It’s probably not news to anyone in commercial banking that, as an industry, we’re facing a significant shortage of commercial lenders. We’re hearing it from big and small banks alike. Across most geographies. And based on the current demographics and expected economic growth, it’s unlikely to get better any time soon.
According to the Bank Director’s 2016 Compensation Survey, 43 percent of the 262 bank executives and board members who responded stated there aren’t enough talented commercial lenders in their markets, indicating a troublesome shortage in the people who help drive a large percentage of the industry’s revenue.
The numbers don’t lie – a big chunk of the industry can’t find new lenders, and without lenders, they can’t grow. We’re seeing particularly acute shortages in smaller or more rural markets and niche areas like agriculture and SBA lending. Certain banks are doing a better job of winning talent, and here is what we’re seeing as their keys to success:
Make it Easier to Close Loans. It’s not complicated to make a commercial lender happy. They want to close loans. To do so, they 1) must believe in the bank’s vision and have the ability to offer the right products to the right customer base in their specific market; 2) must understand, be amenable to, and be able to work within a bank’s credit culture; 3) must have the ability to be competitive through rates, process, and/or service; and 4) must have confidence their back office can support the loan volume they are bringing to the bank. If you can sell these 4 key elements of your platform, you have a much better chance of impressing and bringing on a top-performing commercial lender.
Recruit New Blood: Every bank wants to hire a senior lender. They can hit the ground running, produce faster, know their markets, and often bring a book of client relationships and referral sources. It takes a lot longer to grow a new lender, but it might be more sustainable long-term. Not to mention, you can train them to lend according to your specific culture and goals. You’ll want to start engaging young people as soon as possible. College recruiting should be a top priority. Also, consider hosting events or competitions for high school students to expose them to banking and your culture at a young age.
Consider Other Financial Sales Professionals: Capital markets is a broad space. There are many professionals in the broader industry who understand credit and finance, are good at sales, and are driven enough to succeed in commercial lending if given some guidance and opportunity. Some of the banks successfully growing their teams are getting creative and hiring people from wealth management, equity or debt capital markets, investment management, and other areas of financial services. Again, it’s not the easy fix of hiring a senior lender, but it may be a strong longer-term option.
Play to Your Strengths: Larger banks may come with more organizational complexity to navigate, but they can offer lenders the ability to work on larger clients and more sophisticated loan structures. They may also offer the ability to be a specialist in such areas as agriculture, healthcare, or other key industries. It may be tough for smaller community banks to match the compensation potential and deal size/complexity that larger banks can offer. However, there are many advantages that a smaller bank can highlight. These can include a more high-touch, community oriented culture, greater focus on relationships, a family-like environment, better quality of life, more creativity in customers and types of loans, and sometimes more flexibility.
Retention is all-important: Retention of your most valuable lenders, while mentioned last, is your first line of defense. The people we speak with who are happy and not making a move any time soon talk about things like a clear and workable credit box, flexibility to work on the loans that interest them, commitment to continuing education, autonomy to manage their time and workflow, a strong compensation plan that offers stability but also rewards performance, and opportunities to move up into leadership.