Chicago Bankers Weigh In on MB-Taylor Deal's Impact

Rivals of MB Financial and Taylor Capital have been hit with questions about how the all-Chicago deal will remake the local banking landscape.

Chief executives of every large commercial bank in the Second City who host earnings conference calls took questions from analysts about MB's (MBFI) agreement this month to buy Taylor (TAYC). Their reactions ranged from congratulatory to sarcastic, but all had something to say about how they plan to take advantage of the disruption.

Bank M&A is always a hot topic in Chicago, but it had long been just talk except for a slew a failed-bank opportunities.

The main question is whether the will force other banks to turn the longtime chatter into reality, says Chris McGratty, an analyst with Keefe, Bruyette & Woods.

"You have to ask it. There are five [large, publicly held] community banks there, and one is being acquired," McGratty says.

Here are highlights of the CEO's answers to that and other questions.

Ed Wehmer, CEO of the $17.6 billion-asset Wintrust Financial (WTFC) in Rosemont, Ill.
Chicago's busiest buyer was among the first questioned about the deal on July 17. True to form, he answered with playful sarcasm.

"Was there a deal done here? Wehmer said.

Wehmer continued that he thinks it is a good deal for the two parties, but Wintrust will be on the lookout for ways to seize an advantage. In general banks see mergers as an opportunity to reel in new customers and employees.

"Anytime that there is any change in the market, that leads to disruption in the market, and we have made a living out of standing underneath all the destruction with our net and catching the good things that fall out," Wehmer says. "In the words of my favorite movie 'The Godfather,' we wish them the best of luck as long as their interests don't conflict with ours."

As part of the deal, MB is allowing Taylor to market the mortgage bank with the hopes of getting its shareholders additional consideration.

Wintrust has acquired the operations of several mortgage banks in the last few years, but it appears that Wehmer would not be interested in acquiring Taylor's Cole Taylor Mortgage unit because of its wholesale-lending component.

"We don't do wholesale lending right now," Wehmer said. "We don't like that business."

Larry Richman, CEO of the $13.5 billion-asset PrivateBancorp (PVTB) in Chicago
PrivateBancorp and Taylor Capital were major benefactors of the 2007 acquisition of LaSalle Bank by Bank of America (BAC), with the companies hiring dozens of commercial bankers and their new chief executives from those banks. Richman says he, too, will look for ways to capitalize on the latest disruption.

But will it lead his bank to buy? Possibly, Richman says. Besides a failed-bank deal in 2009, PrivateBancorp has focused on internal loan growth.

"We are opportunistic here as well. And so we are looking. We are discussing, as everyone is," Richman said July 18. "Ours is primarily organic growth, and we feel good about those opportunities. But yet at the same time, you always have to be aware."

Philip Flynn, CEO of the $24 billion-asset Associated Banc-Corp, Green Bay, Wis.
Associated (ASBC) was already on the hunt for a slam-dunk deal, and Flynn says that is still the case.

"The most effective M&A transaction for us will be the one where we can either buy … where we have significant overlap so that we can be assured of significant cost takeouts," Flynn said July 18. "Our view of that hasn't changed, even given the transaction that was announced in Chicago a couple days ago."

Paul Greig, CEO of the $23.5 billion-asset FirstMerit in Akron, Ohio
FirstMerit (FMER) spent 2009 and 2010 building a major Chicago presence through a branch deal and two failed banks. But Greig's tone changed last fall when the company announced it would acquire Citizens Republic in Flint, Mich.

At the time, Greig said he didn't think any anything "particularly attractive will be available within the next year or so" in Chicago.

He reiterated those sentiments in a July 23 call.

"I see no change for FirstMerit based on that transaction," Greig said. "There will be some expense trimming as two in-market companies are coming together, which could give us some opportunity with both customers as well as with employees."

Mike Scudder, CEO of the $8.2 billion-asset First Midwest Bancorp in Itasca, Ill.
First Midwest is considered by several analysts to be one of the best positioned companies to buy small banks in Chicago. Scudder told analysts July 24 he agrees that his company is an acquirer, but is unsure about the timing.

"There are a lot of conversations going on, but there has always been a lot of conversations. [But] if writing it down made it happen, we would all be wealthy," Scudder said. "I think the key in this environment … is it's all about patience and discipline in terms of what you are trying to accomplish in there."