Grow Your Own Business Bankers

Commercial loan growth is difficult to come by these days. Some is a result of anemic economic growth and an uncertain business climate. These factors are beyond a banker's control. But what is within your control is the number and quality of business bankers deployed into your bank's markets.

Nearly two years ago I wrote a job description for a business banker based on what I heard from bankers on the qualities they value most from people occupying this position. How rare is it to find an exact match between people and expectations? Do your business bankers build well-rounded relationships, or bring you deals? Do they bring value to the customer relationship with expertise in cash flow management, inventory financing, and liquidity needs? If so, can they consistently bring loans that are priced appropriately for the risk, or do they need to shave rates or terms to get deals done?

The answers to these difficult questions makes me wonder why we keep relying on "experienced lenders" to move our institution forward. Perhaps populating our ranks with long-tenured lenders married to price-driven deal making is holding us back from becoming the institution we strive to become.

Maybe there is another way. When bankers comment that they can't find experienced lenders to add to their staff, I frequently ask what they are doing to grow their own business bankers. What is your answer to that question? Show me the curriculum you have in place to turn the recent hire into the business banker you envision?

There are plenty of high quality training opportunities out there. Both the American Bankers' Association and Risk Management Association have formal training to teach bankers the skills needed to become the business bankers of the future. Beyond formal training, is a plan, a process if you will, to create bankers capable of flawlessly executing your bank's strategy and give you a competitive advantage. How can you achieve a competitive advantage by developing business bankers to your exacting standards? Because so few are doing it.

Brokerage firms and insurance companies troll college campuses for their next "big producer". Most

recruits flame out because they see themselves as the "Wolf of Wall Street", only to find out that they make little money and get little respect from customers and coworkers at the outset. The "eat what you kill" variable compensation structures don't pay back the student loans, in most cases.

Banks, conversely, hire with the majority of employee earnings coming in the form of salary. This is a key differentiator to bring your next rising star on board from the college ranks. Entry level professional positions could include the assistant branch manager or branch manager, which was my entry point. Or it could be a credit analyst or portfolio manager. A continuous plan to populate these ranks with recent college graduates with great attitudes and a willingness to learn will breath fresh life into your institution and provide a solid base to build business bankers into the future.

But you need a plan, and have to execute it. If not, good luck on your hunt for experienced lenders.

Do you have a development plan to build business bankers?

~ Jeff

Note: This post first appeared as a guest post for Sageworks in March.

The Three Levels of Business Bankers

Community bankers hunt aggressively for experienced lenders to grow their loan portfolios. I outlined a Business Banker job description in a prior post based on what I hear from bankers about what they expect from that position. 

You can't teach an old dog new tricks. If that job description represents our ideal, then we have a long way to go to develop the type of business bankers that will drive our bank forward. Instead of striving for our ideal, we continue to pluck old-school lenders from competitors because we need our pipelines filled now, not two years from now. So I opined to a community bank client what I thought was a healthy composition of business bankers.

Note I mention banker composition, not loan composition. For risk management purposes, we are accustomed to managing the mix of loans on our books. We may not be as accustomed to managing the mix of employees responsible for generating those loans. I put Business Banker composition in three categories.

1.  The Fat Cat

Don't contact my HR department. This is not commentary on his or her body composition. It's more a testimony as to the size of the Fat Cat's portfolio. It's usually large (typically > $50 million). And size does matter. Because of the large portfolio, this lender comes with a high number of relationships, and little time for meaningless meetings and all of your chatter about "total relationships" and "core deposits". Their portfolio is large and profitable, and they know it. Their salary is high and the bonus pool is flush. They are not as concerned about growing their portfolio as they are about maintaining it. They might be open to sharing smaller relationships with more junior business bankers, but not because they are the best team players. They simply don't have time to deal with lower balance customers, and they know that balances drive their bonus pool. They are also hesitant to bring other bankers into their relationships, for fear they may screw them up.

2.  The Builder

This person has a mid-range portfolio, somewhere in the $25-$50 million range. They take their growth goals seriously. Because they see the Fat Cats reaching critical mass and milking those portfolios into retirement. They want that too! So they leverage their relationships into more relationships such as calling on COI's they met at the latest Chamber mixer. This group may also be willing to take the junior business banker under their wing. They are not so far removed from the "junior" status that they lack empathy for the Up and Comers. Unlike the Fat Cats, this group tend to be better team players, because they may have greater organizational ambitions other than to be a Fat Cat.

3.  The Up and Comer

This person came from the branch manager, credit analyst, or portfolio manager ranks. They received a taste of the life of a business banker in their former position and they liked it. They have small portfolios, typically well under $25 million. Community banks frequently have inadequate support structures to nurture the Up and Comer. They have no mentoring programs, little in terms of formal training, and even less in terms of patience and the ability to carry "non-producing" producers for any significant period. But the Up and Comer can be the Builder and Fat Cats of the future, if the community bank thought farther than the current budget into the future. Another benefit of populating your Business Banker ranks equally with Up and Comers is instead of taking more experienced ones from competitors and inheriting their way of doing things, this group grew up in your way of doing things. 

