Things I Wish I Knew My First Year of Commercial Banking

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Podcast Transcript

Hello and welcome to another episode of Lender Performance. Dallas and Jess here from PrecisionLender, and thank you for joining us.

Today we are going to pick Dallas’ brain about the top five things he wishes he knew when he started in the banking industry. Hopefully his years in the trenches will make it a little easier for some of you out there. Before we get started, Dallas, a lot of folks know you and have listened to you, but for those who might not know, can we start with a quick bio? What’s your background, and what were you doing before you were at PrecisionLender?

It started with way back in college, an internship with St. Louis County Economic Council, which I think its changed names since then, but what that entity did was run the SBA loan program there in St. Louis County. They also managed a finance fund, kind of a mezzanine finance fund that was meant for deals that weren’t quite bankable. Anyway, the job there was kind of, with training wheels on, helping underwrite bank deals and some SBA deals, and then submit those to the local board that would approve them. The local board was all bankers. Once I graduated those were the only people with real jobs that I knew, so that’s where I landed.

I went into the credit analyst program at … At the time what was Union Planner’s Bank before it became Regions Bank and Regions Bank then merged with AmSouth, it was several versions ago, but it was Union Planner’s at the time, which as one of the bigger banks in the St. Louis area. I was there for a little while doing the credit analyst stuff, just started doing commercial lending there, then went to a community bank to do commercial lending, then started going finance stuff just because there was a lot of it to be done, and I started doing it as a side thing, and ended up switching from lending to finance. I eventually became the CFO of that community bank, then went to another one as it was doing some acquisition stuff, and then from there I went to a consulting company that was owned by a bank, and did asset liability consulting from other banks all over the country. Then from there is where I landed at PrecisionLender.

I started on the traditional lending path of kind of credit analyst to a loan officer, but then switched gears and went to finance and then consulting. Those two roads kind of meet at loan pricing. That’s how I ended up here at PrecisionLender. That’s the background which is a little bit of an unusual route to get there, but I got to see lots of different parts of it along the way.

Dallas, walking in after your internship, your first real job walking into a bank, what were you expecting? What kind of things did you think you were going to be doing on day one?

I had this notion, like probably most college graduates do, that I was going to be walking into the middle of all of these really exciting incredibly awesome deals, and that I was going to be working with all of these people who knew exactly how all of this stuff works and was put together. What I figured out, of course, is like all industries, all business, most people are kind of winging it, and there’s a lot of boring stuff that happens in there too. That was probably the biggest surprise was how siloed the work really is.

You go from this academic experience in college of everything’s very theoretical, and you see how all the blocks fit together, and then you put your nice, neat, clean math equations to it, and you come to the right answer. Then you get into the real world, and you figure out, well these people have no idea how the rest of the bank works, and their just kind of working deal by deal, and putting it together. The theories all gone out the window. There’s little pieces of it remaining, but it’s all very tarnished by the real world. None of the deals fit in a box, and none of the math equations work because the assumptions don’t fit anymore and that kind of stuff.

I don’t think my shock was anything unusual. It was just that I think … That’s something that’s interesting when we talk to others about what we do. We are a software company, and we help banks price their loans. When you tell people that, they’re like, “Well isn’t that what banks are really good at? Don’t they know how to price loans? That’s kind of what they do for a living.” The surprising thing is is that there’s a lot of them that are just kind of making it up and flying by the seat of their pants and doing what the guy down the street is doing. That was the biggest surprise to me. A lot of lack of precision in a business that’s kind of thought of as being very exacting.

Going down that track, looking back at your early years in the banking industry. Today we’re going to talk about the top five things you wish you knew in your first year.

I’ll do a combination here of my real world experience, and then also just some other things of reading and picking them up other places … Hindsight’s 20/20. I don’t know if these are necessarily in any kind of order, but as I just sort of scribbled them down, these five stick out. I think would be applicable to wherever you are in the bank, and really in any business most of these are going to apply.

The first one, and I would put it first because I think it is the most important is just to be a good listener. That old thing of we have two ears and one mouth for a reason. There’s a lot of folks who don’t take advantage of that. I think it comes from a good place. People want to come in, contribute and show that they know things, and that they belong, and that they’re a valuable part of the team, but I think especially in those early months on the job, anytime you’re in doubt you just kind of need to sit there and soak it in. I think what people don’t realize is that’s kind of the expectation, is that you’ll come in and you’ll soak things in and just kind of watch for a while.

That’s not just a green newbie out of college thing either. I think I remember having the same kind of conversation with you when you started at PrecisionLender, which was we hire really ambitious, smart people, and you’re going to want to come in here and hit the ground running, we’d rather you didn’t. Slow down. Soak it in. Take the time now while you’re going to have it because pretty soon you’ll have way to many things going and not enough hours in the day. You won’t have the chance to come back and do this stuff, and do things like –

You’re only the new kid once.

