Associated faces challenges in finding the right leader

Sep 19, 2009 (Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) -- ASBC | Quote | Chart | News | PowerRating -- Whoever takes over as the next chief executive of Associated Banc-Corp ought to have a successful track record of navigating through tough economic times and, if at all possible, possess an affinity for the Midwest, say investment professionals who follow the bank.

The Green Bay-based parent company of Associated Bank announced last month that Paul S. Beideman was retiring after six years on the job. Only three months earlier, Lisa B. Binder, a former Philadelphia-area colleague whom Beideman recruited to Associated, abruptly resigned as president, leaving the company without an obvious successor.

Now the board of directors has the task of finding a new CEO at a time when Associated, like many other banks, is facing a rocky economy and an increased number of souring loans. Associated, which is the second-biggest bank based in Wisconsin, posted a rare loss in the second quarter of this year. Also, like other banks, it has seen a rise in delinquencies on commercial real estate and business loans.

The new CEO at Associated needs to be adept at managing a bank in an unfavorable environment, money managers and analysts said.

"They would be looking for someone with top-level experience at a major institution who has demonstrated the ability to lead a company or lead a large division of a very big company through all of the economic cycle," said Terry McEvoy, an analyst who covers Associated for Oppenheimer & Co. in Portland, Maine. "They are seeing stress in their commercial loan portfolio, which is where we are in the credit cycle, and that's where banks are focused today in terms of minimizing the risk. So it should be someone who comes from a commercial banking background versus somebody with a more consumer banking background."

Kenneth Brusda, president of North Star Asset Management Inc. in Menasha, said whether the new CEO is from a big nationally known bank or a good-sized regional bank, it should be an institution that has been able to do relatively well during the recession.

"Associated has credit problems -- they need a credit guy, someone whose experience is that particular strength," Brusda said.

But Thane Bublitz, an analyst with Thrivent Asset Management in Appleton, said Associated's hiring in August of Mark G. Sander, a former La Salle Bank executive, as executive vice president of commercial banking may give the company some leeway to bring in a CEO who can coordinate the bank's efforts but hasn't necessarily specialized in business lending.

Bill Fitzpatrick, a bank analyst for Optique Capital Management in Milwaukee, however, also favors someone with plenty of commercial lending experience.

"I still like to see folks who have been in the trenches," Fitzpatrick said. "I think a strong credit background at this point actually would be very important."

Jon C. Bruss, chief executive of Fortress Partners Capital Management Ltd. in Hartland, thinks a business lending background is a priority for Associated's CEO.

"I'd certainly look for someone with very strong credit skills," Bruss said.

There probably isn't a shortage of candidates, but it will be harder to find one from a successful institution after a period in which banks have struggled, Brusda said.

"There's going to be a lot of bankers who would love to jump ship, but they're jumping from a sinking ship and they're not going to want them," Brusda said. "So maybe that leads you to somebody on the bench, down a few notches, at one of the bigger banks."

U.S. Bank and Wells Fargo may be good places to look, Brusda and Bublitz said.

"It wouldn't surprise me if they got a senior banker from U.S. Bank, JPMorgan, or they may also get one of the top executives from La Salle Bank," Fitzpatrick said. Chicago's La Salle was acquired by Bank of America in 2007, and many of its executives left after the merger.

George Reis, president of George V. Reis Investment Group in Two Rivers, is among those who think even though Associated is conducting a nationwide search, the bank shouldn't look far from home, as it did with Beideman, for its next CEO.

"In my opinion, probably your ideal person would be someone who has a strong Midwest identity," Reis said.

Brusda likes the idea of a person with Midwest ties, too. Beideman, 59, often traveled back to the Philadelphia area, where he has family and friends.

"He's got to be willing to commit to Wisconsin and should be willing to move here permanently, not fly back and forth," Brusda said of the next CEO.

Bublitz, while complimentary of Beideman's management of the bank, said he thinks it would be best if the new hire is "someone who really knows the Midwest markets." Associated operates in Wisconsin, Illinois and Minnesota.

Said Fitzpatrick: "My thought is they'll get someone with a lot of experience here in the Midwest."

The new CEO can expect to have precious little free time until the banking climate in the United States improves, Bruss said.

"I think most bank CEOs will tell you this is a 24/7, 365-day-a-year job, especially now," he said.

"It's important, too, for the bank to regain its marketing mojo," Bruss said.

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