Associated Bank apologizes to Chicago customers

Posted March 9, 2010 at 10:49 a.m.

By Becky Yerak
| The new chief executive of Associated Banc-Corp apologized last week to
almost 300 Chicago-area customers, prospects and employees at a private
breakfast, saying that the Green Bay-based lender has been too “inwardly
focused” and vowing to be more aggressive in the market.

“We’ve done a lousy job for our customers,” Philip Flynn, who joined
Associated last December, told the gathering at the Mid-America Club in
Aon Center. “We’re sorry and we’ll fix that.”

Associated workers have been “somewhat shell shocked” by the bank’s
problems, explained Flynn, previously a 29-year veteran of San
Francisco-based Union Bank who most recently served as chief operating
officer for the Japanese-owned lender.

The $23 billion-asset parent of Associated Bank, which has 27 Chicago-area branches, has been dealing with mounting problems in its commercial real estate portfolio.

Its former CEO announced his retirement last year after six years in the job, months after his hand-picked heir apparent quit abruptly. The bank grew rapidly in recent years but ran into trouble in 2009, losing $161 million. Its stock price was down about 45 percent, closing the year at $11. In early 2009, it was also the center of a public uproar due to plans to reward 100 high achievers with a trip to Puerto Rico; Associated was among the banks that received capital through the U.S. Treasury Department’s Troubled Asset Relief Program. The company later canceled the trip, according to the Milwaukee Journal Sentinel.

But in January, Associated raised nearly $500 million in a common stock sale “relatively easily,” Flynn told the crowd. Its stock is trading around $13.

“We need to go back to being an outwardly focused company,” he said, encouraging attendees to call him or Mark Sander, a former LaSalle Bank executive who’s now a commercial banking director for Associated, with any concerns. Associated said it was its first such outreach event in Chicago.

Associated is looking to add 10 to 20 Chicago-area commercial bankers — it currently has about 35 — as well as a handful of wealth managers. It operates in a three-state footprint, but has only 17 private bankers, those catering to wealthy individuals.

It expects troubled banks, particularly in Chicago, to be a fertile hunting ground for new workers.

An audience member asked him what he found so attractive about the Chicago banking market.

“This is the biggest market in the Midwest, and it’s the most fragmented big-city banking market in the country,” he said. “It represents a great opportunity now that we’ve righted our own ship and rebuilt our capital base.”

It’s among the top six players in five of its six markets, the exception being Chicago, where it’s 24th in market share.

While Associated has recognized its problems and successfully raised capital, it needs to reduce the levels of troubled loans on its books before it can participate in deals for failed banks. Nearly 8 percent of its loans were delinquent at year-end, a level that Flynn has called “very miserable.” That’s up from 6 percent in the third quarter, when its peers were at 4 percent.

When Associated gets its big credit problems out of the way, it would like to bid on failed banks, Flynn told the Tribune afterwards.

When the Federal Deposit Insurance Corp. shuts down a bank, it usually lines up a healthy institution to take over the failed lender’s deposits and assets through a loss-sharing deal.

Associated would be unlikely to do a deal without FDIC assistance, Flynn said, noting that few banks have been unscathed in the recession.

“To buy a bank without protection on the downside doesn’t make any sense,” he said.

Asked to elaborate on his “lousy job” comment, he said that the folks out in the field generally weren’t out looking for new customers and were uncertain about what they could deliver. They could be slow, for example, about servicing existing customers who wanted, for example, loan refinancing.

Last month at a Keefe Bruyette Woods 2010 bank conference in Boston, Flynn said employees got paralyzed by the bad news piling up.

“Stuff gets bounced up the chain for approval; stuff gets pushed down,” he said. “The board yells at the credit guys. The credit guys yell at the line guys.

“I’ve seen this happen through the cycles during my 30 years in banking, and I know this can be fixed,” he said. “And I think it can be fixed within the next quarter or so.”

Associated said it has been moving up the ranks of Small Business Administration lending in Illinois. And the company had a record year for mortgage loan originations in 2009.

But overall it has had declining loans balances.

“We’re going to have more shrinkage in 2010 because we have to run off about a billion and a half dollars of the combination” of loans that aren’t generating interest income, as well as shared loans that Flynn doesn’t think Associated should be in.

“At some point, you’ll start to get some new growth,” Flynn said at the Boston conference. “But you won’t see net growth for quite a ways out, given the magnitude of what needs to leave the balance sheet.”

It has marked down some of its nonperforming construction loans, for example, to 61 cents on the dollar.

“When I say ‘mark,’ I’m talking about charge-offs taken and reserves held against specific loans,” he said at the conference.

Charge-offs occur when a bank deems a loan uncollectible and removes it from its balance sheet, an action that eats into its reserves for loan losses. And when a bank sets aside more money for loan losses, that comes right off the bottom line.

“We’re going to actively sell loans into the secondary market as we go through the course of 2010,” Flynn said last month. “A really crying need for the company is to work down the” nonperforming assets.”

Another upcoming challenge for Associated and other banks will be the impact of legislation that restricts overdraft fees.

“Associated booked about $80 million of overdraft, non-sufficient funds fees last year,” he said. “Come July 1,” about half of that will be under pressure, he said.

Also, consumers still aren’t spending a lot of money.

“We actually saw a decline in debit card usage and transaction dollar volume,” he said.
Flynn, 52, also said last month that he was interested in the Associated job partly because he knew that he’d never get the CEO job at Union, a Japanese-owned bank.



  1. Gidget March 9, 2010 at 12:22 pm

    Associated bank has only itself to blame for the trouble it is in! When they decided to change their hours from 7-7 to 8-6 they lost business. Business people liked banking early and late in the day, thats what works best for them. Then they totally down sized they don’t even have enough tellers working. If you go to make a deposit it takes forever, your lucky if you get out of there in 15 or 20 minutes just making a simple deposit. They even sometimes take people who have the desk jobs to work the teller line and they have no idea what they are doing and anyone can tell they don’t want to be working as a teller! Employees are not happy because they are under staffed, which makes customers unhappy! All of this makes customers leave the bank to bank elsewhere!

  2. Gidget March 9, 2010 at 4:50 pm

    The tellers are not to blame for the under staffing, they are working really hard and are great people, and are doing a great job.

  3. Worst bank in America March 9, 2010 at 5:28 pm

    My company had a line of credit with the bank that was collateralized by our A/R. When the crisis hit our receivables obviously took a dip and we were out of compliance based on the agreement. They assured us that if we raised enough capital to get the line back into compliance they would 100% renew the facility for the following year. Well, we repaid the portion out of compliance and the next day they called the loan. We had a 10 year relationship and this was the first and only time we breached a covenant. Even with the breach we made full interest payments on the outstanding balance yet they called the facility. It put my company on the brink of insolvency as I had barely any time to line up another lender. It was the most unethical move I experienced during the crisis and my entire business career. I will never bank with them again and will tell anyone who will listen my experience.

  4. Chase March 9, 2010 at 7:23 pm

    Gidget, I really would like to know which branch you are talking about.

  5. Gidget March 9, 2010 at 8:36 pm

    Chase: I will tell you what branch if you tell me if you work at associated bank and if you do about what is your job position?

  6. Gidget March 9, 2010 at 9:24 pm

    Chase: Chicago. The tellers are whats keeping this branch alive, the only ones with personality.

  7. Sal March 10, 2010 at 11:45 a.m.

    Associated is a lousy bank for businesses. We left Associated and are much more impressed with the regional banks (Charter One, Harris, 5th Third, etc.).