Associated Bank Thought Leadership Podcast

WGN: We’re on with Danny Salazar, senior vice president, relationship manager and commercial banking at Associate Bank. Danny, welcome back.

Danny Salazar: Thank you, Steve.

WGN: As we really get into the middle of the year here, we're almost at May, I want to talk a little bit about some top concerns among CEOs and business leaders about the economy and other things. CNBC, the business network, talked to 30 CEOs and business executives and industry leaders, and they had a wide range of concerns. First and foremost—and I think a lot of us are feeling this—is just a constant state of shock with things going on, not only in our local communities, but around the world as well.

DS: It is interesting. I just this week had multiple conversations with business leaders and the key theme was, you know, what's going on in the world, how they can best prepare their businesses for the disruption and all of the volatility. And it's no surprise that, you know, it used to be where we would have those conversations at the early onset of the year. And then you could look out one, two or three years and start planning ahead.

Now it feels like it's quarter by quarter. And, you know, as you highlighted, Steve, it is just constant shock and volatility, and that is kind of the new normal. So, in many ways, business leaders have really come to adapt to that mindset. And it is—it's a quarter-by-quarter planning session of what's going on in their industry, what's going on in the world, and, you know, where do they need to prioritize their times, their clients and their suppliers.

WGN: Danny, a lot of businesses have three- and five-year plans, and their budgets are annual budgets. So, to go to a quarterly schedule like that must be just throwing your hands up in the air and flying by the seat of your pants.

DS: It is. But in another way, it's also, I think you start to sense how helpful it is in times where there's a lot of volatility and when there isn't. I think it's a good practice to have in any event, you know, and whether it's if you're covering the same topics or themes quarter by quarter, I think it allows you to fine tune and perfect your strategy.

If the environment provides uncertainty and volatility, it gives you the opportunity to consistently evaluate, you know, your strengths or weaknesses, your opportunities, and then really be able to better navigate the environment. Ultimately, I think what we're sensing is that there's a lot of preparation that comes into play. Business leaders are taking into consideration things that they hadn't in the past, and because they're doing it more frequently, it allows them to have better coverage on their business and their industry.

I'll give you a perfect example. Technology. You know, this was a theme or a topic that we noticed with our clients last year, and it was one that was brought on at the onset of ’25, where there was so much going on with AI, cybersecurity. And in many ways, a lot of those business leaders put that on the shelf because they wanted to see how it was going to evolve.

Fast forward a year and you know, I can easily say that technology and AI is probably that discussion topic is happening quarterly and it's not always the same conversational pieces. I think, for example, at the beginning of this year it was, you know, what are some of the key AI providers out there, whether it's ChatGPT or others, Copilot. And now as we enter into the second quarter, that dynamic and conversation has shifted into, okay, how can we best utilize those services? How can we integrate them? And I anticipate that the next quarter will be, how does this impact our our people, our talent, and then cybersecurity.

So, it really has provided a good foundation for clients to revisit, talk about and plan for the next quarter in light of everything that's changing around them.

WGN: Danny, I want to dig down deeper on some of these concerns. A couple of them we've talked about in the past, but they still remain front and center: Supply chains are getting costlier. They're still under strain. Talk to us a little bit how that's impacting businesses, not only around the world, but right here in the Chicago area.

DS: Yeah, that's a good segue. You know, in Chicago, I think we have a very good rail, trucking and distribution hub. So it often feels like any supply chain stresses that we experience are often felt here first. And I think one of the things that we're we're seeing is the impact of the conflict in the Middle East, specifically as it relates to oil prices. Transportation companies are definitely feeling that at the gas pump. The price of oil or the price of gas has crept up significantly in the last 60 to 90 days.

It's a matter of time before I think consumers feel that because, as companies are paying more for hauling and freight services, it's going to impact the prices that they pass on to their consumers. And then consumers are eventually going to start to face those challenges of, you know, now they're paying higher prices at the pump—where do they need to allocate their resources, specifically as it relates to higher prices, and then a potential return of higher inflation.

WGN: And speaking of that, higher inflation, we're seeing that in a number of ways impact consumers in the lower-income and middle-income consumers especially. They're shifting their behavior, aren't they?

DS: Yeah, I think I mean, I see it in my own household where, you know, you start to factor in the cost of energy, the cost of food, traveling, you name it. It really starts to impact how you make decisions, what items are worth prioritizing, what are things that you can forgo and hold off. But it certainly has an impact on day to day, just the mindset of, you know, what your week looks like in terms of food, energy, luxuries, things like that.

WGN: Yeah, entertainment. We had a report earlier this week where younger people especially are curtailing their entertainment. They're not going out on dates as often. They're not doing, you know, going out to bars. They're not doing some of the things they used to do.

