Jeff Judy and Associates

In the April, 2007 issue Independent Banker from ICBA, my comments were featured in an article titled “On the Hunt”, about attracting and retaining commercial loan officers. If you didn't catch that article (by Ray Pelosi) in the Lender Life section of the magazine, or don't subscribe, the summary below captures the key points I made in that article.

The article focused on the challenges community banks face in staffing commercial lenders. The banking industry as a whole is facing a labor shortage for many positions, and competition for skilled employees can be fierce.

As the author pointed out, salary is obviously a key factor, and larger community banks tend to pay higher salaries.

But given roughly the same salary, what other factors play a role in finding and keeping good commercial loan officers, and in getting the most out of them? That's the area I addressed in my comments, and I made the following points:

Results-based incentives are becoming more common in community banks. The bankers supplement their salaries, but the bank ensures that they are rewarding performance. Some banks award bonuses based on individual performance, but others tie these incentives to the performance of the entire lending portfolio. Your best approach depends on the size of your bank, the number of staff, and the culture of your organization.
If you can't find a complete commercial banker, with all the skills in credit analysis, sales, and customer service -- or you can't compete with larger institutions for those kinds of employees -- the find someone who has some of the skills and attributes you need. That is, hire someone who is strong in sales, or good at credit analysis, and then:

You can provide training in the skills they lack, growing your own “complete banker”.

You can support them in other skill areas through other employees. Some banks have separate underwriting departments with dedicated credit analysts, for instance. Others might have a team of commercial lenders in which some are strong in credit, some strong in sales, and so on.

Don't just look inside the banking industry for good candidates. As an example, a past chief of the St. Paul police built a police department that enjoyed good community support by hiring people with good interpersonal skills, and then taught them how to be police officers, in contrast to the common practice of setting military/law enforcement backgrounds as the first priority.

In the same way, someone who has a lot of business experience in your community, who knows your market and understands the kinds (and size) of business you work with, could have a huge head start on building business relationships with your prospects and customers. As above, you can provide the training needed to get the required commercial lending knowledge and skills. It is much harder to add understanding of, and relationships with, your community to a commercial lender you've hired from a different market.
Invest in training. Better-trained people will produce better results. After all, every banker is going to compute the same current ratio on your prospect. The differences in the quality of the decisions you make, and in the profitability of the relationships you establish, lies in your people. You invest in upgrading your computers, your software, even the furniture in your lobby, you should be at least as committed to investing in "upgrades" of your people on a regular basis.
And remember that training is available in a wide range of formats, that have different advantages. Off-the-shelf self study programs and online courses can provide a lot of basic knowledge. Live seminars, and web and telephone conferences, should also be part of the mix, to make sure you develop more than purely technical skills in your staff.

Community banks have to face up to the challenges of acquiring and developing good commercial lending staff. But salary isn't the only tool they have to achieve good results! Applying the ideas I´ve suggested above can greatly boost your return on your investment in recruiting and retaining commercial loan officers.

Copyright © 2009 Jeff Judy and Associates