Hiring and retaining qualified commercial lenders remains one of the biggest challenges for many community banks. In the past, large commercial banks served as the “farm system” for training and developing new lenders, and community banks were often able to recruit well-trained lenders from them. But with fewer big banks now providing this kind of training, there are fewer qualified lenders – who possess both sales/relationship and technical credit and underwriting skills – for community banks to choose from.


These challenges have led some community banks to separate the sales side of lending from the credit analysis and documentation side. Centralizing the credit function by allowing a credit analyst to do the “heavy lifting” is one way to accomplish this, Thus freeing up commercial lenders to concentrate on business development. However, there are risks in this “hunter and skinner” model – namely, that lenders with inadequate knowledge of credit analysis will bring in loans that are fraught with problems.

Many bankers are familiar with “two year wonders” – lenders who quickly grow large portfolios and then leave the bank about the time all the problems with the loans start to arise. That’s why lenders should receive at least a minimal level of credit training, even if they will be concentrating primarily on sales.

So the first step in hiring and retaining qualified lenders is to define your model: Is it a traditional community bank model in which lenders do it all, or a centralized credit function that separates sales and credit analysis? If you choose a traditional lender “do it all” model, your primary challenge will be either finding lenders who have the training to pull this off, or training them yourself.


As noted earlier, finding welltrained lenders who can do it all is getting more difficult, and recruiting them may be even harder still. Few community banks can match the compensation potential offered by most large banks, so you must compete on a different playing field.

For example, stress the lifestyle advantages you may be able to offer lenders. High income potential is usually accompanied by high stress and long hours. Does your position offer fewer hours, a shorter commute, more flexibility – in short, a better quality of life? Another strategy is to hire relatively young and inexperienced lenders and teach them fundamental lending skills yourself- cash flow, loan structure, financial and tax return analysis and problem loan identification. This can be accomplished through a combination of online training programs (like those offeredby state banking associations and also found at http://rmahq.org and http://aba.com), conferences and workshops (like those offered by the ABA and BAI), lending schools and community colleges, and mentoring by more experienced lenders.

If you plan to train lenders yourself, realize that it will require a heavy investment of time and energy by your bank. A chief credit officer or senior lender with credit training experience should be in charge of the effort. Take advantage of as many opportunities as you can to participate in industry association events (e.g., conferences, seminars, trade shows) that will help your new lenders get up lo speed as quickly as possible.

Also allow them to attend loan committee meetings so they can see firsthand how loan requests are structured and presented. By letting them underwrite smaller accounts and work on loan spreads early on, you’ll help them gain confidence. You can increase their responsibility gradually as they demonstrate increased ability.


Here are a few more pointers for hiring and retaining lenders in today’s environment: Turn to your network. This is the first step in filling any key position, as the professional networks you and other managers have built over the years are usually your best source for qualified lenders.

Look closely at troubled banks. Lenders at banks undergoing turmoil as a result of the credit crisis may be more inclined now than they were a year ago to consider making a move. This includes lenders at some troubled large banks, who might not have been willing to consider moving to a community bank before.

Hire lenders who can bring customers with them. The mindset of the best lenders is that “borrowers do business with bankers, not banks.” Ideally, lenders you hire should be able to bring some customers with them. It’s hard to carry a new lender for a year or longer waiting for him or her to build a portfolio from scratch.

Structure compensation to incent retention. Compensation plans that feature “golden handcuffs” like deferred compensation will give lenders strong incentive to stay with you for the long haul, rather than jump to the next attractive offer that comes along. Similarly, consider having new lenders sign an employment contract to help protect your investment in their training. Acclimate new lenders to your bank. Once they are hired, there should be some kind of structured program lo help orient lenders. This includes educating them on your culture, credit philosophy, approval process, risk tolerance, etc. Don’t let them “learn” by getting beat up in loan committee during their first year.

Offer a clear career path. This is one of the most important keys to employee retention. For commercial lenders, this path should require a commitment to continuing education – Such as membership and activity in industry organizations like the ABA and RMA – in order to keep their skills sharp.

For help in your new lender recruiting, training and development efforts, please give us a call.


The ideal lender compensation structure includes a balance of incentives so that a portion of remuneration is based on personal performance. It should consist of seven components:

  • Business development
  • Relationship management
  • Bank profitability
  • Portfolio profitability
  • Asset quality
  • Timely and accurate assignment of Asset Quality Ratings (AQRs)
  • The number of unapproved or uncleared exceptions or variances from procedures

Financial Lending Notes 2008:

This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting tax or other professional advice or opinions on specific facts or matters and , accordingly, assume no liability whatsoever in connection with its use. The information in this publication is not intended or written to be used, and cannot be used, by taxpayer for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this publication.