June 29, 2024 / VOLUME NO. 320

Connecting People and Profits

Many banks struggle to find talent. But a bank’s financial performance could be an indicator of how much it may struggle.  

Bank Director’s 2024 Compensation & Talent Survey, sponsored by Chartwell Partners, finds 39% of bank leaders reporting that it was harder to find talent in 2023-24 compared to previous years. That’s down from the previous year’s survey, but a deeper dive into the data shows it’s a particular challenge for less profitable banks.

For the senior executives and board members representing banks with a return on assets above 1.75% for fiscal year 2023, 19% say it has been more difficult to attract talent. For less profitable banks, that percentage spikes to 42% for institutions with an ROA of 1.00% to 1.75%, and 40% for those with an ROA under 1.00%.

And profitable banks were more likely to add talent in 2023, too. Almost two-thirds of respondents representing the higher ROA tier increased their number of employees on net; 60% of those in the 1.00% to 1.75% tier did as well. But just one-third of banks with an ROA below 1.00% were able to add talent and were more likely to report a decrease. Notably, the majority of respondents represent that lowest ROA tier. 

There are strong ties between profitability and productivity, which is often measured in the industry via the efficiency ratio. When asked about their performance, the CEOs of efficient banks emphasize talent and culture. 

“Higher performing employees are more efficient than poor performing employees,” said George Gleason, CEO and chairman of $36 billion Bank OZK in Little Rock, Arkansas, when I interviewed him earlier this year for Bank Director magazine. He’s willing to spend money to hire the best. “The better person you hire,” he said, “is likely to make a much more than proportionate increase in the productivity of your company.” Bank OZK ended 2023 with a return on average assets of 2.3% and an efficiency ratio of 33.7%.

And while pay is important, $16.5 billion CVB Financial Corp. in Ontario, California, also invests in employee development and conducts an annual employee engagement survey. “Engaged associates are much more productive,” said CEO David Brager. CVB reported an efficiency ratio of 42.0% and an ROAA of 1.4% last year. That exceeds the median, 1.0%, for the 300 largest public banks, per Piper Sandler & Co.’s analysis of S&P Global Market Intelligence data. 

Employees generate profits, and banking’s top performers understand that. A focus on talent — in good times and bad — may differentiate the weak from the strong.

Emily McCormick, vice president of editorial & research for Bank Director

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 “It is an incredibly difficult job and sometimes there’s a lot of pressure put on those officers.” — Kristina Schaefer, Fishbank Financial Corp. 

• Paul Davis, contributing writer for Bank Director 

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About Bank Director

Bank Director provides research, peer-insight and executive and board services to the financial industry. CEOs, CFOs, Chairs and leadership teams at financial institutions, fintechs and financial services firms turn to Bank Director to keep pace with their ever-evolving business landscape.