While most of the banking industry is aflutter with the possibility of increased consolidation, Joseph Chillura, president and chief executive of USAmeriBancorp in Clearwater, Fla., is likely to stay on the sidelines.
The $3.5 billion-asset USAmeriBank is one of Florida's biggest privately held banks. Though going public would raise funds to help the company participate in a wave of mergers in the Sunshine State, Chillura prefers organic growth, viewing deals as an unsustainable way to generate returns. He is also content with USAmeriBank's current structure, where employees own a large portion of the company, which helps with expense control and retention.
"To build up an institution that is really just meant to drive up the stock price isn't what we're all about," Chillura said recently in an interview.
"Our model is a little bit different," he added. "We feel like we can build solid earnings and create shareholder value over the long term by staying independent and private and growing from an organic standpoint."
The following is an edited transcript of American Banker's discussion with Chillura.
How does the company's ownership structure influence how it does business?
JOSEPH CHILLURA: The bank is about 20% owned by management and employees. It's a huge differentiating factor. We treat this like our own small business. When we're lending money to small businesses, middle-market companies and real estate developers, we're lending our own money. My whole net worth is invested in this bank, and that's true for the other people in the organization.
The structure helps with expense control and decisions on loans and hiring. We're transparent with employees with our numbers so they know the value of the stock from a book value standpoint and the earnings of the organization. It bodes well for keeping happy, healthy employees who are motivated to do the right thing, not only for the client but also the other shareholders.
We often hear that community banks have trouble attracting talent. Is the ownership structure a good recruitment tool?
Early on, it was a little bit easier to attract talent because we were in this massive recession and people were looking for a safe haven. We had a clean balance sheet. We offered the ability to buy in and we were handing out options. We really made it an opportunity for people to hang their hat and bring their customers over.
We're in such a digital age now where customers really focus on technology, but I saw that you offer fresh-baked cookies at your branches. Do you think customers still care about those types of touches?
I would tell you that our client base appreciates both [technology and personal touches]. Over time, it feels like people want solutions that are more technology driven. I would agree with that, but I do believe that, even if you look at the millennials, they are very localized. They love technology, but they also like visiting local restaurants and knowing who is purveying their meat and brewing their coffee. If we can pull off providing them with up-to-date technology and still stay local, then we might have something special.
How do you attract new business?
I always tell our folks that we can't be the cheapest and we won't have the most locations. We have to differentiate with speed, flexibility and knowledge. We've got to be able to make things happen. The industry itself is very slow and it takes a long time to not only borrow money but to open an account. We need to know our clients better than the competition and be much more progressive in how we take care of them.
Are acquisitions on your radar?
I wouldn't say never, but it's not high on our priority list. We consider buying other banks, but we're not publicly traded, so we're at somewhat of a disadvantage. It seems like most of the people looking to sell are fatigued and want to get out. Anything we would buy, we'd really only be buying the management team and the customer base and carrying it forward. It's difficult to find like-minded people from that prospective.
What about going public?
We have a management team that is well equipped to go public if we needed to, or if we thought it would be appropriate. But we just don't see ourselves as an acquirer, and the only reason to go public is to create a currency that we could use to buy banks.
Why are you uninterested in acquisitions?
The purpose of an acquisition is really about cost controls and expense savings. A lot of these banks are using an inflated currency to buy banks that are really tired and fatigued with the regulatory process, and then they just cut all of the costs out … which then somewhat upsets the client base. That's their strategy. The stock market has been very nice to those banks because the value of those organizations goes up as a result of their acquisition activity. I don't think it's the best thing for clients and, over the long term, the earnings aren't sustainable.
Do you see yourselves as a seller?
You never say never, but that's not really on our radar. We're a 3% [deposit] market share player [in the Tampa Bay area] and we feel that there's plenty of runway left in the economy. Tampa Bay and the Alabama market have some really strong signs of growth over the next few years. We're bullish on our ability to grow organically.
There was speculation that USAmeriBank could sell after Bank of the Ozarks agreed to buy C1 Financial. How do you address those types of rumors?
We're pretty transparent with our employee base. We have a monthly call where we talk about our performance and talk about whatever issues are on the table. There's a lot of scarcity value with our organization, and we look at that as making us more and more valuable over time. If you look at the decisions we're making, as far as the people we're hiring and the infrastructure and technology we're investing in, it's clear to anyone on the inside that we're not positioning this bank for sale. We're positioning it for the long haul.
What are the biggest challenges facing the banking industry?
Trying to find innovative people to work for financial institutions and banks is tough because the regulatory environment has been taxing on a lot of more entrepreneurial types over the last seven years. We've got to rewind and rewire their brains to show that there's lot of opportunities in banking. A more regulated environment will ultimately be healthier for the entire system. Once you accept that, you can work within that framework and become a real player by bringing on people who are more ambitious and innovative.
A second thing is a real challenge to grow deposits. Deposits are difficult to move from larger institutions because of the technology associated with how people do business. It's very sticky. Even though the service levels are bad, and they aren't happy where they are, it feels very daunting to have to move to another organization.
Are there any trends you expect to see in 2016?
I think you will see more consolidation with some of the smaller banks. I think larger institutions are becoming more aggressive at acquiring new business and they're looking for balance sheet and earnings growth. You might see the regionals and the larger banks looking at acquisitions. The community bank model is one in which you have to be a certain size to have any traction and scale. Some say it's a $1 billion or $2 billion [in assets]. We're hitting the sweet spot.
Why is that the sweet spot?
If you're over $1 billion [in assets] you've got some earnings and you've got some ability to pay for the infrastructure and risk management needed to compete. You can sustain yourself with earnings growth and you can pick up market share, given how concentrated these markets are. Once you're in the $10 billion range, you start talking about public companies, which are at a huge disadvantage managing to a quarterly number. They're forced to enter the acquisition game. I don't think acquisitions, even though they may seem accretive and solid from a day-to-day standpoint, are building organizations that are sustainable over the long term. I think banks in that $1 billion-to-$10 billion range can stay independent and can serve their communities and generate returns, which is good for everyone.