Making the conversion

This February, Harris N.A, a Chicago-based financial institution with more than 230 bank branches in Illinois and Indiana, closed on its purchase of both Ozaukee Bank and Merchants and Manufacturers Bancorporation Inc. (MMBC) for approximately $320 million.

Harris’ parent company is BMO Financial Group, a financial services firm based in Toronto. Harris N.A. has more than $41 billion in assets; BMO Financial Group lists more than $391 billion in assets.

The transactions, more than one year in the making, gave Harris an entry into the Milwaukee market and several other Wisconsin locations. Ozaukee Bank and MMBC had about 30 branch locations throughout metro Milwaukee, said Thomas Bolger, president of Harris Bank Wisconsin.

“The two (banks) give us a reasonable critical mass in metro Milwaukee,” he said. “Doing two of them at once made a very significant, we think, statement to the market of not only our first step, but a pretty strong signal of an intention to grow in the future.”

Milwaukee’s close proximity to Chicago, its higher than national average median household income, a strong state economy and the presence of healthy manufacturing and distributing companies made it a natural market for Harris’ expansion, Bolger said.

The Chicago-based bank also believes it can compete with the many well-established local and national banks that are already in the Milwaukee marketplace.

“Chicago is an intensely competitive market for banks,” Bolger said. “And Milwaukee is certainly a competitive market. But as we look at Wisconsin and Milwaukee it appears that there is room for a significant new competitor to grow here.”

Flipping the switch

The conversion of Ozaukee Bank and the MMBC banks to the Harris name has, so far, been a quiet process; the banks are still operating under their purchased names. However, the bank is nearing the end of its “quiet period,” and will begin sending informational letters to Ozaukee and MMBC customers in coming weeks.

The real work will take place in early September.

“Our conversion weekend is planned to start Sept. 6 and be finished by (Monday) Sept. 8,” Bolger said. “We will close them as Ozaukee and MMBC banks, change the systems and equipment, test the systems on Sunday, and on Monday will open as Harris banks.”

Harris has acquired other banks in Illinois and Chicago previously, Bolger said, and the bank believes it will be prepared for its conversion in September.

“We’ve done this many times, but this one is different because it’s two banks at once,” he said. “We’ve been working intensely since (Feb. 29) on the integration process. At the time the signs change our employees have to be ready to serve our customers well and to serve them crisply, so they are not disappointed in the process. We only have one chance to make a good impression in the conversion.”

Some of the internal integration is already completed. Harris’ Wisconsin banks are now working under a three-district regional model – a northern region, a metro Milwaukee region, and a state region.

Jim Rothenbach, president of Ozaukee Bank, is now regional president of the northern region, which includes Ozaukee Bank, as well as Grafton and Wisconsin state banks.

“We have a very nice position, a good market share and a good reputation because of what all three of those banks have done in those markets,” Bolger said. “And there were very, very good reputations in the community for those banks, especially from community support. And so, from that standpoint, it creates a very nice market for us to integrate and to grow from.”

The metro region, which Bolger is overseeing on a temporary basis, is made up of the Lincoln State branches, which has several locations in the city, including a downtown Milwaukee office at 1000 N. Water St.

“We don’t have the same kind of good, solid geographic coverage (as in the north region),” Bolger said. “If you look at the branches we have here in the metro area, we certainly have pockets of good representation, but there are also some pretty big gaps. And we will evaluate opportunities to fill some of those gaps.”

The remaining MMBC banks and branches outside of the northern and metro regions comprise Harris’ state region, Bolger said. Those include banks in Reedsburg, La Crosse, Prairie du Chien and Oconto Falls. The state group is being led by Mel Hahs, past president of Reedsburg State Bank.

“If the Ozaukee group has a natural fit with the geographical density, the state region, what they share in common is smaller communities with a different kind of customer base with different lending,” Bolger said.

The northern group makes up about 50 percent of Harris’ deposits in Wisconsin. The metro group makes up about 35 percent of its deposits, and the state group is about 15 percent.

