Build Your CRE Lending Bench Strength

By Julie Knudson

With commercial real estate lending a continued area of competitive advantage for community banks, some lenders are finding their team could use a performance boost. Building bench strength in commercial real estate is an important goal, and institutions have several options to increase their internal expertise.

A tough role to fill

Community banks and other small institutions encounter a host of challenges when it comes to attracting, retaining and developing competent commercial lenders. A lack of financial professionals can make it difficult in rural areas, for example, where the talent pool may be particularly lean. FirstCapital Bank of Texas, headquartered in Midland, has run into the issue over the years. “Generally you’ll be trying to find someone either in your local market that wants to move from another bank, or you’re going to be using recruiters,” says Greg Burgess, the bank’s Amarillo-based chief credit officer. “There the challenge is finding good lenders willing to move.” An experienced headhunter can often ferret out interested CRE specialists, but banks will incur additional costs to secure those services.

Another issue vexing the sector is that fewer people entering the job market are opting to build their careers in banking. The financial crisis wasn’t good for recruiting, and a changing marketplace is compounding the problem. “Banking got such a bad reputation during the recession, and community banks were tied equally to Wall Street banks,” recalls Darrell Jaggers, senior partner for lending at the family-owned, Merrillville, Ind.-based Centier Bank. “We still suffer from that comparison. Banking isn’t as respected as it used to be.” Those coming out of college also have a wider field of options beckoning them. “They can go into technology or other types of industries,” Jaggers says. As other sectors work to make themselves attractive to those entering the job market, banking has struggled to maintain its image as a good place to put down roots.

Finding qualified and talented commercial lenders is a problem across the entire industry. “In terms of the area of focus, commercial lending is one of the hottest areas in banking,” says Kristine Oliver, managing director at executive compensation consulting firm Pearl Meyer. “People to fill the positions are very challenging to find and even the larger banks are having a hard time attracting that talent.”

And the industry had not built a sufficient training pipeline, says Oliver. “The big banks historically had significant training programs,” she explains. This created a relatively stable flow of qualified candidates, but that well is running dry. “Those training programs have been cut over the past decade.” The combination of factors has created a growing gap between the needs of the industry and the availability of workers able and willing to fill those roles.

Connect with experts outside your bank

Job hopping—once seen as a negative on a candidate’s resume—is becoming the norm, and Jaggers says smaller institutions are increasingly exploring other avenues to connect with potential lending candidates as they move between jobs. “Community banks are networking like crazy, getting involved in different banking associations, economic development organizations and chambers of commerce.” Putting feelers into the local community helps develop relationships with potential workers and keeps them engaged with the institution even if they aren’t currently interested in the commercial lending sector. “Banks are networking and identifying where the talent is and getting to know them,” Jaggers says.

The team at FirstCapital Bank attends career days at nearby universities and colleges, meeting the soon-to-be graduates. “In certain cases, we know the business school deans well enough to call them and have them refer someone,” Burgess says. The bank may interview numerous candidates in a single day to get a good cross-section of those with the potential to grow into successful CRE lenders. “We spend a lot of time asking questions of these students on what they want to do and what they think their career path is,” Burgess explains. His team already employs several senior lenders who were brought into the organization using this strategy.

Make the most of what you already have

Growing talent internally is often the preferred method for building bench strength in commercial lending. A strong mentoring and career development program gives the best performers a reason to stay with the organization, plus it’s an excellent tool to attract younger individuals just entering the workforce. “If you’re focusing on millennials, they want to ensure they’re being developed,” Oliver says. “They want to gain more skills and see their careers move forward.”

Community banks can take advantage of this desire by providing opportunities for cross-training and showing new employees where their newfound skills could take them. Oliver refers to it as the “career lattice” approach—distinct from a career ladder. “Think about the typical discussion about career paths,” she explains. “The career lattice would be making sure you’re moving employees into different areas and roles within the bank to expand their skill set.” It keeps workers excited and also exposes individuals with high potential to many different areas of the bank.

Burgess says the best way to build strength, depth and knowledge—particularly as it relates to how each individual banking institution looks at lending—is to “allow credit analysts and junior lenders to attend loan committees.” This provides the bank’s emerging commercial lenders the opportunity to understand the different thought processes that go into evaluating lending decisions and to see for themselves how loans are discussed. It’s the kind of experience that can turn a fledgling employee into a competent lender, able to think clearly and rationally through each credit decision. “It’s not always just about the numbers,” Burgess says. “There may be other solid reasons for making a loan that on the surface looks weak. You have to learn to see and understand that.” Sitting alongside the loan committee as the details are evaluated and analyzed can be tremendously instructive for junior staff interested in the commercial real estate sphere.

Several of Centier Bank’s young lenders have credit training and degrees in financial accounting. The organization is keen to provide them with opportunities to gain additional exposure to CRE transactions as part of their ongoing training. “We pair them with a manager or a senior lender with a lot of experience and they go on joint calls together,” Jaggers says. In addition to working together, the bank helps newer lenders learn how to build connections of their own with customers. “We try to transfer some credit relationships to them early so they can start getting used to the process, but we hold their hands a lot in the beginning,” he explains. Training and other educational opportunities, such as a tuition reimbursement to help obtain an MBA, are also available for commercial lending candidates who show good potential.

Outside relationships within the community help attract successful CRE lenders. And with a program in place to provide existing employees with hands-on experience and additional training in target areas, banks can continue to build their bench strength in commercial lending.

Julie Knudson is a frequent contributor to the ABA Banking Journal.