Destination Milwaukee: A community bank's incremental expansion
Milwaukee is rarely included on lists of the country’s fastest-growing markets, but that fact hasn’t stopped a number of banks from expanding into the Badger State’s largest city over the past two years.
The latest, the $901.3 million-asset PSB Holdings in Wausau, Wis., plans to open its first Milwaukee-area branch later this year in West Allis, an adjoining suburb. With a goal of reaching $1 billion of assets, PSB, parent of Peoples State Bank, figured it would have to expand to a larger market eventually.
“We recognized the combination of us having the No. 1 community bank market deposit market share in north-central Wisconsin and this region being a lower-than-average growth area made existing-market organic growth challenging,” President and CEO Scott M. Cattanach said. “We started to think about where to go next because we needed areas with more robust growth potential.”
PSB looked at a number of areas, including the Fox Valley corridor between Green Bay and Milwaukee, and as far west as Minneapolis and St. Paul in Minnesota. "We didn’t look just at Milwaukee," Cattanach said. Still, when all was said and done, it was the city that seemed to hold the best prospects.
“Along with those geographies which had higher-than-average growth potential, we also considered markets where we had existing connections. That’s where Milwaukee started to come to the forefront,” Cattanach explained. “Pat Heier, our senior lender here in our home market, spent some of his career working in the Milwaukee area and has family there.”
PSB opened a loan production office in Milwaukee in 2016 and soon will have the full-service branch in West Allis. Underscoring its growth ambitions in the city, PSB appointed Corey Vanderpoel, a Milwaukee-based investment banker, to its board last week.
Other banks interested in Milwaukee have entered with a bigger splash.
Last year, the $33 billion-asset Associated Banc-Corp in Green Bay, Wis., paid $482 million for $2.7 billion-asset Bank Mutual, while the $37.7 billion-asset First Citizens BancShares expanded its Milwaukee presence by paying an undisclosed sum for Capital Commerce Bancorp and its $216 million-asset subsidiary Securant Bank & Trust.
Last month Chicago’s $17.5 billion-asset First Midwest Bancorp agreed to acquire the $1 billion asset Bankmanagers Corp. and its Milwaukee-based subsidiary Park Bank for $195 million in cash and stock.
That deal, which came 10 months after First Midwest agreed to acquire Northern Oak Wealth Management in Milwaukee, capped years of quiet growth, President Chief Operating Officer Mark Sander said in an interview in August.
“Our teams have been calling in southern Wisconsin for a number of years,” building a $500 million loan portfolio, Sander said. To build on that foundation, First Midwest opened a loan production office in March and jumped at the chance to acquire Park Bank.
“We’d gotten to know [Park’s executive team] over several years,” Sander said. “We had our eye on them specifically because we just liked what they’ve built.”
“Milwaukee is an attractive market,” Sander added. “It’s a natural extension of our footprint.”
Lacking the deep pockets of a First Midwest, First Citizens or Associated, PSB has taken a more methodical, budget-conscious approach to Milwaukee.
Indeed, after making the decision to enter the market, it spent a year looking for the right market president, settling on Jeff Musa, who joined the bank from PNC Financial Services Group.
Over the past three years, Musa and his team have built a portfolio of about $61 million, amounting to about half the bank’s growth in that span.
“When we got to that point, we know we needed some deposit funding for further growth,” Cattanach said. “It was our plan from the beginning to grow into a full-service organization. Jeff has been a great fit in guiding us through a measured-growth approach. He understands you have to pay as you go, a step-by-step process, but he has a very long view.”
At the same time, the company is counting on Vanderpoel, managing director and owner of the Taureau Group investment bank, to drive additional growth.
“Commercial lending in southeastern Wisconsin is a growth opportunity for the bank,” Vanderpoel said last week in a press release.
Vanderpoel’s appointment also provides Cattanach with a valuable source of advice as he eyes possible M&A opportunities in Milwaukee and elsewhere.
While Cattanach has no complaints with the results of PSB’s one-step-at-a-time approach, he is also not adverse to jumping ahead with a deal.
Vanderpoel’s investment banking experience “helps us evaluate and negotiate deals in a way we didn’t have before,” Cattanach said. “He’s already made contributions in helping us with that in the brief time he’s been with us.”
With an eye toward a deal, PSB has been quietly upgrading its back-office and special-project capabilities “so we can take on these additional duties that come with an M&A transaction,” Cattanach said. “We completed acquisitions in 2012 and 2014 and would like to use that experience again.”