As credit unions expand their MBL programs, finding qualified personnel gets trickier.
New business lending rules recently approved by the National Credit Union Administration are providing an opportunity for credit unions to expand even further into commercial lending—offering benefits both to members and to credit unions.
Business lending is big business but, unfortunately, it’s a competitive business both in terms of attracting business borrowers and in terms of attracting the business lenders to make those loans.
The new rules have already sparked interest, says Pamella Easley, CEO of Extensia Financial, a CUSO based in Northridge, Calif. Following NCUA’s announcement in February, she says, “We’ve been receiving a lot of phone calls from credit union CEOs and chief lending officers as to how should we get started, or we want to start lending, what’s your advice.”
New Opportunities in Business Lending
There are a couple of options available to credit unions hoping to expand into commercial lending.
“What we’re seeing is that this really falls into three categories,” says Easley. “The larger credit unions have departments already—they’ve already hired seasoned commercial banking professionals. Then we have the mid-sized credit unions where they may have hired someone who was in middle management, or at least a staff member within commercial banks, or within a larger credit union commercial department. And then you have the smaller credit unions where they’re finding hiring, or at least recruiting, business lending professionals is a challenge.”
That’s because, she says, “well-seasoned commercial bankers are in a perfect market right now where they’re high in demand not only in the credit union space, but also within the insurance and commercial banking space.”
“If you find a good commercial lender, I can find them a job in two days,” says Charles Shanley, SPHR, CFS, executive vice president of CUES Supplier member John M. Floyd & Associates, a consulting and executive recruiting firm, with headquarters in Baytown, Texas. “That’s one of the challenges credit unions have.
“The biggest hurdle is that it’s a little pricey to get those folks; we have turned down searches because it’s not realistic to find what they’re looking for.”
In some cases, though, particularly in smaller credit unions, CUSOs will be used to handle the underwriting and processing. “We can be a cost-effective solution so that the credit union doesn’t have to hire an entire experienced commercial banking department,” says Easley. “Instead, what they’ll probably need to do is hire someone to oversee and manage the business lending or commercial lending area for the credit union, someone who is responsible for interacting with a CUSO, or training somebody internally who has the acumen to translate their lending experience into commercial lending.”
“Larger credit unions are usually the ones that bring it in house,” says Shanley. “It’s really those that are $500 million and up that are really doing commercial lending. Smaller credit unions just don’t have the size. They may offer it, which is great—you want to offer it to your membership—but the way they get around it is through a CUSO to handle everything for them.”
Bringing Commercial Lenders on Board
Both aptitude and experience matter when it comes to identifying commercial lending talent. “In the commercial lending and small business lending space the most successful lenders are those that have some experience in reviewing and underwriting commercial properties and really have a deep underwriting background,” says Easley.
In addition, though, these lenders also need the soft skills that will make them a good fit for the credit union and a good advisor for members, says Deedee Myers, Ph.D., MSC, PCC, CHIC, CEO of CUES Supplier member and strategic partner DDJ Myers, Ltd., headquartered in Phoenix. The company focuses on leadership development, executive search and strategy.
Regardless of the position, Myers says she gains a view of the entire person when assessing candidates. “Completion of a degree and other items that we find on resumes help us learn about the candidates, but they aren’t used for the complete hiring decision. The subjective pieces, the information we can find through assessments, help us build a picture of the entire person.”
As part of her recruiting practice, she looks at 23 personal mastery competencies. For a credit union position as business lender, she believes five of these competencies are most critical: analytical problem solving; strong decision making; management; goal orientation and interpersonal skills.
Of course, those that bring experience with them, along with these softer skills are in high demand. Demonstrated experience matters, says Shanley. “In a perfect world, they’d love to have someone with a book of business,” he says. A search he was recently involved with, for instance, resulted in the recruitment of a commercial lender who was actually bringing in business to the credit union. That’s a big benefit. However, it is exactly the value of that benefit that makes these candidates difficult to court and, once aboard, often difficult to retain.
