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Take Five with Corey Chambas: First Business Bank’s first 30 years

The birth of a local finance icon occurred on April Fools’ Day of 1990, but the launch of First Business Bank was no gag. This bank had a business focus that was dead serious because financial industry consolidation threatened to take decision-making too far away.

Now, 30 years later, First Business has grown organically and geographically, encompassing four banking locations and a publicly traded parent company that employs more than 300 people with more than $2 billion in assets. In this interview, First Business Financial Services President/CEO Corey Chambas talks about the bank’s 30th anniversary.

Can you explain why it was important to establish a business-focused bank in this region three decades ago?

Corey Chambas

When the bank was founded, one of the main drivers for [founder] Jerry Smith was that there was a lot of consolidation going on in the banking industry. At that time, virtually all the banks in the Madison market — there had been a lot of independent banks based here in Madison — were being swallowed up by the big banks in Milwaukee. Back in those days, it was M&I, First Wisconsin, and Marine Bank, and so local decision-making was going away and he really felt the local business community needed a local business bank where decisions were made in the Madison area. That was a big driver.

In an era when technology brings banking services to our phones, I would imagine you believe the relationship-based banking that your bank is noted for takes on even more importance.

Yes, it’s even more differentiated today because the consolidation that was happening 30 years ago has continued. Back then, there were 14,000 banks or more. Now, there are less than 6,000. The big banks are way bigger than they used to be, and there is a lot of automation and technology. It has advanced a lot of things in banking in a good way, but it has also taken away the local community bank feel that a lot of businesses experienced. So, we believe our model — where we still go out and see our clients and local people who are part of the decision-making process — is even more of a differentiator.

Jerry Smith’s emphasis on banking relationships and an employee-engaged culture was said to be a departure from the image of many large, corporate banks. As an executive who also views himself as a chief culture officer, how does your organization keep employees engaged?

Business growth is an important part of it because if you’re going to attract talented people who want to grow in their careers, and you’re not a growing organization, there is not enough opportunity for them. I remember back when I started in banking at a big bank in Milwaukee, there were 35 commercial lenders, five group heads, and the president of commercial lending and the president of the bank, and the only way some of those 35 got promoted to the next step was if somebody somewhere up the chain died, basically.

In an organization like ours that’s growing and entrepreneurial, it does create unique opportunities for people to flourish in their careers. We’ve had many people who’ve been successful in our organization, who have come in at entry-level positions, grown with the bank, and in many cases moved into some of our specialty finance businesses or even outside the standard banking business because we kept adding new business lines and that created opportunities for people. That growth piece is very important. It would be very hard to maintain a really a vibrant culture without growth. I really think you’d be hamstrung in that regard.

The rigor that we go through with hiring is way beyond — and that’s what people tell us when they come — what other folks put people through because we want to be picky about who’s on the team because we’re so protective of the culture. So, that’s another really big aspect of it. It’s bringing in the right people who fit your culture.

The final thing is everybody has to live it. It can’t be that the execs don’t live the culture where we say no task is too menial, but the execs leave a conference room with glasses and cups and plates or whatever and expect somebody else to clean it up. That’s everybody’s job. We have this statement of beliefs that Jerry Smith and the original employees wrote up — 25 tenets, if you will, about how to behave. About 15 years ago, we added three things to it. I took a half day and I grabbed a group of people that fit our culture to a T — our best culture stewards — and we went off site and we looked at it. We were going to revamp it and we looked at it and said, ‘No, we’re not touching any of this.’ The grammar might be wrong on a sentence or two here, and there might be something that’s not exactly how you write it today, but they all still ring true. We added three things, but we didn’t change the first 25, and we make sure that we all live that culture.

When you think about all the ways First Business has evolved, whether it’s market expansion, the asset-based lending division, or managing your clients’ personal wealth with First Business Trust & Investments, has there been a guiding principle that helps you make those expansion-related calls?

We’ve really tried to not get too far from our roots. So, pretty much all those business lines we’ve gotten into, we’ve been led into them by what we already do. We were running into commercial lending opportunities that didn’t quite fit with standard commercial lending, but they would work as an asset-based loan. And so, we would refer those out and eventually we decided, well, we should be in that business. That’s business banking, too.

In the same way, we got into the receivables finance business because our asset-based lenders were running into those situations. That’s how we got into the trust and investment business, as well. When people would say, “Well, I have my 401(k) plan at my existing bank, too. Do I move that to you guys?” And we realized, that’s a business line that makes sense for us to be in.

So, the guiding principle was really about whether it was logical for us to be in that business based on our existing client base and the people that we work with. To begin with, the whole idea behind a business bank was because focus brings expertise, and then that expertise is what benefits the clients. So, we didn’t want to lose our focus. That’s one of the guiding principles as we continue to expand.

Are you at liberty to discuss the next expansion move, whether it’s another market or another line of business?

Right now, we still have a lot of room to grow in the banking markets we’re in outside of Madison. Those three markets have a lot of room to grow. As for the other business lines, we’ve got 10 different new business lines that we have going, including a bank consulting business that actually goes back to Jerry Smith’s roots of doing asset liability management and securities portfolio management for banks. He was doing that asset liability management before he started First Business Bank, but we’re doing that now for other banks. Again, we’re trying to leverage expertise we already have that can benefit someone else, so we’re doing that for smaller community banks that don’t have that expertise in house. That’s the latest thing.

Going back to a conversation we had years ago, before the financial crisis of 2008–09, I recall you hoping that banks were doing a better job with the quality of their loans. Did we learn a permanent lesson there? You might have been alluding to the subprime loans and those things that led to the crisis.

It wasn’t so much the subprime loans on the residential mortgage side. It was on the business side, which is what I know. I don’t really know about the residential mortgage business, but I did see, and you’re probably recollecting correctly the conversation we had because I know I was saying this: It’s part of the duty of the banking community to keep discipline in the financial marketplace. Clearly, on that side, on that subprime, they didn’t maintain discipline at all. Lots of folks got way out of line on that. What I was alluding to was more on the commercial lending side for commercial real estate lending. When we do that, we require cash up front from the borrower.

Less speculation, in other words.

Right, so real cash in the deal, not 100-percent financing, and then tenants in advance so that there was enough lease-up of the tenants to carry the deal. Not speculative like, “If I build it, they will come,” and also requiring personal guarantees from the people doing the deals, and I was probably talking about that side of things because at that time, I was seeing banks going away from that.

And we were starting to lose some deals. I remember a client who was unhappy with me because other banks were not requiring him to have a personal guarantee on the deals or to have preleasing, and I said, “Well, that’s just not how we do business because if you have somebody who is going to develop real estate, and you don’t make him put any money in the deal, you don’t make him have preleasing and they are not personally guaranteeing, where is their skin in the game?”

And that’s analogous to the residential side, too, when they got away from real down payments on home loans and people not being able to afford those loans. Well, it’s the same way here. If there is no down payment on the building and you don’t have tenants lined up, well, it might not work but the developer’s not going to lose. The bank is going to lose on that, and it’s not always going to be good. So, that’s where the banking industry did a little bit of a disservice and got away from the core fundamentals that we try to stay consistent with.

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