And we're talking about the CNBC report about the concerns of CEOs and companies, and one of them is cybersecurity. That has always been one of them, but it's even more so now keeping CEOs up at night because they're thinking about how AI has helped with the scale of some of these attacks.

DS: It is. As I mentioned earlier, that technology is evolving quickly and in the same light that cybersecurity has to be considered in the same vein. With AI consistently improving. I think we're finding and learning of new ways that banks, corporate companies, consumers are actively being targeted. I think with AI, it's easier to infiltrate systems. It's easier to phish. And so it deserves—and it's getting—the right amount of attention from across the board. But yeah, I think cybersecurity and trust are probably one of the top concerns amongst business leaders in this environment.

WGN: And it's not all bad, though. Some of the CEOs say that they're also pretty happy with AI, because it's become a cost saver and a growth driver for their companies.

DS: It has. You know, it's a double-edged sword. With the cybersecurity or the rapid evolution of technology and how it could pose potential threats, it's very helpful in helping companies become more efficient. I think what we're seeing is it's a tool that's enabling businesses, really use it to free up capacity. And that extra capacity that they're finding, they're able to allocate towards driving revenue or having more strategic considerations into their client initiatives. It's

having a very positive impact on U.S. regional and mid-sized banks are dramatically reinventing their business models.

WGN: Switching gears here to focus a little bit more on this, I want you to kind of tell us why that's happening. I know some banks are also reconsidering how they're going to generate revenue and manage risks. And this is really something that impacts banks like Associated Bank, right?

DS: Yeah, well, not too far from the theme of technology, I think what one of the drivers of why banks are evaluating their business model is, is how fintechs—financial technology services—are impacting consumers. I mean, what we're finding is, consumers are more likely to open accounts, move money from one institution to the next, pay services through their mobile applications. And that's a market that has evolved over the last five, ten years, and even more so now as consumer preferences tend to lean towards those types of providers.

I think it's allowing banks to re-evaluate their business model and see where they can enhance their services so that they can keep up at the same pace as fintechs, make sure that their services are equally beneficial to their clients, their matching what trends you're seeing across the board. And so, to that end, banks are re-evaluating how they deliver their services to the consumers.

WGN: The consumer has a easier time of moving money around these days. You mentioned some of those fintechs. Rising interest rates in recent years has given depositors a chance to start moving some of their money to these other companies that have higher yielding alternatives. How are regional banks responding to that?

DS: Yeah, that's something that we see a lot. And I think, you know, we're seeing it at Associated. I'm sure other regional and larger-sized institutions are facing the same challenges. And one thing I think that is common across regional, small and large banks is, you know, how do they improve their operations? How do they adapt to this changing environment?

One of the things that we're seeing is a shift in terms of, you know, how banks make money, paying depositors for those deposits and then lending those deposits and receiving an interest rate. And because of all of the volatility in the interest rate environment and deposit movement, these banks are leaning towards moving more fee income services as the new growth engine. You know, when you think of fee income, you’re thinking of treasury services, wealth management, payment processing services—things that can serve as growth for the organization, but then also at the same time reducing the sensitivity to interest rate swings.

WGN: Yeah. And then what about those deposit rates? Are those going to get any better for consumers?

DS: Oh, that's a good one. Well, I know, this year has evolved in terms of what the market was expecting for interest rates. I think at the beginning of the year, many were anticipating one or two rate cuts, which ultimately meant that depositors would earn less in their money markets. Now, I think those rate cuts have been shelved, and at least for the time being, it's safe to say that rates will be held steady for at least one or two quarters.

And I think the surprise is that now a rate increase is on the table. So, you know, going back to my earlier comment about evaluating your business quarter by quarter, I think that's the right mindset here in terms of how consumers can evaluate their deposits. You know, seeing what the Fed does with rates quarter by quarter, it's going to shift.

WGN: Do you think that there will be more consolidation coming in the regional mid-size bank territory?

DS: Oh, it's hard to say. I think we, you know, having been in banking for 20-plus years, I think consolidation is always top of mind, where banks can look at other institutions for growth into

new markets into new services. I think the same will continue this year and into the next two years, where, because it's become so competitive and banks are consistently evaluating their business model, I think strategic merger M&A activity is a key component of that conversation.

You know, where do banks want to expand geographically? Are there services that other banks have that a bank could use? And instead of preparing or starting those from scratch, does it make sense to acquire another bank? So certainly, I think it is going to accelerate at what pace and when. It's hard to say just because you have, you know, so many other things evolving around us.

WGN: All right, Danny, great conversation. How can people get ahold of you and have a one-on-one if they want?

DS: Thank you, Steve. It's always great to be a part of this conversation. Individuals can reach out to me via email at Daniel.Salazar@AssociatedBank.com.

WGN: All right, Danny, we'll talk to you next time. Thank you.