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Are you a born community bank lender?

Part 2: The case for “small”

Are you a born community bank lender?

This two-part series debuted last week with “Big bank or small bank? Your career choice, lender,” the case for large bank careers. This week Ed O’Leary tackles the case for community banking. 

Although “commercial lending officer” is a specific type of job with its own particular description, the differences in the jobs at a large bank compared to a small one can be enormous. These range over a variety of issues, including compensation, responsibilities, product knowledge, and career mobility.

Consider the essentials of the job, whether performed at a big bank or a small one. Lending money is a specific discipline with a relatively large body of established principles and rules. The basics of the job are recognizable at virtually any sized institution. Figuring out personally whether a “small is better” or “big is beautiful” requires some careful consideration of some ancillary but critically important characteristics of each environment.

Begin with training

It used to be an article of faith—and perhaps it’s still the prevailing norm—that large banks have training programs that will impart skills valuable to lenders at any sized institutions.

What gives me pause in asserting the continued relevance of that assumption is the anecdotal, but persistent, evidence that many banks have curtailed or even eliminated their in-house training activities. The large banks and certainly the large regionals continue to offer formal programs as before. But there are significant differences in the formality of functional job training as one comes down the size scale.

Small banks were never known for their formal training programs that resembled  big bank models. Training in a small bank tended to be along the “apprentice” model. Individuals learned the back office sorts of tasks as a product of day-to-day workflow routines. As they began to learn the specifics of lending, they toiled as assistants to more experienced lenders.

It is a closely supervised “learn to do by doing” environment.

This is a good model—insofar as it goes. The young person experiences customer and banker interactions first hand and begins to actually perform parts of the process in his or her own right.

But what doesn’t happen very often or with any defined consistency is the mastery of the craft of financial and credit analysis. Applications of the concepts of liquidity, profitability and solvency are not necessarily learned in a predetermined process— nor necessarily equally well.

Ten years out, a cohort of lenders who began their careers at community banks in 2005 can be said to have 10 years experience. I suspect, though, that the quality of the training is uneven. So too, I suspect, the degree and depth of the analytical skill sets to properly and adequately determine a borrower’s capacity to repay a loan from the ongoing operation of a business is not that widely implemented.

I experienced this myself many years ago. At The Bank of New York, the lending trainees learned lending skills from a practical application sort of model. We conducted financial analyses on actual loan requests under the supervision of a corps team of permanent credit officers.

A colleague with whom I worked some years later in Florida had been through Citibank’s program. He and his fellow trainees had a strong dose of formal classroom analytics. Frankly, I admired his facility with complex financial analysis. I “got it” but it took me longer.

This suggests to me that if a young person wants to learn lending with a good balance between quantitative and qualitative techniques, a formal training program at a large bank will be a better choice.

But …

Choosing the “small” option

But there are significant natural advantages of working for a community bank. Beyond the level of formal lending expertise, there’s the issue of how “close” to the customer a lender is likely to be.

In smaller environments, the lender is more thoroughly and systemically involved with the customer in the full sense of a lending relationship over the entire lending cycle. This continues from prospecting to underwriting to servicing and collecting.

At a smaller bank, the lender does most all of it himself or exercises close working supervision over relatively small groups of internal servicing people. The customer-banker relationships tend to be more personal.

In a community bank environment, there are more opportunities for direct customer contact and interaction on a variety of fronts. This in turn leads to working relationships over time that are more of a collaborative nature and can evolve into very personal relationships. The commercial lender frequently becomes a trusted advisor and source of information and advice to a business and its owners.

Community lenders who progress into senior management positions have a bird’s eye view of how the bank works and its components fit together and integrate. There are few in upper management positions in larger banks with a similar breadth of experience and understanding of the functional interrelationships.

Lenders are front office people responsible for bringing in the business—new lending business to replace amortizing loans and to provide for orderly and sound growth for the institution. We are all sales people and failure to sell is a longer-term failure to grow and prosper as the institution expands its influence. This impacts both the firm’s financial prospects but our own individual fortunes and personal growth.

Making the shift for the wrong reason

In its own way, what I wrote above makes an attractive case for a community bank lending career.

I’ve heard of some community lenders who have left the very large banks for the “shelter” of community banks where the pressure to meet sales and production goals may be less intense.

I personally think that anyone explicitly opting for a community bank environment to escape the every day expectations of business in the 21st century is doing both himself and his employer a disservice.

Shareholders expect and deserve a competitive return on their equity—making them no different from shareholders and corporate owners anywhere. Individuals should also seek to be the best that they can be or they are abdicating their talents and opting for an easier and more comfortable position.

Is this what some may mean by “retired while working”?

Competition and technological change are tearing up the strategic plans and business models of our industry.

Banking in coming years will take a level of talent equal to or stronger than our industry has needed at any time in its history. Survival skills today are not simply being able to make it through to successive paydays or successive safety and soundness examinations.

The pond you’ll swim in

The real career question—once an individual is reasonably sure that he likes the variety and challenges of being a commercial lender—is to determine the sort of environment he chooses to work in. The choice is ultimately subjective. I’ve had a fulfilling career as a commercial lender, workout specialist, credit administrator, and executive manager mostly at medium-sized and smaller institutions.

A community-banking career means being largely a generalist within the broad parameters of a functional specialty. Personal success most likely hinges on how explicitly one chooses one type of environment over another.

But remember this: It’s a choice to be made, not an accident to endure.

Ed O’Leary

Banking Exchange Contributing Editor Ed O'Leary, a veteran lender and workout expert, spent nearly 50 years in bank commercial credit and related functions, working with both major banks as well as community banking institutions. His last job before retiring was as the CEO of a regional bank headquartered in Alburquerque, N.M. He earned his workout spurs in the dark days of the 1980s and early 1990s in both oil patch and commercial real estate lending. O'Leary began his banking career at The Bank of New York in 1964, and worked at banks in Florida, Texas, Oklahoma, and New Mexico. He served as a faculty member and thesis advisor at ABA's Stonier Graduate School of Banking for more than two decades, and served as long as a faculty member for ABA's undergraduate and graduate commercial lending schools. Today he works as a consultant and expert witness, and serves as instructor for ABA e-learning courses. You can e-mail him at [email protected]. O'Leary's website can be found at

In mid-2016 O'Leary's "Talking Credit" blog received a bronze excellence award for the Northeastern Region from the American Society of Business Publication Editors.

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