Guest blog written by: Jocelyn Lane, Commercial Loan Officer, Stockman Bank, Missoula
Most of you would expect something written by a banker to be full of numbers, facts and riveting subjects such as capitalization rates and gross rate multipliers, but I’m not going to do that here. Instead, I thought it would be worthwhile to share my experience and perspective on banking relationships; more specifically, the relationship between the commercial client (you) and the commercial banker (me).
Before I dive into the relationship stuff, I will create the stage for why it’s so important to us, the bank, to form this relationship with you, the client. While I’m simplifying this greatly, the bank has four primary goals to achieve. Like most companies, these goals pertain to the balance sheet and income statement. And, they include the following: 1) manage operations to create a sound entity designed to handle risk and liquidity needs while following the rules set by the bank and the regulators; 2) make a profit (thru interest and fees primarily); and, 3) receive back over time the return of the principal loaned to you. After all, in business, if you don’t stay profitable, then you don’t stick around for long.
What about the 4th goal? Simply put, it is the bank’s reputation. The one thing that can keep a bank in business and contribute most to its longevity is its reputation. Reputation isn’t a line item on the balance sheet or the income statement. It’s not something you can quantify, nor is it an asset you can put a dollar figure on. The best way to enhance a positive reputation is by creating, building and retaining relationships with clients – with you.
While I hate to give away any hints of my age, I’ve been working in banking for over 30 years. During that time, I have been truly proud to be a banker. I’ve been proud to represent this industry; proud to work for the companies I personally represented; proud to help out my clients. However, there was a certain period of time I was not proud to be a banker. It is that particular time I want to talk about because I believe it altered and changed the relationship between the commercial banker and the client. Can you guess when that was?
“The one thing that can keep a bank in business and contribute most to its longevity is its reputation”.
I’m sure it was pretty easy to guess – the Great Recession, starting around 2008. I have been through previously market downturns, but nothing quite like that. Like many others who lived and worked with it close to the vest, I hope I never have to experience anything like it again. At that time, I was working in Florida – one of the hardest hit areas in the country. It was not pretty. I was working on the executive management team for a business bank (primarily our clients were business owners or commercial investors) with an asset size of about $600 million. Our bank wasn’t large by any means but we were a 5 Star Bauer rated bank going into the recession so we had a strong capital position for a bank our size. But even so, we had to be very strategic in how we were going to guarantee our survival.
As a lender, you strive to originate loans that you have no doubt are solid, good credits. Unfortunately, though, many of these didn’t turn out the way we had planned. I had some really tough conversations with my clients regarding their collateral values, and their ability (or inability) to pay their loans. Left and right, banks were shut down by the FDIC or forced to merge with another bank just to survive. I witnessed lines out to the street at one multi-state regional bank – something that had occurred during the Great Depression – but not what I expected to see in my lifetime. I will also share something very personal that I recall from that time. I purposively did not wear my name badge around town because I didn’t want people to realize I was a banker. As you can well imagine, we weren’t the most popular group of people during that time. But the real reason I didn’t wear it was because I could feel the “relationship” between the client and the banker deteriorating. Consequently, I wasn’t as proud to be a banker anymore. I had believed so much in the importance of the “relationship” and not to have it reign supreme just felt so wrong.
“Clients were conditioned to view a loan a just a tool with a set of costs and terms.”
As you know, many banks weren’t in the financial position to negotiate with clients, and as a result, many lost what ‘good’ reputation they had. Some banks hadn’t been responsible lenders and they made loans to unqualified borrowers or didn’t structure them properly, compounding the problem. Further, many bankers who weren’t as committed to the profession left the industry and weren’t available to work with their clients. The consequence was a customer experience which suffered. As a result, the reputation of the industry took a huge hit.
We know that when a not-so-great reputation exists, there is usually some aspect of accountability the company should own. In the case of the banking industry, it had its fair share of blame. Additionally, just as the economy was starting to improve, technology enhanced the ability to apply for loans online. Now, disgusted and disappointed clients, along with the ease of technology, started to view a loan as just a commodity. And, it was a justified reaction. Clients were conditioned to view a loan as just a tool with a set of costs and terms. I believe some approach it like buying at a local brick-and-mortar vs purchasing online. If they can get it cheaper and with less hassle, just order it. No need for a ‘relationship.’ Right?