If your Business Banker ranks were built by you, first as Up and Comers, steeped in your bank's way, that grew into Builders and Fat Cats, would you be better capable of moving your bank forward?

~ Jeff

Job Description: Business Banker

I frequently hear lamentations about the gap between the performance expectations of community financial institution (FI) personnel and performance results. A frequent challenge is that performance expectations are not documented in the form of job descriptions. Instead, expectations are often trapped between the ears of the supervisor or senior management.

This post is geared toward drafting a job description of the FI business banker. Although I am not an HR expert, I am often engaged in discussions with FI senior management teams on what they expect from the person occupying this position. Often, senior management would like business bankers to build total relationships with businesses within the FI's market area. Instead, they often get commercial real estate transaction specialists, leaving small and medium sized businesses that don't own real estate in no-man's land between the branch manager and the "lender". The job description does not include qualifications or compensation, as each FI can assess what is needed based on their own expectations.

Business Banker

Summary of Responsibilities: Relationship management... Develop relationships with business's within the position's assigned market area. Relationships should include knowledge of the customers' business, industry, banking needs and their service expectations from their FI. Evaluate customer product use to determine optimal product utilization, and make routine customer contact. The objective is a level of customer satisfaction that increases customer loyalty based on service and relationship, not price/rate.

Product knowledge and expertise... Develop and maintain significant knowledge of FI product offerings, with an emphasis on products most needed by target customers as per the demographic profile of the area surrounding the FI and the FI's strategic focus. Develop and maintain financial acumen in customer balance sheet and cash flow management to assist customers achieve financial success. The objective is to establish the business banker as the subject matter expert of bank products within the bank's market(s).

Community relations... Become the primary community representative by joining a minimum of two community organizations with an emphasis on those where business owners are likely to participate. Volunteer for a leadership position in at least one. The objective is to promote community involvement consistent with the FI's strategy and to expand the business banker's relationships for future business development activities.

Business development... Grow customers at a pace faster than general market growth that is consistent with the FI's strategy. Interface with other FI departments such as branches and marketing to maximize effectiveness of business development efforts. Participate in social media efforts by contributing blog posts and managing FI-branded Twitter account geared toward small business.

Portfolio Management... Business bankers should manage 100-200 relationships, dependent on size and nature of relationships. Portfolios should include all forms of business lending within the FIs capability and strategy and consistent with risk appetite. Deposit portfolio should equate to at least 50% of loan portfolio. Business banker will lead the customer support team that includes portfolio managers, loan administration and loan servicing personnel.

Credit Quality... Business bankers are responsible for the quality of the loans they book. All loans shall be consistent with the FIs risk appetite and within loan policy, unless approved as exceptions to policy. The business banker will be the first to contact borrowers for non-compliance with loan covenants and the first to initiate collection on delinquent loans. However, loans scored as "doubtful" or worse shall be managed by the FIs workout department. A portion of the business banker's incentive compensation is subject to a multi-year holdback to offset loan losses.

Business Banking Department Profitability... Business bankers are collectively responsible for the overall profitability of the Department, and to establish a positive profit trend that is consistent with the FI's overall strategy.

Other duties as assigned.

What did I miss?

~ Jeff

A Few Good Commercial Lenders

My boss loosens up strategic planning retreats with funny stories and anecdotes. Below is one of my favorites. The commercial lender's part is played by Jack Nicholson and the finance part is played by Tom Cruise from A Few Good Men. If you haven't seen the movie or don't remember the sequence, I have it embedded below. Enjoy!

A FEW GOOD COMMERCIAL LENDERS

Lender: "You want answers?"

Finance: "I think we are entitled to them!"

Lender: "You want answers?!"

Finance: "I want the truth!"

Lender: "You can't handle the truth!!!"

Lender (continuing): "Son, we live in a world that requires revenue. And that revenue must be brought in by people with special skills.

Who's going to find it? You Mr. Finance? You, Mr. Operations?

We have a greater responsibility than you can possibly fathom.

You scoff at the Lending division and you curse our lucrative incentives.

You have that luxury. You have the luxury of not knowing what we know: That while the cost-of-business results are significant, they drive revenues.

And my very existence, while grotesque and incomprehensible to you, Drives REVENUE!

You don't want to know the truth because deep down in places you don't talk about at staff meetings ... you want me on that call. You NEED me on that call!

We use words like another round, top-shelf, medium-rare, on-the-rocks, cabernet, cognac, luxury box, Cohiba and foursome. We use these words as the backbone of a life spent negotiating something. You use them as a punch line!

I have neither the time nor the inclination to explain myself to people who rise and sleep under the very blanket of revenue I provide and then question the manner in which I provide it.

I would rather you just said "thank you" and went on your way.

Otherwise I suggest you pick up a phone and call on some customers and prospects. Either way, I don't give a damn what you think you're entitled to!"

Finance: "Did you expense the lap dancers?"

Lender: "I did the job I was hired to do."

Finance: "Did you expense the lap dancers?!"

Lender: "You're g**damn right I did!"