In December Dan Ariens needed a $15 million increase in his credit line, and he needed it fast.
The chief executive of Ariens Co., a Wisconsin-based maker of lawn mowers and snowblowers, wanted to acquire a Nebraska manufacturer and a Detroit parts distributor. Time was of the essence because a Dec. 31 deadline loomed for the Motown deal.
He approached his lender, LaSalle Bank, to see if it would ramp up his $30 million credit line to $45 million. But LaSalle, which on Oct. 1 was bought by Bank of America Corp., would never get the additional business.
Ariens, in fact, ended up moving nearly all of his banking relationships to PrivateBancorp Inc. The Chicago-based bank hired 56 managing directors in the fourth quarter, most of them from LaSalle, and posted a 12 percent increase in loans compared with the year-ago quarter.
Bank of America was “not as quick, and we weren’t getting answers,” Ariens recalled of his initial attempts to increase his credit line at LaSalle’s new parent.
LaSalle defectors at PrivateBank, however, needed just a few weeks to pull together the financing for Ariens’ fourth-generation company, which is based in Brillion, about 25 miles south of Green Bay.
“It felt natural to stay with the people we knew,” he said.
It’s a scenario increasingly being played out on Chicago’s banking scene, mostly because of two recent deals: Bank of America’s purchase of LaSalle, which had been the city’s No. 2 bank in deposit market share and a pre-eminent commercial lender, and National City Corp.’s purchase of MidAmerica Bank, a deal creating Chicago’s No. 4 bank.
Such upheaval can cause clients to move their banking relationships, either because they are unhappy with service from the new owner or, more likely, they have stronger ties to departed bankers.
Employees whom PrivateBancorp has hired include former LaSalle CEO Larry Richman and commercial banker Bruce Lubin, whom Ariens calls “the banker who has an umbrella when it rains.”
“Our new hires, working with our existing managing directors and staff, are becoming productive quickly,” Richman told analysts in a conference call last month.
National City arrives
And it’s not just the LaSalle-Bank of America merger that has rival institutions like PrivateBancorp licking their chops.
Business also is likely to be poached as Cleveland-based National City integrates MidAmerica, a Clarendon Hills-based bank it bought last fall.
“MidAmerica is more of a community bank, and National City has a different strategy, so those two have presented opportunities,” Ellen Costello, CEO of Harris Bank, the city’s No. 3 bank, said at a recent conference.
“Our conversations with customers indicate a high level of confidence and enthusiasm that National City will continue delivering the same high-quality and personalized service that MidAmerica customers have come to expect,” said Joseph Gregoire, president of National City-Illinois Banking.
‘Minimal’ defections
As far as Bank of America is concerned, its client losses have been “minimal,” and, in fact, it has added new clients and expanded relationships with some existing ones, said Mark Sander, Midwest executive for commercial banking for the nation’s No. 2 bank.
“Customers are joining us because of our greater capabilities,” he said.
But to some clients, relationships are more important. Eventually, Ariens, whose company has 1,200 workers in Brillion, Indiana, Nebraska, Minnesota and Alabama, plans to move his cash-management needs to PrivateBancorp from Bank of America.
Bank of America does “a great job, but it works better” when there’s also a loan involved, because it simplifies paperwork when one bank does all the work, he said.
David Witz, president of Skokie-based Continental Electrical Construction Co., also has followed his LaSalle bankers to PrivateBancorp.
“We were actually their first customer when they went over” to PrivateBancorp, said Witz, whose company has annual sales of about $180 million and has counted McCormick Place, U.S. Cellular Field and the Chicago Mercantile Exchange among its clients.
Continental has established a $6 million credit line with PrivateBancorp but still has back-office payroll processing and checking with LaSalle.
“As PrivateBank gets its services up to speed, we’ll migrate those services over to PrivateBank,” Witz said.
