Money mergers

Posted on Jan 12, 2016 :: Banking , Insight On
Posted by , Insight on Business Staff Writer

Most people probably don’t think too much about the name on the building when they visit their local bank or credit union.

You might want to take a peek the next time you visit.

A wave of buyouts and consolidations swept through the industry in 2015, many with a focus on creating stronger institution with greater efficiency, enhancing customer services or the strategic entry into desired markets. The buildings and people may be the same, but many of the names are different.

“This was a chance for us to diversify our loan portfolio and strategically move into markets where we want to be,” says Timothy J. Schneider, CEO of Investors Community Bank and president of Manitowoc-based County Bancorp, Inc., which in November announced a $29 million acquisition of Appleton-based The Business Bank.

“We’ve had a fairly defined strategy for a couple of years that included acquisition into key markets,” Schneider says. “It’s a logical fit geographically and positions us in areas we have been targeting for expansion.”

The deal is expected to close by the second quarter of 2016. Once closed, the combined bank will operate under the Investors Community Bank name with combined assets of more than $1 billion, making it the 11th largest bank headquartered in Wisconsin.

About the same time ICB and The Business Bank announced their merger, the holding corporation for Baylake Bank, based in Sturgeon Bay, announced the completion of its acquisition of NEW Bancshares and its wholly-owned subsidiary Union State Bank.

With that move completed, Baylake can now turn its full attention to its announced merger with Green Bay-based Nicolet Bankshares, Inc. The new bank will operate under the Nicolet National Bank name and will be headquartered in Green Bay.

This merger, expected to close in the first half of 2016, will create a bank with assets of nearly $2.2 billion, which will make it the fourth largest bank headquartered in Wisconsin when measured by deposit market share. All told, the new bank will have 41 branches covering a geographic footprint that includes Northeast and Northcentral Wisconsin and Michigan’s Upper Peninsula.

“Both sides took a serious look at the direction we were headed and realized the benefits of coming together made more sense as a merged bank, so we figured it out,” says Bob Atwell, founding chairman and CEO of Nicolet.

While there is overlap in the service areas of Baylake and Nicolet, Atwell says the only folks who will see a change are those where the branches are in close proximity.

“In those cases, it’s probably just a change of a few blocks,” Atwell says.

While the signs may change, and overlapping branches may be shuttered, the bankers involved in the recent mergers say the larger banks will have the economies of scale to offer more banking options while maintaining higher levels of customer service.

“The resources we have will allow us to offer some really strong tools to customers,” Schneider says.

Acquiring the resources to offer a wider array of customer services is also factoring into recent consolidations of credit unions — Prospera’s recent absorption of UW Oshkosh Credit Union, for example — as smaller credit unions may not be able to keep up with the pace and cost of options that consumers are demanding.

The wave of mergers in the financial industry come as most of Wisconsin’s state-chartered banks have shrugged off the challenges from the Great Recession and improved their financial picture.

Across Wisconsin, state-chartered banks posted a third quarter 2015 income increase of nearly 11 percent compared to the previous year, while total lending during that same period increased 6.5 percent.

“The overall strength of our state-chartered banks, especially the continued growth in lending activity, is a positive sign for the economy,” says Ray Allen, secretary of the Dept. of Financial Institutions.

The state’s credit unions have also reported similar results, with revenue increasing nearly 23 percent and lending up nearly 11 percent in the third quarter of 2015.

That strengthening of the industry is part of the reason investors and bank managers are more willing to explore mergers now than they were just a few years ago. After the recession, values were deflated and the focus was on internal operations, bankers say.

“Five years ago, we were in a pretty serious economic crisis, and we had to deal with that right then,” Atwell says. “I think we have taken care of those internal things, and now, with relative values increasing, everyone is feeling a lot better. The problems are solved and now we can try and add value.”