Orange County’s banking and thrift industry has added more than a thousand workers in recent years,a sign of expanding retail and business growth in one of the nation’s most affluent counties.
Amid the gains, there’s one key role that some smaller banks and thrifts are having a tough time filling: credit officers who analyze and approve commercial loans.
The shortage includes small-business loan officers, and even in some cases a bank’s chief credit officer,the watchdog of banks’ credit underwriting standards.
Some officials even describe the shortage in these specialized workers as approaching a crisis, with lending standards potentially at risk in rare cases.
“What we’ve seen are people involved in a critical component of the lending process who are not familiar with or don’t know how to critically analyze commercial lending,” said Anissa Yates, spokeswoman with the California Bankers Association.
Several local bank chief executives and headhunters said they’ve had a tough time finding qualified commercial lending officers, experts in credit underwriting on corporate or construction loans, and lenders who know how to navigate the bureaucracy associated with doing lending under the nation’s Small Business Administration program.
Skills required include reading a tax statement with an eye toward finding potential landmines and looking at all aspects of a customer’s ability to repay a loan.
“It’s the $64,000 question in the world of commercial lending,” said Tom Dobyns, president of retail banking for Fullerton Community Bank. “Finding those people with those kinds of skills is getting fewer and farther between.”
Recent layoffs at OC subprime mortgage lenders have led to a flood of resumes from prospects applying for commercial lending jobs, said Thomas Yott, chief executive of CalWest Bancorp’s South County Bank in Rancho Santa Margarita.
But those workers aren’t always a fit for commercial lending.
“As the production level of refinancings decrease in mortgages, these companies start to displace employees,” Yott said. “Many feel with their background in mortgage lending that it fits these types of positions. But they can’t relate to commercial credit and business banks.”
Job Openings
In addition to a dearth of commercial credit underwriters, at least four local banks are searching for chief credit officers. These are a banks’ top officials who help develop a credit culture by creating internal controls. At heart, they safeguard the asset quality of the bank.
These officers are rare breeds in the world of banking. At a bank or a thrift, the buck stops with them on what loan gets funded.
Tustin-based Sunwest Bank lost its chief credit officer last summer when J. Douglas Sherman took the same position at startup Plaza Bank of Irvine.
Sunwest Chief Executive Glenn Gray has filled in while the thrift searches for someone to fill Sherman’s shoes.
Irvine-based Orange County Business Bank saw its chief credit officer leave last month. The bank’s senior officers have taken over the responsibilities for now.
Rancho Santa Margarita-based South County Bank still has an opening for a chief credit officer after Christian Plummer retired early last year.
And Culver City-based Alliance Bancshares California, which counts about a quarter of its $600 million in assets from its Irvine branch, also is searching for a chief credit officer.
Fresh off a recent stock offering in which it raised more than $11 million, Alliance has plans to add more branches in OC this year.
Training Lags
Observers say there are several reasons for why it’s tough to attract chief credit officers.
Big banks, such as Bank of America Corp., Union Bank of California and Wells Fargo & Co., cut back on their commercial loan officer training programs in the early 1990s.
At the time, banks were looking for ways to trim expenses amid a recession. A spate of failed banks and thrifts were forcing financial institutions to get lean and the ranks of credit officers thinned.
Meanwhile, a flurry of startup banks in OC in recent years has tightened the supply of chief credit officers and experts in commercial credit underwriting.
“Relatively speaking it’s a little bit more challenging than I thought it would be,” to find a chief credit officer, said Sunwest’s Gray. “The proliferation of de novo (startup) banks targets our employment base. It sucks up our supply.”
Gray also said that the industry hasn’t done a good job at grooming its own candidates.
Plaza Bank’s Chief Executive Donald L. Solsby said finding a chief credit officer at his startup bank was a daunting task.
Startups have a regulatory burden that requires them to only hire a chief credit officer who has held that post during the past three years.
“It’s very difficult,” Solsby said. “It took us a significant amount of time.”
Banks frustrated by their inability to find good candidates have turned to headhunters.
Jesper Andersen has worked the phones from his Alaska office trying to find candidates for OC banks such as Fullerton Community Bank and Costa Mesa-based Pacific Mercantile Bancorp, among others.
Andersen, 62, worked for decades out of Seattle for Cleveland-based KeyBank.
But now the banker-turned-headhunter dials prospects from morning to dusk with his father at their company Man-agement Recruiters of Anchorage LLC.
“There is a huge vacuum in that area,” Andersen said of trying to find commercial credit officers. “It’s like pulling a huge rabbit out of the hat.
“The logic is that the big banks can absorb someone who isn’t qualified and just train them,” he said. “The smaller community banks can’t.”
Banks are tweaking their pay and employment packages for credit officers.
Commercial lending executives command base salaries of up to $100,000, with other compensation incentives dangled as financial lures, said Hal Horowitz, senior vice president of the banking and finance group for Wingate Dunross Inc., an executive recruiting firm based in Agoura Hills.
Commercial lenders receive commissions on their loan production. Headhunters said they also are seeing small banks offer more stock options or a stake in the bank. Shorter options vesting periods and longer vacations also are being used to attract executives.
Timing is a factor. Some big banks pay year-end bonuses to high performers. To get some to leave their jobs, banks are boosting signing bonuses.
Pick Up in Classes
Trade groups such as the California Bankers Association and Philadelphia-based Risk Management Association have debuted training programs in recent years.
“This is certainly an issue that comes up often when chief credit officers come together to talk at our round table meetings,” said Pam Martin, the Risk Management Association’s director of regulatory relations. “It’s particularly challenging for smaller institutions. Most don’t have a formalized training program.”
The California Bankers Association launched its training program after hearing from small banks.
“Everyone was poaching each other’s commercial lending officers,” said association spokeswoman Yates.
She said her group’s training program has graduated about 120 bank officers from its commercial underwriting school during the past three years.