Yeah. Exactly. You only get that chance once to be like, “Hey I’m going to sit in my office, and I’m going to watch recordings of the demos that you guys have done over the past couple of months. Then I get to see how you guys do it. I get to see how they’ve changed over time, and kind of hear the questions that bankers have about the stuff we’re doing,” and that stuff that I think is really valuable. I wish everybody had more time to do it, and you just don’t after a while. Just listen. Pay attention to what’s going on around you and ask lots of questions. Especially as a newbie. Again, that’s a chance where it’s okay to say, “Hey this is my first real job. I don’t know how this stuff works.” You can ask that and everybody’s going to be perfectly okay with it. Ask while you can.

Some big ones. Figure out by listening, asking directly, and watching those around you. What are the most important parts of the job that I should master during my first few weeks? What’s expected of a new hire, and what do I really need to have under my belt 30 days in? Who are the key people that I need to meet? What should I learn from them? You’ll learn that pretty quickly of who you need to know and who you need to avoid, and all those kind of politic things, but don’t jump in so early that you don’t have a chance to learn that. What processes, procedures, and all that kind of stuff are most critical to my job, to my team, to the bank as a whole? What’s the best way to communicate. Ask your boss that, how do you want me to communicate with you? Do I come in your office? Do I send you emails? Everybody’s kind of got their own style, and just ask. Listen and take that time while you have it.

Related to that I think would be the second one. In addition to just being a good listener, and this is one that we also found from the founder and CTO at Hub Spot.

They say to spot the high performers and mimic them. I would adjust that slightly. This is a term we use, and it’s a term of endearment, but look for what we call the Debbie Doers in the bank. All businesses have these, but I think banks have a lot of them. Have people kind of enjoy sitting in meetings and talking and talking strategy. From our end it can make sales cycles really, really long because they want to over analyze and over talk every decision. At a bank a Debbie Doer is the person who takes all of the meeting time and all that discussion, and actually turns it into action. It’s a rare and it’s an incredibly valuable thing. The banks that we see that are really high performers, they have a Debbie Doer whose been put in a high enough ranking spot to be really effective.

If you find a Debbie in your bank, make friends. A couple reason for that. Number one, they obviously know how to navigate the waters. Getting things done in a bank can be really tricky sometimes. There’s a lot of roadblocks in the way at every bank, and we’ve talked about a lot of the reasons for that. You’ll learn directly from the best about how to get through those things and just get stuff done. If you can help them carry that load whenever possible because Debbie Doer is always going to be overworked and have to many things to get done. If you can help her carry that load, then you’ll have a great ally for when you start taking on some projects of your own. Learn who those people are, and align yourselves with them. Action is also rewarded over the very eloquent speeches in a meeting. Align yourself accordingly, and the action and the results will, I promise you, end up the better reward in the end.

Sort of along those lines too, every organization’s different. They will organize themselves. The hierarchy will be different, both the formal one and the informal one. Spot those people who are performing well within that culture. Which attributes really matter in that bank, and they’re all going to be different, but it goes back to that lesson of pay attention, see who’s doing what, who’s going places, and this is not trying to ride their coattails. This is figuring out how are they doing that. Those relationships are important, and those are the people you need to mimic just so that you can try to recreate some of those results.

Now onto your third piece of advice.

Yeah. Number three would be to get a really broad knowledge base. That would be in kind of what I would call Banking 101. Banking 101 would fall into two bit buckets. Number one would be how do banks make money, and the other bucket would be, in a highly regulated business, what are the ways that I can get in really big trouble. When I left the big bank, which was Union Planner’s as it became Regions, decent size regional bank, and all the kind of classic big bank issues of just going through a merger, lots of reorganizations, lots of politics going along with that, and just kind in a lot of ways had some trouble getting out of our own way, and tripping over lots of things that in hindsight should’ve been kind of easy.

When I went to the smaller community bank, I got to do a management trainee trip through the whole bank. I did shadowing of just about every function. I got to spend time at every branch. There weren’t a ton of them. I even got to spend some time actually doing some of the jobs, opening accounts, running a teller drawer for a couple hours, helping get a loan actually boarded onto the court system. At the time it was useful just to, again, be able to learn the organization and figure out who the real doers were in each department, and build some of those relationships. It was a good foundation for me, but it became really, really important a couple of years later as I started doing finance stuff and was being promoted into kind of more management stuff and in handling some of the operations things and some of the finance and accounting stuff. That knowledge and maybe more importantly, the empathy, was really valuable.

