"You've got relatively slow economic growth, low interest rates and greater regulatory pressures, both from a capital and compliance perspective," Scudder says. "Those things are happening everywhere, but in a market this fragmented, it creates additional pressure on the bottom line."
For better or worse, the road to a healthier market will likely involve a reduction of banks, with much of the activity flowing through the Big Four.
Wintrust, MB, Private and First Midwest approach the market in different ways, but all feature straight-shooting, savvy management teams and, significantly, a key business line that has little to do with Chicago and has helped them to survive the worst of the market's competitive pressures.
For Wintrust, it's a big national insurance-premium finance unit. Private, meanwhile, boasts commercial loan offices in cities such as St. Louis, Minneapolis and Atlanta.
First Midwest supplements its suburban Chicago business with agricultural lending in western Illinois and Iowa, and MB has a national leasing business and provides business-banking services to equipment lessors.
"You can't be successful here without having something on the side," says Chicago banking consultant Paul O'Connor of Angkor Strategic Advisors.
The big local players know each other well, and can readily detail key competitors' branch maps and strategies. "We study those guys aggressively. Everything they do, we want to know why," Feiger says. "It's a pretty good chess match."
Lately, there's been plenty to watch. MB picked up six failed banks in 2009 and 2010, including $2 billion in local deposits and 11 well-positioned branches from Chicago-based Corus Bankshares, the big condo lender.
Since then, MB has been holding back, unwilling to cross the $10 billion-asset threshold, with its additional regulatory costs, until the right deal comes along. "We will go over $10 billion," Feiger says. "It's just a matter of choosing the right time."
Perhaps even more dramatically, Private, once a staid commercial real estate lender, shifted its strategy abruptly to become more of a middle-market lender with the LaSalle hires.
While it leveraged those relationships into fast growth at the beginning, the low-hanging fruit is now gone. And operating like a "little LaSalle," with out-of-market loan offices but no deep-pocketed parent, could be difficult.
"When Larry was at LaSalle, he could call ABN Amro and they'd ship him $50 million," says one investment banker. "Now he has to go to private equity guys who demand higher returns on their money. It's a much more difficult strategy to execute."
First Midwest, the only one of the Big Four not to turn a profit in 2012, has picked up about $800 million in deposits through four failed-bank deals, but also has struggled more with asset quality issues. It recently took a $98 million charge after clearing its books of $233 million of nonperforming real estate loans through a bulk loan sale.
"We wanted to take away the distraction and put those assets behind us, as opposed to letting things drag out over the long term," Scudder says.
Wintrust has picked up 11 banks since 2010, nine of them failed institutions acquired through the FDIC, adding about $7 billion in assets and $5 billion in deposits. Wehmer attributes his success to a lending pullback in 2006, when the market was at its frothiest.
"We were very well positioned to take advantage when the competition was on its back, and that's allowed us to double in size," he says.
Wintrust's biggest strength, however, could also prove to be its Achilles heel: a supercommunity banking strategy, with 15 different charters and 50-some nameplates.