Smaller Banks Hiring as Bigger Ones Lay Off : Banking: Southern California’s economy is in such a slump that it is an exception to the trend of community institutions adding personnel, however.
SAN FRANCISCO — Massive job cuts at the nation’s largest banks have riveted the industry’s attention. But with little notice, community banks have been adding workers--except in Southern California, where the economy is still in the doldrums.
The number of full-time workers at banks with less than $1 billion in assets last year rose 2.8% to 625,082, according to an analysis by Ferguson & Co., a Dallas-based consulting firm.
In the past four years, the number of jobs at these institutions has risen 6%.
The expansion is in sharp contrast to the shrinkage taking place at the nation’s biggest banks. At banks with more than $1 billion in assets, the number of full-time equivalent jobs shrank 3.4% last year to 910,060.
During the past four years, the job loss at these institutions was 3.9%.
“The break is somewhere around $3 billion in assets,†said David Partridge, a consultant with Towers Perrin in Los Angeles who has studied the trend.
“Institutions above that size have been downsizing; companies under it have been holding steady or adding employees.â€
The divergent job trends reflect the difference in performance between major banks and their smaller counterparts.
Over the past decade, profits of larger institutions were eroded by waves of credit quality problems. That, in turn, put heat on the banks to cut costs, especially for personnel.
By contrast, community banks as a group fared reasonably well and did not feel the same pressure to trim overhead.
“If you are performing well and have adequate capital, you are not likely to be cutting jobs,†said William Ferguson, president of Ferguson & Co.
All that is changing, however.
Higher deposit insurance premiums, stepped-up competition from major banks and non-bank financial service companies, and a tougher regulatory climate are likely to produce a more difficult operating environment for community banks in the years ahead.
That will force many of them to focus on costs with the same fervor showed by their larger cousins.
What’s more, while community banks as a group are expected to survive the industry shakeout, their numbers are likely to decline as a result of mergers. Such consolidation will trim the industry’s employment base.
Andersen Consulting predicts that 10% to 20% of jobs in banking will disappear in the 1990s, many at smaller institutions.
“Community banks will not continue to be spared,†warned Joel Friedman, Andersen’s managing partner in San Francisco.
“Their cost structure will be increasingly burdensome, competition will be more ferocious and capital will no longer be plentiful.â€
Although they have generally succeeded in avoiding big layoffs, community bankers say they are feeling growing pressure to trim payrolls.
Bank of Utah, with $156 million in assets, has increased its payroll 24% the past 30 months after an expansion into insurance and mort gage banking.
But Bank of Utah President and Chief Operating Officer Roy Nelson, who is also president of Western Independent Bankers, said he is under the gun to keep the work force lean.
“If you are not constantly examining your full-time equivalents, you are not doing your job,†he said.
Of course, many community banks have already started cutting staff. In Southern California, where the economy is slumping, “people have stopped hiring and are trying to eliminate positions,†said James Staes, president and chief executive of Home Bank.
Home Bank, with $400 million in assets, cut its full-time staff 18.4% during the first half of 1992, primarily by turning to outside suppliers for its back-office operations and not replacing employees who quit.
When California’s recession caused Home’s earnings to plunge, “we felt we could operate a bit thinner and ask existing staff to work harder,†Staes said.
Job cuts at smaller banks usually take different forms than cuts at major institutions.
Wholesale firings, in which entire divisions are restructured or eliminated, are rarer because community banks usually have just a few business lines. Work force reductions by attrition are more common.
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