“Revisit the relationship between the commercial investor and commercial lender. Just like your investment can produce meaningful returns, so can the relationship created with your commercial banker.”
But, I’d like to challenge you a bit on that thinking as I’ve had to challenge my own. Remember, I told you how proud I was to be a banker and how I lost that during the Great Recession? Well, I had to tell myself that we bankers are still valuable; that we can make a difference in the experience the client has with the bank. Therefore, I’m happy to say I’m back and just as proud, if not even more so, to say “I’m a banker!” I truly believe a loan is much more than a commodity. While a loan doesn’t necessarily have to involve a relationship with a commercial lender, I think it’s better for you if it does.
If you can find a good banker, they are worth more than the .25% interest or the lower fee that you can find across the street or online. A good banker will listen. They will learn about your needs, your challenges and will offer options which better suit your needs. It may even be a solution you weren’t aware of or hadn’t considered.
A commercial banker now also adds more value than ever on the deposit side of the relationship. With all the advancements in technology, we have so much more to offer on the way cash is moved between companies. I have seen many situations whereby the cash management solution has created so many efficiencies it freed up a client’s employee by 50% of their time now devoted to other projects. The right solution can get you paid quicker, ease the means by which you process payments, sweep dollars to reduce credit line expenses, reduce in-house paperwork and processing time and the list goes on and on.
With the lending hat on, a knowledgeable and caring banker may help you understand why you can’t get a loan in the manner in which you expected but how you can qualify a different way. They may be able to offer with a short term line of credit more flexibility than you ever expected with just a term loan. Or perhaps, they can offer up methods of how to improve your position, so you can qualify for a larger loan (i.e. pay down a current debt, select a guarantor, acquire more capital/equity, etc.). And while it may not feel good at the time, sometimes the best thing a banker can do for you is to tell you “no.”
“Most importantly, the banker will be the one who speaks up on your behalf in loan committee stating why they feel comfortable in supporting the credit as presented and that it should be approved. The lender actually becomes your spokesperson within the bank.”
The unexpected value comes after the loan is closed and you have a question or need a copy of something. You can call, text or email them directly and not get tied up into the vacuum hole of a 1-800 messaging system whereby when you do finally get an actual person on the phone they are likely sitting in a call center in a foreign country. Most importantly, the banker will be the one who speaks up on your behalf in loan committee stating why they feel comfortable in supporting the credit as presented and that it should be approved. The lender actually becomes your spokesperson within the bank.
If you’ve grown to think more of a commercial loan as just a commodity, my hope is for you to revisit that thinking. Just like the business or building you invest in can produce meaningful returns, so can the relationship created with your commercial banker. Through time, building trust and keeping each other abreast of changes, you can have an advantage you wouldn’t have otherwise. Your commercial banker can be a resource of information and even a “partner.” Fortunately, this area has strong community banks with experienced, passionate and dedicated commercial bankers with ties to the community where we all live and work. We are vested. We care. And most of all, we personally desire and are committed to developing a strong relationship with you, our client.
About Author: Jocelyn Lane, Vice President
Commercial & Consumer Lending Officer
Contact Jocelyn via LinkedIn by Phone or Email
With over 30 years experience within the banking industry, Jocelyn’s career has included an emphasis in the areas of commercial lending, cash management services, executive management, retail banking, investment banking and wealth management. With this diverse but comprehensive background, she provides a unique perspective on the client experience.
Jocelyn holds a Bachelor of Arts Degree from the University of Florida and a Masters of Arts from the University of South Florida, both of which focused on communication and marketing as well as a Masters in Banking from the University of Virginia in conjunction with the Consumer Banking Association. Further, she’s been trained as a Stephen Covey Facilitator for The 7 Habits of Highly Effective People and First Things First. While born in Florida, Jocelyn heard the mountains calling her and now happily resides and calls Montana home. In her spare time, she hikes, snowshoes, gardens, volunteers and enjoys all the great things this area brings.