The fourth-generation electrical-contracting business goes way back with LaSalle principals. Former longtime LaSalle CEO Norm Bobins, who was succeeded in that job last year by Richman, was a lender to Continental during his days at Exchange Bank.
“That relationship established our business with LaSalle,” Witz said.
Financed repurchase
Now, “Larry Richman, myself and our family have a great working relationship,” and Witz counts Robert Frentzel, a former LaSalle construction banker now at PrivateBancorp, as “a good friend.”
Witz said he is forever grateful for how helpful LaSalle was when, in 2002, the Witz family sought to repurchase the business from a public company it had sold it to in 1998.
“Both Larry and Bob and the whole team stepped up,” he said, noting that they issued him a “significant” $16 million loan.
He was asked whether Bank of America tried to get Continental to stay.
“I received a call from our relationship manager, and he understood the depth of the relationship” we had with the former LaSalle managers, Witz said. “But I never received a call from any senior person asking us to stay.”
Thomas Bagley, senior managing director of Pfingsten Partners LLC, said a 20-plus-years relationship with certain LaSalle executives, including Richman, was a key factor in moving most of his firm’s banking matters to PrivateBancorp.
Shortly before Bank of America acquired LaSalle, the Deerfield-based private-equity firm had been planning to move its partnership business, which basically consists of cash management and operating accounts, as well as a “fairly large” credit facility for the partnership itself to fund its working capital needs, from a Chicago bank it declined to name. Among the rival banks it was interviewing was LaSalle, which had helped Pfingsten finance some acquisitions.
“At about the time we were going to award the partnership business to LaSalle, the acquisition by Bank of America occurred,” Bagley said. “We made the decision that the relationships we had with the people were more important than the marquee in front of the institution, so we basically followed the people,” including its LaSalle point person, Steve Cohen, to PrivateBancorp.
“All of that business has moved over to the PrivateBank,” where Pfingsten has a $60 million credit facility for its partnership’s working capital needs, Bagley said.
In the future, Pfingsten also will look to PrivateBancorp for financing as it does deals.
Pfingsten generally buys companies with annual sales ranging from $20 million to $150 million. Its holdings include Tropitone Furniture Co., a designer and maker of upscale casual outdoor furniture, as well as Elmhurst-based Closet Works Inc. and Las Vegas-based Crowne Enterprises LLC, which design, make and install organization products for closets, offices, garages and bedrooms.
Pfingsten was encouraged in November when PrivateBancorp raised $200 million in a private placement. That transaction helped the bank boost its loan limit to $125 million from $75 million, assuaging Pfingsten’s concerns that PrivateBancorp might not be able to help it finance larger deals.
“They assured us they’d have enough lending capacity to take care of what we needed because they were raising the capital simultaneously,” Bagley said.
He notes that LaSalle continues to lend to one of Pfingsten’s portfolio companies, Elk Grove Village-based Happ Controls, a maker of parts and accessories for gambling, vending and industrial markets.
Pfingsten plans to keep that relationship at LaSalle, Bagley said.
Recalling ‘good old days’
Meanwhile, BJB Partners, which owns apartment buildings on Chicago’s North Side, had been with LaSalle for more than 15 years and moved to PrivateBancorp when its loan officers, Karen Case and James Turner, joined that bank.
BJB now has a commercial lending relationship there, as well as private banking and commercial checking accounts.
“We did a fairly large refinance with them in December,” more than $75 million for five properties, said BJB principal Jamie Purcell. “Traditionally, that would have been LaSalle’s business, and we went to PrivateBank.”
The refinancing transaction reminded Purcell of LaSalle’s “good old days.”
“They were really quick on due diligence, and from start to finish closed the transaction in just under three weeks, between Christmas and New Year’s, which was another miracle,” he said.
LaSalle/Bank of America did little to try to persuade BJB to stay, Purcell noted.
“They made an attempt, but I wouldn’t call it much of an effort,” he said. “It was weird. It just seemed like Bank of America really didn’t care that much about losing us.”
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byerak@tribune.com
