Associated Bank gets bold with mandate for organic growth

Green Bay, Wis.-based Associated Bank leapt into Minnesota toward the end of the 1990s with a pair of acquisitions (Windsor Bancshares and Riverside Bank), then scooped up Signal Bank in September of 2001. Successive buys of noted commercial franchises were attention-getting for the newcomer to the Twin Cities. But then another event grabbed the headlines that month and the bank symbolized by an evergreen tree blended into the landscape..Seeking growth through acquisition isn’t uncommon nor overtly risky, especially in this instance given that Minnesota and Wisconsin are practically siblings (football allegiances notwithstanding). But having a cohesive strategy to build market share regardless of a deal’s particulars is requisite. “We were pretty fragmented here in the Twin Cities,” said Twin Cities Market President Paul Schmidt, who joined Associated Bank in 2015 and is set to retire at the end of this year. “It was a kind of a conglomeration … and we weren’t very well connected. I’d say that was the biggest challenge we had.”Associated brought to the North Star State a long history of commercial banking, commercial real estate (Schmidt’s bailiwick), branch banking — and lending conservatism; but a unified strategy for how it could differentiate in the market, or as Schmidt characterized it, “how we wanted to act in the market” remained elusive.The fact that the market was quickly evolving only complicated Associated’s challenge. The 2000s brought 14 de novos into being throughout the Twin Cities metropolitan area. Then, well, there was the Great Recession. Once recovery took hold, banks from the hinterlands set up offices in the uber-competitive metro market. And let’s not forget that Wells Fargo and U.S. Bank cast long shadows over the river towns.Associated remained in the mix throughout; the bank doubled-down on its Midwestern identity; people increasingly recognized its brand; but it wasn’t until after the pandemic, after it hired a new CEO in 2021, after it introduced an initiative dubbed “Engage Local,” that things started to coalesce in the bank’s third-largest market. The thought was that by focusing on building community in a more organized way, it would lift the bank’s visibility, Schmidt said.In terms of untapped potential, CEO Andy Harmening told investors in February that Associated has “a long way” to run in Minnesota. With 200 employees and now 19 offices in Minnesota, Schmidt said he feels like they’re just scratching the surface on growth.As the bank quickens its stride in 2025, it is building out a branch in downtown Minneapolis’s IDS Crystal Court, which is expected to open in October. The $42 billion bank has also bolstered its commercial lending team in Minnesota and beyond, with eyes open for opportunities up and down the I-35 corridor. It’s all part of a multi-phase initiative a couple of years in the making, with the goal of positioning the bank to capture renewed attention — and a lot of new business..Downtown chroniclesIt is no secret that downtowns across the country have struggled to regain vibrancy after office workers headed home in the early days of the pandemic. Before covid, 216,000 people routinely worked in downtown Minneapolis. Now, the office vacancy rate there is 30 percent, and the skyway economy that supported all those workers — coffee shops, dry cleaners, hair salons, et al — is anemic at best. Furthering the decline, all those department store brands that brought people to downtown live on in memory alone. Even the retail spaces in the famed IDS Crystal Court, which was immortalized in the opening of the 1970s sitcom, “The Mary Tyler Moore Show,” a space that serves as sort of a town square for Minnesota’s largest city — and whereAssociated Bank is building out an 8,000-square-foot branch — are largely vacant. Despite the obvious challenges, “we like being in the IDS Center,” Schmidt said. “It’s sort of the iconic location in downtown Minneapolis. And we think it’s really an important part of our visibility and our growth strategy as we move forward here in Minneapolis.”It’s worth noting that other banks encircle the bright, tree-dotted atrium. Bank of America is there. Wells Fargo is there. U.S. Bank is there. Huntington Bank is there. Bremer Bank, by now rebranded as Old National, is there. Soon Associated Bank will open there too. Symbolism is alive under glass..“We come from the belief that the state of Minnesota needs a thriving downtown,” said Phillip Trier, EVP and head of corporate and commercial banking. Trier, who came to Associated about 18 months ago after a long career with U.S. Bank in Minneapolis, spent a decade on the board of the Minneapolis Downtown Council, serving one year as its chair. The current Council includes another representative from Associated Bank.“We have a seat at the table. We have a voice. We’re invested in downtown,” Trier added. “It is really important for us that the Twin Cities does well. The fact that we’re planting a flag in the IDS with the new branch and office space right adjacent to it, I think is a good testament of our commitment.”That extra space Trier referenced will be used by private banking, wealth management, commercial banking and commercial real estate, the latter diminishing in focus. “Our office portfolio, which everybody talks about as being the biggest issue in commercial real estate, is very limited,” Schmidt said. “We see opportunities in commercial real estate with the right people and the right projects.” Apartment buildings across the country are a primary example.