Grooming business lenders from within can be one option for boosting the odds that your credit union will be able to retain that lender for a longer period of time.
Grooming Talent From Within
A line manager with profit and loss responsibility, who would need to learn the credit side of the business, could make an ideal candidate, says Myers. That strategy could be ideal for CUs that have a philosophy for promoting from within. Ideally, companies that promote from within should have strong development programs. Oftentimes, those development programs don’t materialize because of time constraints, she said.
However, “we need to learn to be more strategic. If we put the time into determining what type of company or what type of goals we want to achieve, there will be a lot less pain and stress and a more productive future.”
When grooming talent from within, aptitude is particularly important, says Myers. “Candidates need analytical skills and an inquisitive personality, enabling them to reach out, establish relationships, be curious and understand the strategic needs of businesses the credit union wants to serve.”
Simply put: “Does the candidate have the aptitude to get up and get out of the office?” Myers asks.
That aptitude is critical based on the breakdown of a day by staff in a business lending department. Myers estimates that at least 30 percent of time should be devoted to being in front of members and making outgoing calls. Another 10 percent to 20 percent should be tied to community events and visibility, with the remainder on ensuring that the loan process is handled in a detailed, efficient manner.
Linda Henman, owner of Henman Performance Group in the St. Louis area, also believes that acumen should be the primary focus of credit unions seeking commercial lending talent.
She suggests hiring potential talent right out of school and then grooming these individuals internally. “Recruit directly out of the best business schools in your area. Make generous offers to those who graduated at the top of their classes, and then train them in lending processes,” she suggests. “The best candidates will have an ability to see patterns, anticipate consequences, and analyze relevant information.”
If your CU is looking to expand its business lending team, this could be a useful hiring strategy. Jim Devine, founder, chairman and CEO of Hipereon Inc., Seattle (and lead faculty for CUES School of Business Lending), says hiring a recent business school graduate can work well if a CU already has an experienced commercial lender on staff.
“I think it is feasible to hire college graduates but only if you have mentoring capabilities already on staff and an individual training and development plan created that will serve to mold them into qualified credit analysts and eventually commercial lending officers,” he says.
The Importance of Training
Training is going to be a critical must-do whether growing from within or bringing in talent from outside the credit union. “If finding candidates with the right experience proves to be too difficult, it is possible for CUs to train current staff to handle business loans,” says Steven Rothberg, president and founder of College Recruiter, in Minneapolis.
“You can grow from within, but you’re going to have to have some credit training,” agrees Shanley. “There are training programs that offer commercial lending courses they can go through.” (Learn about programs offered through CUES in the You Might Also be Interested Into the left of this article.)
Still, he says, credit unions will still need to offer a competitive salary if they hope to keep those internally trained candidates on board. “You might lose them if you can’t be competitive in the market,” he says. “They have their book of business and, after a few years, they’ll leave.” Good commercial lenders, he says, “rotate around every few years.”
Credit unions themselves need to also ensure that they’re staying on top of trends and changes in the business and commercial lending landscape.
“I think it’s all about partnering and leveraging experience that resides already in the industry and identifying who, in the industry, or what organizations in the industry, have this expertise,” says Easley. “Who has a deep understanding and how can we partner with them to learn or update our knowledge?”
While Easley acknowledges that there are no “magic answers,” she says: “I do believe that the core is going to be around finding the expertise or finding the entity that you’re comfortable in working with, absorbing the knowledge and information and then developing a program that makes sense for you.”
It’s a new frontier for some credit unions, Easley says, and one that can be fraught with new risks that must be effectively managed. But there is no question that opportunities exist for those credit unions that are poised to seize them.
Lin Grensing-Pophal, SPHR, is a freelance writer and human resource management and marketing communication consultant in Chippewa Falls, Wis. She is the author of The Everything Guide to Customer Engagement (Adams Media, 2014) and Human Resource Essentials (SHRM, 2010).