Associated CEO says regional banks need to grow to compete
After quietly growing and solidifying its position as the biggest bank based in Wisconsin over the years, Associated Bank has made a splash in the past nine months.
It started with last summer’s announcement that Associated would acquire Brown Deer’s Bank Mutual Corp. — the third-largest bank headquartered in the state at the time — for $482 million. In September, Associated said it was buying the suburban Chicago wealth management firm Whitnell & Co. In February, Associated announced it was acquiring Diversified Insurance Solutions, a Brookfield-based insurance brokerage.
Behind the acquisitions is what Philip B. Flynn says is a need for regional banks to grow if they intend to compete in a world where the three largest banks — JPMorgan Chase, Bank of America and Wells Fargo — hold about a third of the nation’s bank deposits and are adding more via strong technology that younger customers prefer to use when they do their banking.
“There’s a real imperative for us and other regional banks, and even superregional banks, to build some scale to be able to make the investments that we have to make in technology in order to be competitive,” Flynn, president and chief executive officer of Green Baybased Associated, said during an interview at Associated’s downtown Milwaukee office in the 330 E. Kilbourn Ave. tower.
Flynn came to Associated Bank from California, where he was a top executive with Union Bank, in December 2009 to help Associated recover from losses and financial stress sustained during the Great Recession. Associated has been profitable every year since 2011, and in 2017 posted earnings of $219.9 million. The company’s stock price has climbed to almost $25 per share from about $10 eight years ago.
Two years ago, Associated bought the 28-story Milwaukee Center tower, a landmark skyscraper at 111 E. Kilbourn Ave. in downtown Milwaukee, and plans to make the building its regional headquarters for southeastern Wisconsin.
Although analysts speculated when Flynn first came to Green Bay that he would head back to California after turning around the bank’s fortunes, Flynn has stayed put and now even serves on the board of the Green Bay Packers.
Here is an edited version of the Journal Sentinel’s recent conversation with Flynn.
Q. How do the recent acquisitions help Associated?
Flynn: The Whitnell acquisition in Chicagoland is a wealth management family office operation, so it clearly fit into our wealth management, private
banking space. We didn’t have that kind of very high-end family office, so that makes good sense.
We have a pretty big insurance brokerage operation already. It is one of the larger bank-owned insurance operations and actually is one of the top insurance brokers in the country. We were relatively under-weighted here in the Milwaukee area. So (Diversified) fills that gap.
What they do is very similar to what we do as Associated Benefits and Risk Consulting, so that will seamlessly merge right into the operation there.
We need to be bigger in order to be competitive. That’s why Bank Mutual makes sense.
Particularly here in Wisconsin, we essentially sit completely on top of where Bank Mutual’s franchise was, so it gives us the opportunity for a lot of efficiency. They had 58 branches. We will close 36 branches — 29 of them were theirs and 7 are ours — for a net additional 22. That makes bigger branches with more deposits and more efficiency.
Q. Banks generally offer the same products. How do you differentiate Associated? Customer service?
Flynn: We have 24/7 call centers. We just opened another call center over in Hales Corners.
We work really hard on differentiating ourselves in the whole customer experience spectrum, but particularly on that live phone channel. You call there and you’re going to get somebody who knows how to help you.
JPMorgan Chase spent $9 billion on technology in 2016. We’ll spend around $100 million this year, which I think is a lot of money, but it pales in comparison. If we don’t differentiate on establishing relationships with our customers, whether they’re consumers or businesses, it’s going to be pretty hard.
Q. How important is Milwaukee to Associated Bank?
Flynn: It’s the largest market in the state, and we put a huge effort into continuing to gain market share, which we’ve done. We have a couple of rather enormous competitors here who are very established — U.S. Bank and BMO Harris. But we compete with them fiercely.
Q. Is there anything new to report on the Wisconsin Center tower?
Flynn: We’re in the process of just finishing renovating one of the floors, so we’ll be moving some people into that floor. But ultimately the big move of all the people in this building will occur once the BMO Harris tower is finished across the street. The BMO Harris folks who now lease space from us in there (the Wisconsin Center) will move into their new building, and then we’ll renovate the floors that they occupy and then we’ll move in there. That’s still a few years out.
Q. From a banker’s perspective, how is Wisconsin’s economy doing?
Flynn: It’s booming. A 2.9% unemployment rate. All of our customers — anyone who’s in a business, they need skilled employees of any sort or even employees (generally).
That’s their biggest issue, finding people.
Q. Do you expect the Foxconn development in Racine County to generate new business for Associated?
Flynn: Sure. With the unbelievably huge investment and all the jobs that will be down there, that’s going to bring more activity into the state. We have operations there. We should pick up business from that.
It’s not just Foxconn. It’s all of the supply chain and everything that comes around it is where the juice is going to be. I think it should have a healthy impact on the entire state, not just the southeast corner.
Q. Associated was the first major Wisconsin company to raise its minimum hourly wage to $15, a 50% increase from the previous $10, as soon as federal tax reform became law last December. What was behind that move?
Flynn: Obviously we’d been tracking the pending tax legislation. And you know that’s a big benefit to the shareholders of Associated. We just felt like it was the right thing to do to share that with our colleagues.
Q. Do you anticipate Associated doing more acquisitions?
Flynn: You can expect us at some point to continue to announce acquisitions and to grow.
Q. Would you consider expanding outside your main markets of Wisconsin, Minnesota and Illinois?
Flynn: We operate in eight states actually. (Associated has loan production offices in Indiana, Michigan, Missouri, Ohio and Texas, but not branches.) It’s possible we would look to expand the branch network.
Q. What do you consider your biggest accomplishment since becoming CEO of Associated in 2009?
Flynn: I think we’ve done a really good job of turning this into a customerfacing company. Everything we do, we talk about the customer service experience. We measure it. We generate lots of feedback. We email our customers. We phone our customers. We have outside parties measure things. With what we learn, we continue to make us better. That’s the most important thing, because without that you don’t have anything.
I think we’ve done a good job of pushing this company to be very customer focused, and then the result of that is that the company has been successful financially.
Q. People were skeptical that a guy from California would stick around after Associated Bank was in good shape again. Why were they wrong?
Flynn: We like Wisconsin. Look, everybody talks about nice people in Wisconsin and the Midwest. It’s true. We have really good friends we’ve made here in that last 81⁄2 years. We’ve gotten completely used to the climate. I really enjoy this job, and I enjoy working at this bank.
I was never skeptical when I moved here. If you do something like this, you need to be all in. You need to want to do it. You have to want to embrace the culture. You want to make it clear that you’re here to stay. And I think we’ve done that.