Commercial Lending Survey | By Laura Alix
It’s a good time to be a commercial lender. So why aren’t more people entering the field?
After a few recession-era years of lackluster earnings, base salary and cash bonuses are creeping back up for many commercial lenders; but for many, the pay is only a secondary consideration, according to a new survey from Smith & Wilkinson, a Scarborough, M.E.-headquartered banking executive search firm.
Base salaries for commercial lenders increased modestly last year, according to the survey. Commercial lenders in Massachusetts and Rhode Island (for survey purposes, the two states were counted together) earned an average base salary of $118,549, and almost 89 percent of commercial lenders earned a cash bonus that averaged $23,217.
Team leaders, or other individuals in charge of managing other lenders, fared even better, earning an average base salary of $161,511 in 2013. Fully 90 percent of team leaders responding to the survey also earned cash bonuses, which averaged a little more than $40,000.
But for many respondents, salary played second-fiddle to having a good work environment with a team you respect. Thirty-four percent of commercial lenders and 47 percent of team leaders surveyed said that co-workers and team were the most important factor in choosing a place to work. Just 20 percent and 14 percent, respectively, put compensation first.
“At the end of the day, people want to be compensated fairly, but what they really want is to feel like they’re part of a team and feel that their efforts are appreciated,” said Carll Wilkinson, managing partner at Smith & Wilkinson.
Robert M. Mahoney, president and CEO of Belmont Savings Bank, agreed, “The reason pay isn’t so important is that they’re very well-paid. These are $100,000-plus jobs with one or two years of experience… Pay is secondary. What matters is: Can I deliver?”
A Matter of Support
Lenders seek a predictable environment, according to the survey. The lender wants to know that the credit analysts and loan committee back at the office can back up his or her promises to a potential client, he said.
“When you make a promise you can’t fulfill, you’ve lost more than one friend,” Mahoney said. “They’ll tell a friend. They’ll tell everyone at their country club on Saturday morning. That’s the worst thing that can possibly happen to a lender.”
And banks are happy to pay those established commercial lenders well, Mahoney said, because they are, collectively, a major profit center.
Arthur Warren, a compensation adviser with the Walpole-based bank consultancy Arthur Warren Assoc., works with approximately 144 community banks across 13 states and specializes in helping banks design compensation packages. In addition to increasing base salaries, bonuses and long-term incentives, community banks are also employing front-end hiring bonuses for new commercial lenders, he said.
“It’s an outright carrot,” Warren said. “The retention bonuses are interesting. We build in future payments to the lender and basically, they don’t own those payments unless they work a requisite number of years.”
To entice those lenders to stick with it for the long haul, Warren said some banks also offer defined retirement contributions over and above the bank’s extant pension plan, 401(k) or profit-sharing plan.
An Aging Population
The Smith & Wilkinson survey also reveals a coming demographic problem in the commercial lending field. The percentage of respondents planning to retire in the next five years inched up to 16 percent last year from 13 percent in 2012. While the survey did reveal a slightly greater number of respondents with fewer years of experience, it’s undeniable that commercial lenders on the whole are growing older.
Once upon a time, super-regional banks like Shawmut and Bank of Boston hired hoards of new graduates right out of school and into training programs, Mahoney said. That’s how he – and many other commercial bankers who started their careers in the 70s, 80s and early 90s – got their start.
Then banks started training and hiring credit analysts, who ultimately helped commercial lenders to become more efficient. With three analysts back at the office, one commercial lender could now do the work that previously required three or four, Mahoney said.
At some point, there seemed to be enough commercial bankers. But “now what everybody does is they just steal bankers from one bank to another,” Mahoney observed.
Mahoney, who noted that he has been looking to hire a new commercial lender for at least six months now, was hopeful that universities might recognize the value of an education in commercial banking and roll out degree programs.
Warren, meanwhile, said the shortage of high-quality commercial lending talent is driving many community banks to court their top lenders into staying aboard, or easing slowly into retirement, while they train their successors.
Even regulators have turned up their focus on succession plans for key talent within community banks.
“This is another form of risk assessment,” Warren said. “If there’s only one lender or one credit analyst at the bank, and they leave, there’s a serious issue.” ■