It was helpful to us to know what it’s like for a teller to have to count a drawer, make sure that they balance, and then get their day changed over in the middle of a Friday afternoon when it’s really busy. That’s a hard thing to do. What we were asking of them was to balance perfectly. We made that, by our incentives, the most important thing. The management group hadn’t paid much attention to it, wasn’t a purposeful thing. It was just a, “Hey what’s a way that we can reward tellers for doing a good job? For keeping their drawer balanced.” In asking tellers to do this, we would pay a little monthly bonus for anybody that balanced perfectly.

If you think about the incentive there, on busy days where there’s just lots of craziness and lots of transactions coming through, you would see tellers kind of dodging transactions. If they saw the big commercial customer with tons of bags of cash to come in with their deposits, nobody wanted to touch that one because it was really hard, and it was going to come out wrong, and your drawer might not balance.

You would also see during that … This was when we’d be changing over days in the middle of the afternoon. I don’t think very many banks do that anymore, but we used to do it at 3 o-clock. We would change the day from one business day to the next. Everybody had to count their drawer and change the date over. It was kind of a manual process. A real pain. If somebody was off by a nickel in their drawer, they would stop and look for it, and then their friends on the teller line would say, “Oh my gosh. She’s off by a nickel. She’s not going to get her bonus, let’s help her find it.” They’d go back through all their transactions. Now there’s lines starting to back up into the lobby.

We had incentivize all of the wrong things, and we had told them what we thought was most important, and it really wasn’t. The important thing was serve that big commercial customer. Do their transaction, and if it’s off by a few bucks, who cares, the bank will eat it. You make it right for the customer. Who cares about finding the nickel, just move on. That kind of stuff that, even if you don’t get to do that kind of formal management trainee thing, learn about how all those pieces of the bank work, and how those people’s jobs operate. What you’ll piece together from that too is the bank itself. How does it operate? How does it make money? What are the things that really drive the performance of the bank? Contribute to those. That’s where the big opportunities are, career-wise, is wherever the bank’s revenue comes from and wherever the growth comes from, be apart of those. That’s the kind of … How banks make money, the industry side of it. Learn as much of that stuff as you can internally. Find it online, sign up for classes, go do training stuff wherever you can.

The other one is the how can I get in really big trouble. This is the regulation stuff. Any bankers listening will know what I’m talking about, but those mind numbingly boring awful online trainings about regulations. Jess, we’ve had to do a few of those since we sell to bankers, and our auditors as us to do the same things. We’ve had to do some on data security and some really exciting stuff like that. Bankers have hours and hours that are mandatory training to do every year. Truth in lending, and Reg Z, and Reg E, and all the stuff that may or may not even directly apply to your job, you have to sit through those trainings. What most people do is they click through them really fast, and you guess at enough answers to get the passing score, and you move onto the next one because it’s tedious and time consuming and all that stuff.

That may be the right approach to get through that, but pay attention to those regulations. At least know … Be aware of what they are so that you know when to stop and ask questions. I saw more than one talented person coming through banks who really just kind of get in a mess because they skipped through something or they made a really bad decision. It goes beyond just, “Hey whoops. I made a mistake and the bank management team’s going to be okay with it,” because then you get regulators involved, and things like the bank secrecy act, they don’t play around with that kind of stuff. If you just out of ignorance don’t fill out the reports that you’re supposed to, or don’t do the disclosures on the loan like you’re supposed to, it turns from a slap on the wrist to something that can follow you around for the rest of your career. As painful as it might be, learn those things. It’s just part of the business, and you’re going to have to figure it out.

The next one is about the company culture. What’s your advice there?

We touched on that a little bit as far as the people involved in the lay of the land, as far as who gets things done and all that kind of stuff. The other part of it though is the sometimes really deeply embedded company culture. As you would expect, in banks these can be very, very different. It was the biggest change for me when I went from the big bank to the smaller bank, and it wasn’t just the size of the organization. It was like this deep seeded cultural difference. I went from one bank which was very deal oriented and all about growth, and we were really trying to expand in the St. Louis market. We were fairly aggressive and doing some deals on the edges, so without anybody explicitly saying so, you figured out that the job was to figure out a way to make deals happen. Be creative, help come up with structures that worked, really help the lenders find a way to stretch on deals so that they would fit within policy and within the pricing targets and all that good stuff. Make the deals happen.

