Mutuals face challenges recruiting talent at a time when commercial banks are aggressively hiring lenders and other personnel.

A big issue is equity compensation. Mutuals that have not gone through a conversion process do not have shares available to provide stock-based incentives.

Compensation could also stymie succession planning. Regulators are playing close attention to such planning, says Robert Davis, an executive vice president at the American Bankers Association. Smaller banks often fall behind in succession planning because there is less investor pressure to make sure that the next generation of leadership in place, he says.

Smaller banks, including mutuals, are trying to "do more with less in terms of management" but "at some point that isn't possible," says Kip Weissman, a lawyer at Luse Gorman Pomerenk & Schick.

Mutuals are looking to recruit and retain staff in commercial lending, compliance and technology. Those that are looking at commercial lending may struggle to land the first few lenders, Weissman says. Culture also plays a role because mutuals often have to move toward a sales-based business model before enticing commercial lenders, he says.

Still, some industry experts believe mutuals can find a way to recruit talent. They say that mutuals can usually compete with cash compensation, and most are able to provide better benefits.

Recruiters should focus on those strengths, while also highlighting a culture that is often less stressful, and more stable, than working at a larger institution. The key is those attributes to combat short-term financial gains.

"Compensation isn't purely financial," says Rod Taylor, chief executive of executive search firm Taylor & Co.

"Nobody likes working for an organization where they have a whip cracked at them constantly," Taylor says. "Mutuals are well advised to look at the things they do well rather than try to compete in categories where they will never be as good."

Mutuals are capable of building a "compensation program for senior executives that is completely competitive with commercial banks," adds Alan Kaplan, chief executive of executive search firm Kaplan & Associates.

There are ways mutuals can combat limitations on stock-based compensation, industry experts say.

Mutuals could look into phantom stock or long-term cash plans, says Susan O'Donnell, a partner in the financial services practice at Meridian Compensation Partners. Phantom stock is similar to a stock option, though it uses a proxy such as book value instead of stock price to determine compensation.

"You don't have to be at a competitive disadvantage," O'Donnell says. "It all comes down to … your institution's philosophy. Why would you come here instead of somewhere else?"

Still, there are non-financial factors that could discourage ambitious bankers from joining mutuals, industry experts say.

Mutuals often have well-entrenched management teams. While this can foster continuity, having long-tenured executives can limit upward mobility. This dynamic could be discouraging to younger employees looking for opportunities, says Brian North, senior vice president of lending and compliance at Fifth District Savings Bank.

The New Orleans mutual has developed a reputation for successfully retaining employees, says North, who has been at Fifth District for 25 years. The $389 million-asset company encourages employees to pursue additional education to help with retention.

"We try to bring in young people at the entry level and train and cultivate them," North says. "We want them to move up and take on more responsibility. That's been one of the keys to the success of our institution."

Culture is always a concern when assessing mutuals and commercial banks.

Cultural fit is a key consideration at Thomaston Savings Bank in Connecticut, says Stephen Lewis, the $781 million-asset mutual's president and chief executive. The mutual offers career programs and internships that let high school and college students work part-time.

The internships and career programs create a solid pipeline to recruit young employees.

Thomaston Savings also emphasizes its 140-year history, which can provide a sense of stability to prospects. It can also be particularly appealing to prospects who are leaving institutions that recently went through a merger.

"At the higher-level positions when people come in, they are looking for a better quality of life and are willing to sacrifice the big bonus you might get if everything goes well" at a commercial bank, Lewis says.

"With the bonuses and stock options, there comes a level of risk and pressure," Lewis adds. "For us, even during the worst of the recession, we increased salaries every single year."

Fortunately for mutuals, more commercial banks are reducing their reliance on stock options for attracting and retaining talent, Taylor says.

Most financial institutions do not expect their stock prices to meaningfully rise. At the same time, regulators are not fond of stock-based compensation, O'Donnell says.

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