2010, about $10,000 more than the national average. For banks with between $1 billion and $2 billion in assets that number climbed to $87,823 per employee in Massachusetts, more than $20,000 above the U.S. average.
O’Donnell confirmed that Massachusetts is indeed pricier: A Massachusetts employee costs 9 percent more than the national average, she said, and in Boston that number rises to 18 percent.
Despite the volume differences, banks with fewer than $1 billion in assets had salary/benefits increases that closely reflected the national average on a percentage basis, usually sticking to within a percentage point or two.
Massachusetts starts to peel away from the national pack after the $1 billion mark. For $1 billion to $2 billion banks, salaries and benefits rose by nearly 30 percent in Massachusetts in 2010 compared to 2003; that rise was only 24 percent for the U.S. as a whole. For banks with $2 billion to just less than $5 billion, costs also rose 30 percent, compared to 25 percent nationally.
Only two banks occupy Massachusetts’ top category of $5 billion and higher – Eastern Bank and Boston Private Bank & Trust Co. – but those two local giants rose the furthest in terms of employee cost between 2003 and 2010, rising about 41 percent compared to the U.S. average of 33 percent.
Whatever the causes, bigger banks’ apparently stronger ability to spend on its employees is in contrast with the compensation packages smaller banks can offer. Thurlow said Reading Co-Operative attracts its talent by presenting a strong benefits and salary package – but also by playing up valuable intangibles, including a close-knit organization and a clearly defined role for every employee.