Then I went to the other bank that was kind of the polar opposite. There were some reasons for that, but basically the bank had this philosophy of everything had to be squeaky clean. We’ll forego some of the growth, and we don’t need to be a giant out performer in terms of earnings, but it’s got to be steady and consistent. We want a nice steady ramp up in earnings, and if we lose some opportunities because of that then so be it. Insisting on the one ratings and exams. We even had some of the examiners tell us that, “We love coming to examine you guys, but I hope you realize how much it costs you to be this squeaky clean. If you would loosen up a little bit, we’d probably be okay with that, and you guys could make a lot more money.”

Those are things that nobody sits you down and says that when you walk in of, “Hey let’s push the envelope a little bit,” or even the squeaky clean side. They may say, “Hey we take this stuff seriously, but you kind of have to soak those things in of how deeply embedded it is in the culture. The other things is kind of how you treat customers and each other. I worked at one bank where it was what was rewarded and expected was kind of who could get a lot of things done, and if you had to be really aggressive and trample some people and make some enemies, then so be it. Then the other one that was more no matter who’s calling whether it’s a customer or an employee, we pick up the phone every time. We don’t let it go to voicemail. We pick it up by the third ring. This is how you answer the phone. Those things that were very clearly spelled out of kind of how you interact.

Banks aren’t always good at spelling out what those values are. There’ll be things on the website, but those are typically marketing oriented values and mission statements and stuff. You just kind of have to live it for a while to figure out what’s the real culture. What are the things that are really important? How are people kind of expected to interact? It’s about those expectations. The kind of unwritten rules. Some ways that you’ll see it is how people talk to each other. Is it in person stuff? Is it on the phone? Is it email?

Meeting cadence, some banks have very formal meetings. We worked with one just recently where for meetings they sent around this excel template, and it was you kind of fill in the blanks of who was there, and what was the discussion, and what was the decision, and who’s supposed to follow up by when, and it was this super rigid formal structure for meetings. One of the banks I worked in, it was like their … My calendar would be empty every week, but it was kind of the drop in. People would … You kind of just got your head down working on something, and somebody else would appear in your doorway and want to sit down and talk through something, and then ten minutes later somebody else would jump in and have the same conversation. Both of those have some pluses and minuses, but you just have to figure out what’s the expectation there.

Similarly, meetings are they optional, are they required. Cell phone etiquette, are you expected to answer emails even if you’re sitting in a meeting? Is that why they gave you the phone, or are you supposed to put it away and pay attention. Those are all very different. Pay attention to those, and make sure that you’re not breaking any of those unwritten rules.

We will wrap it up with what’s your last piece of advice?

Yeah. One more. This one’s more specific to banking and really more specific to loans. I’ve just seen people really struggle with this one a couple times. Know the details of your deals. By your deals, I mean if you’re a lender, the deals with your own customers. If you’re an analyst, it’s the ones that you’ve underwritten and worked on. If you’re a processor, it’s the ones that you’re putting your documents together. The folks who tend to lose the respect of superiors are the ones who when they’re asked questions they get fuzzy on the details, and they mix up pieces of those, and they don’t know the numbers. You kind of got to know the those cold. The reason is is you should be intimately familiar with that deal. That shows that you’ve looked at it forwards, backwards, and sideways.

As a good banker should, when you’re putting together a deal, you should be thinking about what are all of the things that could go wrong. What are the possible places where this could blow up on us? Have I thought about that? Have I tried to quantify what that would look like? Have we tried to mitigate it? If you don’t know some of the basic details, that’s going to show that you didn’t do enough homework.

I’ve seen some young lenders get really embarrassed in loan committee by bringing in things that they were asked questions about. What about the related business? What about this income that shows on their tax return? They’re like, “I don’t know where that came from. I don’t know what that is.” That’s the wrong answer. You just got to do your homework. Spend the time to really know those and be confident about them so that when they go to your boss or to committee, you know where you’re coming from. That gives everybody some comfort with the deal. They can’t ask every question before they approve it, but if they are confident that you’ve thought your way through it, you’ll build that reputation over time of somebody who’s very thoughtful and careful and has the best interest of the bank at heart.

That’s my five.

Thank you Dallas for letting us kind of pick your brain, and hopefully there are some folks out there listening who are early on in their careers that might get some value out of your experiences.

Yeah. Hopefully they can avoid some of the mistakes that I made along the way, and if other people have some things that they think would be useful for the newbies to know, throw them into the comments on the show notes, or let us know. We’d love to hear those and start a conversation about that.

That will do it for us today. Thanks everyone for listening. We will provide links to some of the articles Dallas referenced, and some of those that inspired this conversation today. As always, you can find those at precisionlender.com/podcast. Please give us some feedback and ratings in iTunes, Soundcloud, or Snitcher. We hope you subscribe to our feeds there. Thanks for tuning in. Until next time, this is Jessica Stone.

This is Dallas Wells.

You’ve been listening to Lender Performance.