“We think CRE is a very low single-digit grower for us,” Harmening told investors. “For us, if it’s 1 to 3 percent, that would be fine. We’re not going to push the envelope on that.”Yet the bank has invested heavily in its commercial banking workforce, adding numerous relationship managers since 2023 as part of a multi-phase growth strategy that focuses first on technology and now on people, or as Harmening characterized them, “people who have a following.”Setting up for successIn November of 2023, Associated Bank announced a series of investments in people, products and technology to grow and remix its loan portfolio. Part of its changes included limiting construction lending to customers with deposit relationships, reducing portfolio lending to private wealth, mass affluent and CRA customers only, and selling conforming mortgage loans. In December 2024, the bank sold off more mortgage loans, to the point that by early 2025, its residential real estate portfolio dropped to 24 percent from 35 percent.Other moves between late 2023 and late 2024 included selling $1.3 billion of investment securities and embarking on a capital raise to support its organic growth. Its stock offering had the potential to raise $345 million, or 7.5 percent of its market capitalization. The philosophy, according to Harmening, is “we cut to spend.” Cutting involved shuttering branches and trimming staff. Spending focused on enhanced digital interface for private wealth clients, an omnichannel branch sales platform, and an enhanced digital experience for consumers, which led to the bank garnering a JD Power Award for highest consumer satisfaction in the Upper Midwest. Lastly, it stood up a specialty deposit and payments vertical.Harmening, who joined the bank in 2021, said Associated is in as good a position as it’s ever been with respect to what it can control. He predicted net interest income to be up 12 to 13 percent in 2025, with up to a 1 percent rise in fee income, with “upside to that based on the current regulatory environment.”At the end of the first quarter, the bank reported its commercial and business lending increased $250 million from the prior quarter and increased $908 million from the same period last year — to $11.7 billion. Net income for quarter one was $99 million, or $0.59 per share, a stark contrast to the losses it posted at the end of 2024, where quarter four net income was negative $164 million.On the consumer side, Associated is digging deeper into its customer base with what Harmening dubbed “a massive affluent strategy.” It also has recently met its goal of hiring 26 commercial relationship managers across its footprint.Those hires are an investment “in the corporate and commercial banking space,” Trier said. The bank has big expectations for its investment; building on its 2024 C&I earnings of roughly $800 million, it’s striving to achieve $1.2 billion in 2025. And while plumping its commercial workforce by 25 percent, Harmening told investors he expected expenses to grow only 3 to 4 percent. He called the outlook for profitability “pretty promising” assuming similar GDP and market conditions. His comments came prior to the day President Trump’s tariff roller coaster left the station.Boots on the groundFrom his current office in downtown Minneapolis’s PWC tower, Trier said he expects Associated will hit its marks by focusing on the client experience. “We’ve got a lot of new people who we brought into the company,” Trier said. With a bit of time to acclimate to the culture (and wait out their non-competes) the new CRM’s will “first and foremost, help us create a world-class, high-touch kind of white glove client experience.”An “advisory approach,” he called it, which leads to one particular approach to selling, one focused on pushing the bank’s related services. Bringing in ancillary business isn’t just a nicety; it’s become an expectation, very nearly a demand, Harmening explained. ‘If it’s just a loan-only situation, that’s probably not going to work for us.”“We do think holistically, not only the product offering, but how we deliver it,” Trier echoed. Delivery comprises payments, treasury management, accounts receivables, and more. “Of course we collect deposits and we make loans, but it’s much broader than that. That’s something that’s really shifted in banking the last 10 years as we think about the evolution and innovation around payments, engaging with clients, talking about payments offering. How do we bring efficiencies to the process and how do we really take a lot of that work off of the treasurer or the CFO or off of their team?”That assertiveness is leading to growth in wealth management, in asset-based lending, and in its HSA business, now the 12th-largest in the country, according to the CEO. The bank has seen double-digit growth in treasury management, driving fee income and deposits. The HSA business is important likewise as a deposit generator, Harmening said.“Minnesota is a phenomenal market with a great business community,” Schmidt said. “I think we’ve earned the right to go out and be a bit more aggressive with our brand.”So the expectations in Minnesota are clear, and are spread institution wide. The bank is looking south all the way to Missouri and even beyond — as far south as Oklahoma and Texas. In April, Associated opened a branch in St. Louis, part of its Missouri expansion that began in 2023 with commercial and industrial relationship managers and private banking. Currently, Associated has 20 bankers in Missouri, which includes its three newest commercial relationship managers based in Kansas City, hired just this March.Associated has had a presence in the Southern Illinois market since 1997 and has had a loan production office in Missouri since 2006. St. Louis represents Associated Bank’s sixth-largest metropolitan statistical area with 3.6 percent of total bank deposits. Expansion in Kansas City, Trier said, is “a natural extension to how we think about the Midwest coverage. And of course it’s talent driven.”Associated is also focusing growth in Chicago and Milwaukee. “We are growing in markets that are fairly flat,” Harmening said. In all of its markets, Harmening views the opportunities to be in small businesses and the middle market. “First commercial and, I think, private wealth … Each quarter as we go along this year, that impact will be noticeable,” Harmening said.In Minnesota, Associated is looking to Schmidt and Trier to tap career-long relationships and get their well-connected team moving fast and strong. It sometimes comes to waiting out those non-competes. “We’re building on a really strong foundation,” Trier said. “We’re very selective in who we hire because they have to fit the culture, they have to be additive.”.With expectations high, with energy to match, the goal now is to engage clients and prospects, Trier said. “When we bring ideas to clients, they want to reward us with business. We have got to continue to go out there and prove we can add value as advisors and partners.”After being in Minnesota for a quarter of a century, the bankers feel like the timing for their renaissance is right. “This is not a market where we have to educate people on who we are,” Trier said. “This is a market where we just have to go out and be a little more aggressive about how we tell our story. And we can’t be so ‘midwestern.’ We’ve got to come out bold.”