Bank salaries in New England fare well when compared with those throughout the country, according to a survey by America’s Community Bankers. Farmington Savings Bank was one of the larger Connecticut banks to complete the survey.

What community banks pay employees these days is a key issue for every one of those institutions and for the entire banking industry, especially when it comes to the hottest positions on the market.

Experienced commercial loan officers can “pretty much demand what they want” in today’s banking world, Connecticut Bankers Association Senior Vice President Lindsey Pinkham told The Commercial Record – but salary surveys show compensation for most other bank employees rising at modest rates, slightly above inflation.

Auditors are also “very hot” right now, according to Cambridge (Mass.) Savings Bank Senior Vice President for Human Resources Marie Lodi. “We want to make sure we are paying a competitive salary so they don’t go someplace else,” she said.

Banks rely on salary surveys to make and validate decisions about compensation.

Many cite reports by Clark Consulting – state-specific surveys commissioned annually by the Massachusetts Bankers Association and Connecticut Bankers Association, among others, on behalf of their members – as invaluable to their efforts.

The Clark surveys garner more local respondents (41 banks and credit unions from Connecticut this year and 108 from Massachusetts) than America’s Community Bankers’ Compensation and Benefits Survey, a nationwide survey of community banks conducted annually by the trade group, which had seven Connecticut and 13 Massachusetts respondents in 2006.

But banks like both surveys, for different reasons.

“My primary reason for doing [the ACB survey] is that you try to have multiple sources, and this particular survey is broader because it’s more national in scope Â… You can say ‘across the country, banks are paying this,’ and you can compare that to Connecticut,” said Lee Nordstrom, vice president of human resources at Farmington Savings Bank. With $880 million in assets and 200 employees, Farmington Savings was one of the larger Connecticut banks to complete the ACB survey.

“We also use and, which is part of the Wall Street Journal, so that we have multiple sources. And we use a consultant. There is lots of data,” added Lodi. She said the Clark survey’s value, in part, is in the number of local responses included.

The Clark and ACB reports for 2006 were released last month. They identify trends in salary dollar amounts, ways of compensating employees, bank board of directors’ salaries and non-salary costs such as health care.

“I don’t think there are surprises,” said Lodi.

Salaries in southern New England are on average at least “competitive” with the rest of the country, if not higher, according to John Carusone, president of the Hartford-based Bank Analysis Center, as well as data from one national survey. The cost of living is a key reason, as is bank asset size.

Health insurance also is a major factor in bank compensation programs nationwide, with costs rising rapidly – an average of 11.9 percent last year, according to the ACB survey.

Banks continue to pay about 80 percent of employees’ premiums. Many are exploring higher-deductible plans or increasing the percent they ask employees to pay, but Cambridge Savings is not among them, Lodi said.

“We know that our employees value medical insurance above all other benefits. So we are very generous,” she noted. “I think that most companies are looking at [ways to cut health benefit options] very seriously. We wouldn’t.”

Similar Conclusions

Bonus or profit-sharing pay, as opposed to base pay, appears to be on the rise – in importance as a method of compensation, if not in actual dollar amounts – this year.

Board of directors’ average annual pay remained constant from last year, at around $17,700.

America’s Community Bankers representatives could not be reached for comment, but Susan O’Donnell – managing director of Clark Consulting, which prepared the Massachusetts and Connecticut reports – said both surveys came to similar conclusions about trends in New England bank salaries.

For example, the Massachusetts and Connecticut Clark reports both conclude, as does the ACB nationwide survey, that salaries for bank jobs overall have been increasing, and will continue to do so at a rate of 3.5 percent to 4 percent annually – slightly higher than the current rate of inflation.

“Salaries are going to increase at a very, very modest rate. [Banks may] put more of the pay in incentive pay,” O’Donnell said, noting that she’s seen a two-decade trend in banks’ “desire to hold down fixed costs.”

Incentive pay packages, in which employees are paid according to the bank’s performance, should pay for themselves “if they’re designed well,” she added.

Pinkham said the newest Clark survey shows that one-third of Connecticut’s banks are forming long-term incentive pay programs, a trend he called “interesting” and said shows that banks are looking harder at “ways to retain good people.”

Bank and industry officials agreed.

“We have incentives for all non-senior management personnel,” said Patricia Archambault of Cape Cod Cooperative Bank. “We incent them to promote products.” The bank is researching incentive options for senior management, she added.

At Cambridge Savings Bank, there are short- and long-term incentives, according to Lodi.

“Long-term is a three-year horizon. It’s generally in the form of stock options,” she said. “You want to retain your senior staff – so if you hit certain forecasted goals you will receive stock options. It’s a long-term horizon to keep people motivated.”

Bank executive salaries also tend to be higher in New England than the rest of the nation. The ACB survey puts the average base salary for CEOs, nationwide, at $202,500, and $233,100 in New England. Clark Consulting said CEOs earn an average of $276,000 in Massachusetts and $286,000 in the Northeast as a whole.

Bonus and incentive pay adds a significant portion to total compensation awarded to both CEOs and bank employees at all levels, the Clark Consulting report noted. The larger the bank’s pool of assets, the bigger the award.

For example, at a bank with $350 million or less, incentive pay amounted to 13 percent of a CEO’s base salary. For those with more than $1 billion in assets, it jumped to 45 percent.

Even for “non-officer, non-exempt” (entry-level) positions, incentive pay as a percent of base salary awarded to those employees doubled, from 4 percent to 8 percent, from the smallest to largest banks.

Pinkham noted that he thinks average CEO salary figures reported for the banking industry, or a region, aren’t as meaningful as those reported by bank asset size.

“You need to analyze by peer group,” he said – for example, comparing all banks that are 5 years old and have $150 million in assets.

Nordstrom noted that the type of charter a bank has also influences salary, especially at the senior level.

“You’ll see big differentials between a stock and a mutual company,” he said. “We [at Farmington Savings] are not publicly traded, so Â… we have no stock options or other influences on pay,” especially at the CEO level.

As a result, “We are not going to have as much of a fluctuation in overall compensation to the CEO,” he added.

None of the salary surveys differentiated between men’s and women’s salaries at banks. Pinkham said he was not aware of any such data out there, other than the occasional article about the “glass ceiling.”

Bank Analyst Kevin Timmons of Albany, N.Y.-based CL King & Assoc. said executive salary increases probably will slow in the coming years, due to increased competition from other financial service providers.

Among the average base salaries for major banking positions in New England identified by the ACB survey: Chief Operating Officer, $134,500 (compared to $132,800 nationwide); Chief Financial Officer, $129,400 (compared to $117,700); Corporate Secretary, $48,800 (compared to $63,200); Chief Lending Officer, $129,800 (compared to $118,500); Chief Information Systems Officer, $94,700 (compared to $92,700); Chief Internal Auditor, $76,800 (compared to $73,000); Senior Mortgage Loan Officer, $75,800 (compared to $45,900); Commissioned Mortgage Loan Officer, $35,100 (compared to $33,600); Salaried Mortgage Loan Officer, $46,600 (compared to $41,000); Commercial Loan Officer II, $94,300 (compared to $78,700); and Teller, $22,000 (compared to $20,200).

That survey measured responses from 361 banks, about 10 percent of those solicited.