Banking & Finance


Associated Bank, headquartered in Green Bay, is Wisconsin's largest bank.

Changing times for banking and finance

In an industry that prizes stability, it’s been anything but lately for the financial and investing sector. From the first interest rate increase by the Federal Reserve in nine years to a bevy of mergers and acquisitions, the sector is riding out the waves of change and planning for what’s next.


“There’s definitely a great deal of volatility right now,” said Willie Delwiche, an investment strategist with Baird. “That volatility affects those in the industry, but also spreads out to the wider economy.”

The decision last December by the Fed to raise its key interest rate by 25 basis points – from 0.25 percent to 0.50 percent – in itself was small, Delwiche said, but sent a psychological message that the economy was healthy.

“The rate increase is really a net positive for banks and the economy as a whole,” he said. “When the Fed wasn’t willing to raise rates, it made people think that maybe the economy wasn’t strong.”

In a Wisconsin Bankers Association survey conducted just before rates were raised, 70 percent of WBA members said a rate increase would not affect their loan portfolios and 73 percent had no plans to change their core deposits.

“It’s a new world for those business leaders who have never seen a rate increase,” said Sara Walker, chief economist and senior portfolio manager team leader at Associated Bank, which is headquartered in Green Bay and is Wisconsin’s largest bank. “Some have only worked in a world with either falling interest rates or rates holding steady so they’re not sure what it means.”

As for what the higher interest rates mean, Walker said it’s different for investors and businesses looking to borrow money.

“For investors, there’s less of that tailwind from the falling rates that kept corporate expenses low and drove money into the stock market,” she said.

Associated Bank, headquartered in Green Bay, is Wisconsin's largest bank.
Associated Bank, headquartered in Green Bay, is Wisconsin’s largest bank.

Tim Taffe, senior vice president for Thrivent Federal Credit Union, which has branches in Appleton and Minneapolis, said businesses looking to borrow funds for an expansion project or buying new equipment shouldn’t worry about the higher interest rates.

“Five years ago, there was less competition among lenders since many were preoccupied with managing what they already had on their books and watching that,” he said. “Now, there’s more intense competition for loans. Businesses looking for funding have a lot more sources to choose from.”

Most financial institutions responded to the Fed’s action by slightly raising interest rates on their loans, but Taffe said the increase was so small that businesses might not notice, especially since competition is heating up for their loan business.

“We know that most likely more increases are coming, but the Fed has made itself clear that they plan to take small steps,” he said.

For investors, the Fed’s actions have more meaning, Delwiche said. By raising rates, the Fed sent the message they won’t take steps because of market volatility – something stocks have seen a lot of lately because of other outside influences, especially global markets.

“The Fed’s not going to come in and rescue the market. It needs to stand on its own,” he said.

In addition to raising interest rates, Walker said the Fed also released more money into the system, which means there is more money available to lend.

“The Fed wants to send the message that the economy is healthy and that businesses should have more confidence regarding their growth plans,” she said.

So far, business response to the higher interest rate has been muted, Walker admitted. “Businesses know it’s a transition period, but it’s not like they’re delaying capital plans,” she said. “We’re definitely moving away from a place where businesses were afraid of taking out loans and trying to do everything with cash-on-hand.”

Higher interest rates aren’t the only change happening in the financial industry. Wisconsin financial institutions that are more acquainted with handling deals for other businesses are busy with their own mergers and acquisitions.

For both banks and credit unions in Wisconsin, acquisitions have created opportunities to enter new geographic markets and increase asset bases. Investors Community Bank’s holding company in Manitowoc gained a presence in the Fox Valley with the purchase of The Business Bank, a subsidy of the Fox River Valley Bancorp. The purchase allows Investors, which went public in early 2015, to increase its presence in the Fox Valley with the addition of The Business Bank’s branches in Appleton and Green Bay. The purchase also provides Investors with a larger commercial lending portfolio, a nice complement to its strong ag lending portfolio.

Nicolet National Bank of Green Bay and Sturgeon Bay’s Baylake Corp. also announced a merger, creating the fifth largest bank based in Wisconsin. When the $141 million deal is complete later this year, the combined bank will bear Nicolet’s name.

Beyond the big-name mergers, several smaller institutions also joined forces, from the State Bank of Chilton acquiring Calumet County Bank to the University of Wisconsin-Oshkosh Credit Union merging with Prospera Credit Union in Appleton.

Since the passage of banking reforms in 2008, many smaller financial institutions have struggled to keep up with and pay for new regulations, said Rick Van Drisse, who served as UW-Oshkosh Credit Union’s board chair until the merger was finalized in December. He said new technology, such as mobile banking, is also expensive for smaller institutions to keep up.

“It’s tougher to operate a smaller credit union,” he said.

The numbers bear that out: According to the Wisconsin Department of Financial Institution, Wisconsin had 233 state-chartered credit unions in 2010. That number fell to 151 by the end of 2015.

The number of state bank branches also declined, according to a survey from SNL Financial that looked at how many bank branches opened and closed between April 1, 2014, and March 31, 2015. Wisconsin had 2,197 branches at the end of the survey and saw one branch open but 13 close during the survey period. After the survey was published, Associated Bank announced last July that it planned to close seven branches across Wisconsin. The growing popularity of digital banking, transaction trends and proximity to other Associated branches led the bank to make the decision, officials said when the move was announced.

While Associated scaled back its branches, it did grow another part of its business – Associated Financial Group, a subsidiary that provides employee benefits, business insurance and human resources consulting, with its purchase of Ahmann & Martin, a Minnesota-based risk and benefits consulting firm. The new addition will make Associated Financial Group one of the nation’s top 50 insurance brokerage firms.

Racine’s Johnson Financial Group, the parent company of Johnson Bank, also added to its portfolio with the acquisition in early 2016 of Cleary Gull Advisors Inc., a Milwaukee investment advisory and wealth management firm. The newly integrated company will be known as Cleary Gull Advisors Inc., a Johnson Financial Group Company, and have more than $8.5 billion in assets under administration.

“The move is part of our growth strategy for our wealth business and strongly demonstrates our commitment to the Milwaukee market. It positions us to be a leading provider of investment advisory and retirement planning services,” said Thomas Bolger, Johnson Financial’s president and chief executive officer. 

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