Anthony Labozzetta isn't afraid of change.
As president and chief executive of Sussex Bancorp in Franklin, N.J., he is just as willing to try a new strategy as to reinvent past ones.
That propensity isn't lost on the directors of the $809 million-asset company he helped salvage after the financial crisis.
On many occasions, Labozzetta has worked hard to sway the thinking of a board that was accustomed to moving forward at a much slower pace before his arrival in early 2010, said Edward Leppert, the company's chairman.
"That's a part of the job Tony relishes," Leppert said.
Labozzetta's powers of persuasion were tested after the financial crisis, when he convinced directors that his team should be allowed to keep investing in growth initiatives even as a handful of employees worked to build a firewall around bad assets.
His lobbying skills came in handy again in 2013, when Sussex decided it could no longer rely on its 40-year history of running branches in largely rural markets. To gain traction in the more populous and prosperous areas of New Jersey and New York, Labozzetta proposed resurrecting a hub-and-spoke model that other banks had used before the financial crisis.
However, he wanted to incorporate a twist. Rather than relying on traditional branch managers, he wanted business development professionals to oversee the expansion.
It was a lot for Sussex's conservative board to process.
"We were a little bit cautious because it was a radical change," Leppert said.
Still, Labozzetta prevailed in convincing the board, and so far the strategy has worked out well. Newly added branches, which are operating much more efficiently than traditional sites, also have shown the potential for accelerating deposit growth.
"The thing that has impressed me the most about Tony is that he's always thinking about the business and how he can make it better, change it and keep it nimble and flexible as the environment changes," said Collyn Gilbert, an analyst at Keefe, Bruyette & Woods. "He's very pragmatic in his approach."
Labozzetta's persistence and creativity, willingness to adopt and adapt past concepts, and credibility with investors and directors, have played a big role in Sussex's rebound while creating a blueprint for revitalizing the branch model. For those reasons, American Banker has selected Labozzetta as one of its three Community Bankers of the Year.
Road to Sussex
Before joining Sussex, Labozzetta had never gotten the chance to run a bank. He was close at Interchange Financial Services in Saddle Brook, N.J., where, as chief operating officer, he was arguably being groomed for the top job. Instead, the $1.6 billion-asset company sold itself to TD Bank in 2007 for more than four times book value.
Labozzetta, who eventually became TD's executive vice president of retail distribution for the mid-Atlantic division, enjoyed a three-year stint that would prove instrumental to his career development. Notably, it gave him an opportunity to try retail strategies that he never had a chance to implement at Interchange.
Those experiments would eventually influence how he would run Sussex.
TD, for instance, sought out entrepreneurial employees with the "right personalities" to sell products to customers. The model, which Labozzetta would eventually use at Sussex, favored identifying employees who were geared more toward business development on a regional scale rather than branch management.
It would take years for Labozzetta to implement that model at Sussex, where his first order of business involved cleaning up the balance sheet in the wake of the financial crisis.
Noncurrent loans had begun to increase, peaking at 8.6% of total assets by September 2011, according to data from the Federal Deposit Insurance Corp.
Many turnaround artists followed a tried-and-true approach to address credit issues after the crisis. They completed bulk loan sales, wrote off huge losses and raised millions in capital to plug the holes. Those "fresh slate" efforts, however, were highly dilutive and damaging to existing shareholders, said Joseph Fenech, an analyst at Hovde Group.
Labozzetta and his team decided to chart a more difficult course to recovery, pursuing parallel paths where one small team would focus on internally working out problem loans while everyone else focused on building for the future. The company would eventually raise a small amount of capital, bringing in about $7 million in 2013.
At one of his first board meetings, Labozzetta told Sussex's directors that his team would be reinvesting in the bank rather than simply grappling with bad assets and slashing costs. The pitch met with some resistance, but directors eventually gave Labozzetta their vote of confidence.
The approach made total sense to the company's new CEO.
"You're giving away shareholder capital if you do a bulk loan sale," Labozzetta said. "The key was to reignite the organization, solve legacy issues, bring in new talent and open regional offices."
Labozzetta held weekly Monday morning meetings with Chief Financial Officer Steven Fusco — a recruit from the Interchange days — and a credit workout team to discuss progress on loans, which were segmented into categories and subcategories. Everyone else was insulated from those problems so they could focus on generating income.