Grow your bank at least 10% per year with an effective Loan Acquisition Strategy
With the right approach to loan acquisition, significant loan growth and bank growth is going to occur. Unfortunately, many community banks take a backward approach to the process by focusing energy on non-performers while at the same time end up dumping additional work onto your producers, hindering their ability to perform. It’s not uncommon to see top produces leave a bank or become disengaged once the insanity begins.
Ditch the gimmicks
Effective loan acquisition requires a focused strategy that matches the bank’s relationship culture and philosophy. Too many community banks make the mistake of thinking a purchased list of leads or a cold canvasing mail campaign will miraculously bring in an abundance of loans. Think about it… If it were as easy as sending a mailer and the resulting net income was even as little as 2 to 1 over the expense, then every bank in the country would be doing it and what we’re writing about today would be pretty much pointless. However, you are reading this, so we’re obviously right, it doesn’t work. Mass mailing and cold calling can bring in some business, but 99% of the time, it will not be the best type of business or customer. Additionally, the time spent for the limited return is just not worth it and in most cases is a massive net negative to the bottom-line. And… if you force a top producer to call 20 customers a day just as you would your non-performer, then you’ve just taken a u-turn to Crazy Town.
Developing your strategy
An effective strategy doesn’t come in a box and consist of a cookie-cutter approach. There are far too many variables from the types of loans you are trying to attract to the experience level of your individual loan officers. With the right approach and direction, an effective strategy can be implemented quickly with positive results. Our more than 20 years of experience has proven that a community bank’s strategy must revolve around three key areas.
#1 – Focus on the Super Stars
The first mistake most community banks make is setting up a process that focuses on the under-performers. If you have a commercial lender that has been at your bank for 5 years and still has a book of business below $20 million (and he inherited a $10 million book), the last thing you want to do is focus a plan on him. He may not be fixable. It’s much easier to take a car from going 80 mph to 100 mph than to get a broken car to go 10 mph or even get it out of the shop. Instead, focus your plan on moving performers to super stars.
#2 – Making the layups
If you miss the layups or the business that calls in or walks in your branch on a regular basis, you’ll be missing out on at least 10% of the organic loan growth you should be booking each year. The retail side of the bank needs to be operating at a remarkable level, which gives loan officers the confidence to make loan acquisition a team effort. The officer needs to recognize the layups and the branch employee needs to recognize them as well and should also know what to do with the layup when they see it. Here are a few of the layups.
- The application – Find out where other loans are held and refer to other lending areas.
- Requests for information – Retail employees must be trained in asking the right questions to uncover layups and how to properly transfer calls and set appointments with the appropriate lender.
- Payoffs – Pay attention to loans that are paying off or that have lower balances. Branch employees receiving loan payments will also play a key role in this opportunity.
#3 – An incentive plan for the performer
If you want to get something done other than just thinking about it, you have to keep score, recognize success, pay your producers, and hold everyone accountable. The incentive plan is where it starts and it’s more than just paying a set rate per loan or dollar volume. When it comes to incentive and compliance, all loans are not the same. Know the regulations before you start. You also need to use the incentive plan as a foundation for tracking results, identifying weak points, and celebrating the super stars. It’s also important to tie loan acquisition into the retail incentive plan as well. Implementation requires several key action points. Here are a few of them.
- Discuss cross-sell results with each loan officer at least twice a week on an individual basis.
- Hold weekly departmental meetings to deal with team issues and questions, recognize heroes, and discuss the successes.
- Hold a weekly Loan Acquisition meeting with the entire retail staff of the bank.
- Monitor the growth of Loan Portfolios and DDA deposits on a weekly basis and share the information with all lenders.
- Pay incentive based on developing a full relationship with the customer.
Ideas and good intentions are a waste without implementation
One can have the greatest ideas and the best of intentions, but without a clear process of implementation, you’re in no better shape than if you turn your community bank over to the excuse makers and status quo protectors. Community banks that are losing to the large national banks are filled with good intentions. Begin today by communicating the strategy and committing to the keys of implementation. Don’t cherry pick the parts of the process you want to use. Each key is there for a reason. Leaving one out will do nothing more than lead you to just another failed initiative. We’ve been implementing successful loan acquisition plans for over 20 years. If you need some help, let us know.
