The recent acceleration in merger and acquisition activity among banks in the Washington region is attracting serious scrutiny of an issue that many bankers had taken for granted in the past. They are finding now that their expansion plans are only as good as their hiring and promotion policies.
Item: The Equal Employment Opportunity Office filed a class-action discrimination suit two weeks ago against Citizens Bancorp of Riverdale, one of Maryland's rapidly growing middle-tier bank companies.
Item: The D.C. City Council, in considering interstate banking legislation, requested all District banks to submit documents showing the number of female and minority employes and their positions either as professional or nonprofessional staff members.
Item: At a recent D.C. City Council hearing on an application for a merger between United Virginia Bankshares Inc. (UVB) and NS&T Bankshares Inc., at least one member adamantly insisted that UVB elect five minorities to its board within five years of the merger.
At the same time, the Council demanded that both UVB and NS&T submit documents showing the makeup of their respective work forces by sex and race.
It's safe to say that any banking firm that seeks to merge with a D.C. institution will be required to file similar documents.
No Virginia or D.C. banking firm stands formally accused of discrimination in hiring and promotion but, as in Citizens's case, their merger and expansion plans have drawn attention to a sensitive area.
The suit against Citizens alleges that the bank discriminated against blacks and other minorities as a class in recruitment, hiring and job assignments.
The suit also alleges that Citizens discriminated against females on the basis of sex, in recruitment and hiring.
The timing of the suit seemed odd, considering that the EEOC began investigating a complaint against the company's principal subsidiary, Citizens Bank of Maryland, seven years ago.
Little action was taken after an initial investigation by the EEOC, however.
To be sure, there were attempts to negotiate and conciliate but, after seven years, the investigation appeared to have been dropped.
But then Citizens, which reported little more than $500 million in assets seven years ago, launched an aggressive acquisition campaign in which it bought several smaller Maryland banks and increased its assets to more than $1 billion.
Although its operating style has changed little from the days when it was a small rural bank serving Prince George's County, Citizens has become one of the largest and most profitable of the medium-sized regional banks in this area.
Citizens' rapid growth has played well to investors. Its stock has soared to well over $100 a share.
And, like many investors, the EEOC took more than a passing interest in Citizens.
It was this phenomenal growth, ironically, and not an almost-forgotten complaint alleging discrimination, that renewed the EEOC's interest in Citizens' hiring and promotional policies.
"What that [rapid growth] did was make the commission take a look" at Citizens, an EEOC spokesman disclosed this week.
Citizens has denied the allegations, but the EEOC maintains that, if anything, the company's record of hiring and promoting women and minorities is worse than it was when the original complaint was filed seven years ago.
"When the investigation began, 9 percent of new hires in entry-level positions were minorities," said an EEOC spokesman.
"That percentage has decreased. A decrease over seven years signifies something," the spokesman added.
Citizens officials have refused to comment on the case while it is in litigation, but the company says 30 percent of its 1,390 employes are minorities, while 75 percent are females.
Among Citizens' 93 branch managers, 73 are women and nine are minorities. Citizens did not say, however, how many women and minorities hold the position of vice president and above. Statistics don't always tell the full story, but a sampling of banks in the area offer some interesting comparisons.
The District's second-largest bank, American Security, for example, reports that 58.2 percent of its work force is comprised of minorities. American Security employs 17 women and 13 minorities as managers in its 30-branch network.
Of 123 vice presidents, however, only 10 are minorities. Among the bank's senior vice presidents and executive vice presidents there is one woman, but no blacks. One black and one woman sit on American Security's board.
At NS&T, about 55 percent of the employes are minorities; they hold about 7 percent of the management positions. Two women, one of them black, sit on NS&T's board.
UVB, which will take over NS&T next month, informed the D.C. City Council that 19 percent of its 5,100 employes are minorities.
In UVB's Northern Virginia region, more than half the officers and managers are women, while minorities make up about 8 percent.
Statistics such as those were largely taken for granted by many bank executives.
Now they are finding that their plans to restructure the banking industry in this region are subject to stiffer fair-employment tests.