Growth plans

While Harris is working diligently to make the integration of Ozaukee Bank and the MMBC banks seamless, its plans for the Milwaukee area and the state of Wisconsin already go beyond its existing geography.

“Harris is here to be a significant player in the Wisconsin banking market,” he said. “You’ll never hear us say we want to be the biggest, but we want to be a player.”

Harris will likely achieve its growth through acquisitions because of the high cost associated with starting new bank branches, Bolger said. The bank is open to either purchasing more community-based banks like Ozaukee Bank and MMBC, or a larger regional player.

“We have M&A guys that are in regular contact with investment bankers,” he said. “They know our desire to grow.”

Over time, Harris will seek to grow its presence in metro Milwaukee, Madison and the Fox Valley, Bolger said, because those areas contain most of the state’s population and businesses.

“And our business clients drive a lot of our opportunities with our other business lines,” he said.

Before Harris acquires another bank, it needs to retain Ozaukee Bank’s and MMBC’s existing customers.

“We have to make sure that we successfully bring the customers into Harris,” he said. “Our first priority is to preserve and grow our customers and representatives.”

Harris will also see some immediate growth because the employees of the former Ozaukee and MMBC banks will be able to sell customers products and services they were not able to before the purchase, particularly in the business, wealth management and retail sectors.

“In Ozaukee County, there are a lot of business owners (who are retail customers),” Bolger said. “There’s an opportunity to bring in both business banking and wealth management. Our job right now is to preserve the customer base and grow it. If opportunities present themselves, we’ll do it.”

Right leadership

In Bolger, Harris has found a banker who knows the Milwaukee and Wisconsin landscape.

He spent 32 years with M&I Bank before retiring in 2004. The majority of Bolger’s time at M&I was in commercial lending, but he eventually became the bank’s president.

After a short time in retirement, Bolger became president of Park National Bank in Chicago, helping it to combine five different banks into one brand. In 2007, Bolger learned of Harris’ intention to buy the two Wisconsin banks and decided the challenge of building a new brand in his long-time hometown was too good to pass up.

“I spent 32 years in Milwaukee – my wife and I raised our family here,” he said. “Milwaukee is home. I became convinced that (Harris had) a sincere desire to be a Wisconsin bank with a strong corporate parent, not a Chicago bank that is doing business here.”

Prime position

Unlike many other large banks, Harris N.A. has not been widely affected by the collapse of the housing market and widespread residential foreclosures. Commercial banking has been a traditional focus for the bank, and did not participate in sub-prime residential lending, Bolger said.

“The Bank of Montreal (BMO Financial Group) is a $340 billion company and it’s got $33 billion of capital,” he said. “It’s one of the most well capitalized banking companies in North America. Harris itself is very well capitalized.

“Because of its historical legacy as a business bank, Harris really does not have any significant exposure to subprime mortgages, to some of what you’ve read about in other institutions. We certainly have, as all banks do, real estate issues that we’re working through and we’re monitoring. But our losses, our problems as Harris are clearly below industry averages.”

Harris has found several mortgage-related issues at both Ozaukee Bank and MMBC’s banks, but they have not caused significant problems, Bolger said.

“External market conditions were different when the decision (to purchase the banks) was made,” Bolger said. “We were well aware of the deterioration in the real estate market, yet we closed on the transactions as negotiated. There’s nothing that we have found that has caused us as an organization to not do or try to change the deals.”

Thomas Bolger

Education: Bachelor of Science from Marquette University
Professional experience: 32 years at M&I Bank, primarily in commercial lending, leading to becoming bank president from 2001 until his retirement in 2004. Bolger was also president of Park National Bank in Chicago from 2005 to 2007. He has been president of Harris Bank Wisconsin since late 2007.
Family: Married to Lisa, five sons, one grandson.
Hobbies: work and family
Best advice ever given: “If you’re going to do something, do it right.” (from his father)

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