You might be banking elsewhere soon; Wisconsin bank mergers are off to a fast start in 2019

Many Wisconsin bank customers shouldn’t be surprised if, by this time next year, they’re doing their banking with a new financial institution.

Bank merger announcements are off to a fast start in 2019, with four Wisconsin-based banks already saying they plan to acquire another financial institution in the state. In all of 2018, there were eight mergers of Wisconsin banks announced. In 2017, there were six.

 “I do think 2019 will be a pretty big year for M & A activity,” said Rose Oswald Poels, president and chief executive of the Wisconsin Bankers Association.

Beyond a general consolidation trend in the financial industry, there may be several factors at work in this year’s early rush of bank deals. One is concern a recession could be looming in the not-too-distant future, and bankers remember what the last recession did to the value of their financial institution.

“We’ve seen an economy that has kind of taken off the last year or two, so bank earnings have been really good,” said attorney Peter Wilder, a shareholder with the Banking and Financial Institutions Practice Group of Milwaukee’s Godfrey & Kahn. “Pricing for banks that want to sell has come up. And now everybody’s staring a potential recession in the face within the next couple of years. What may be happening is that banks that have some desire to maybe sell within the next five years or so might say, ‘I need to do it now.’”

Oswald Poels agreed that fear of a recession could prompt some banks to sell this year.

“I do attribute the heightened activity to both bank boards and owners wanting to perhaps sell the bank while times are still good,” Oswald Poels said.

Technology is expensive

But a possible economic downturn isn’t the only factor. In some cases, bank shareholders who invested early on have reached the time in life when they want to cash out, Wilder said.

Succession also is an issue in some bank sales.

“A lot of owners, especially family owned banks in Wisconsin — and there’s still many of those left — are interested in getting their money out of the banks, and unfortunately they don’t have a next generation to pass the bank to who’s interested in running the bank,” Oswald Poels said. “Succession is playing a role as well in M & A activity.”

Most of the bank mergers announced last year involved small community banks. With consumers now expecting their bank to have the latest technology, it’s become more expensive to run a bank — another reason some banks want to “get bigger and join forces,” Wilder said.

“If you look at the median size of the banks that are selling, they’re pretty small — they’re $100 million (in assets) to $200 million banks,” Wilder said. “Those are banks where it’s really tough to make a go of it. With the cost of technology and just cost controls and everything else, it’s tough to be a $100 million community bank these days.”

Banks typically are ranked by their asset size. Assets consist mostly of the loans a bank has on its books. The largest bank headquartered in Wisconsin, Green Bay’s Associated Bank, has assets of $34 billion. In 2018, Associated closed on what was the biggest Wisconsin bank merger in years when it purchased Brown Deer-based Bank Mutual Corp.

Under bank holding company deals announced so far this year:

• Union Bank & Trust, of Evansville, is merging into State Bank of Cross Plains.
• Farmers & Merchants Bank, of Tomah, is merging into Citizens Community Federal Bank, or CCFBank, of Eau Claire.
• Fox River State Bank, of Burlington, is merging into Greenwoods State Bank, of Lake Mills.
• Partnership Bank, of Cedarburg, is merging into Bank First, of Manitowoc.

Fewer banks in state, U.S. 

The banking industry in general is consolidating, and has been for years. In 2008, there were 288 banks based in Wisconsin, according to the Federal Deposit Insurance Corp. Today there are 204, a decline of 29 percent.

Nationally, the number of FDIC-insured banks has been decreasing even faster, down 35 percent to 5,477 from 8,384 a decade ago.

Just in the last week, Michigan’s Chemical Bank announced it intends to buy Minnesota-based TCF Financial Corp. and rename itself TCF Bank. The deal, billed as "a merger of equals," would create the nation's 27th largest bank with 526 branches across nine states. TCF has 17 branches in Wisconsin.

Oswald Poels said it’s “always sad to see some of the community banks merge.”

Still, she said, consumer and business customers today often have access to their banks like never before because of technology.

“With technology being what it is today and customer habits changing largely because of technology, there’s so much that can be done remotely and online that it really lessens the need to come into a bank,” she said. “So having a couple of community banks get together certainly streamlines operations, and can provide some cost savings for the entity without really losing a lot of customer service touch points or responsiveness.”