It’s the industry’s worst-kept secret: Banks across the country are on the prowl for commercial lenders.

Executives at Citizens Financial, Fifth Third Bancorp, Simmons First National and others have said loud and clear in earnings calls and interviews over the past month that they are working hard to poach, er, recruit top talent from rivals.

Their results are all the explanation that is necessary. U.S. commercial loans rose by just 2% in late October from a year earlier, according to Federal Reserve data. That pace is markedly slower than the 8% annual growth trend in the fourth quarter of 2016.

“If you can hire a bunch of teams, then maybe you can deliver,” said Casey Haire, an analyst with Jefferies. Without a “second wind to the economic recovery,” more banks will likely have to redouble their hiring efforts in the months ahead to bring their commercial loan books out of the doldrums.

Shows slowdown in C&I lending growth over the past year.

But snagging free agents is easier said than done because the talent pool is only so deep. Competition for commercial lenders intensified in recent years as big banks scaled back on credit training programs, once a talent pool for the industry.

“There aren’t as many strong lenders as we wish there were,” said Jena Compton, chief people officer at Simmons, in Pine Bluff, Ark. Simmons typically recruits “passive lenders,” or commercial bankers who are not actively looking for a new job but who have a solid local reputation, she said.

The $8.7 billion-asset Simmons says it has seen signs its efforts of recent months are paying off. The addition of commercial lenders in Springfield, Mo., and Knoxville, Tenn., has bolstered the company’s loan pipelines, Chief Banking Officer Barry Ledbetter said during an Oct. 23 earnings call.

Commercial loans at Simmons rose 10% during the third quarter from a year earlier.

But it has been a yearlong slump for most other banks, and there are a number of theories about why. Some executives have pointed to uncertainty about future corporate tax rates as Washington lawmakers embark on an overhaul of the tax code. Others have said that companies are relying more on the debt markets for financing.

Any way you cut it, though, businesses collectively have shown little desire to borrow. According to a recent Fed survey, 25% of loan officers in October said the demand for loans from large companies was “moderately weaker” than in the prior quarter — a figure that has risen steadily throughout the year.

Paying up for talent — and a premium client list — to compensate for weak demand can get expensive.

As demand for loans has fallen, the value of having a top-producing lender on staff has risen significantly, recruiters said.

“If you look at lender pay over the last five years, you would see an upward trend,” Compton said when asked about compensation at Simmons, declining to provide details about what the bank pays. “That’s because really strong lenders are in high demand.”

According to data from the recruiting firm Robert Half, the average salary range for commercial lenders with more than five years of experience increased 4% in 2017 from the prior year, to between $99,500 and $141,250. Those figures exclude bonus and incentive pay.

The projected increase for 2018 compensation packages is expected to be even higher, with the top-earning 5% of commercial lenders making $167,000, according to Robert Half.

“There is a sticker shock,” said Michelle Gil, a financial services recruiter at Chrisman & Co. in Los Angeles. Banks “are realizing they are going to have to pay up for talent.”

For many banks, the investment is well worth the return, particularly when new hires bring with them a long list of corporate clients or a savvy knowledge of local markets.

Citizens Financial, for instance, has hired about 40 commercial lenders in the past few months, said Donald McCree, head of commercial banking at the Providence, R.I., company.

Most of the hires have come from big-bank rivals. “They’re from really strong local banks — SunTrust, U.S. Bank and JPMorgan,” McCree said. “They’re bringing their clients with them, and they are already winning business because of their relationships, so it’s very encouraging.”

During the third quarter, commercial loans at Citizens rose 4% from the prior year.

Fifth Third, of Cincinnati, is also looking to add to its roster of commercial lenders. The bank is planning to hire middle-market lenders in “higher-growth markets” in the Southeast, including Richmond, Va., and Greenville, S.C., CEO Greg Carmichael said in an interview following the company’s recent earnings call.

Carmichael declined to share details about its headcount. “The numbers always ebb and flow,” he said.

Smaller banks have also scored key hires, mostly picking up lenders in “onesie-twosies,” rather than lifting out whole teams, according to Brett Rabatin, an analyst with Piper Jaffray.

Independent Bank Group in McKinney, Texas, has boosted its bullpen of commercial lenders, adding staff across Texas and Colorado to bolster earnings growth in 2018, executives said.

Meanwhile, Webster Financial in Waterbury, Conn., said during its third-quarter earnings call that it has added key hires to increase its presence in Boston.

Expect the competition to remain heated for a protracted period.

“It’s not easy to hire good bankers,” Doug Petno, CEO of commercial banking at JPMorgan, said during the company’s investor day in February. The New York company has ramped up hiring in recent months, with the goal of having a presence in the top 50 U.S. cities by the end of this year.

“There’s not a banker tree, where you can go over and pick three or four bankers,” Petno said. “They are hard — the good ones are entrenched in the banks and hard to pry out.”

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Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.