Bank Calumet of Hammond, Ind., is an anomaly in its home state. While the average bank and thrift in Indiana has a loan-to-deposit ratio of above 100%, Bank Calumet is a more conservative lender, with a ratio of less than 75%.
First Midwest Bancorp Inc. of Itasca, Ill., which is buying Bank Calumet for $307 million, intends to change that.
In a conference call Tuesday, John O'Meara, First Midwest's president and chief executive, said his $7.1 billion-asset company would be a more aggressive commercial lender in Bank Calumet's markets.
"Their approach to the market is a little more passive than ours is," Mr. O'Meara said.
First Midwest's branch network forms a semi-circle around Chicago; buying the $1.1 billion-asset Bank Calumet would take it into the suburbs southeast of the city. (All but two of the seller's 30 branches are in Lake County, Ind., which borders Illinois.)
Mr. O'Meara said that Bank Calumet has a good core of five to six commercial lenders but that First Midwest wants add more after the deal closes in the spring. It was announced Monday.
Ronald J. Peterson, an analyst with Moors & Cabot Inc. in Chicago, said that Bank Calumet has done a good job gathering core deposits and that First Midwest has an opportunity to use those funds to make the Indiana operation more profitable than it is. He said smaller, closely held banks that compete with Bank Calumet could be in for a surprise as First Midwest makes its presence felt.
"First Midwest may be able to take some market share away from these guys," he said.
Aside from its core deposits and its location, Mr. O'Meara said that First Midwest was also attracted to Bank Calumet for its trust department, which manages about $850 million in trust assets and 1,000 accounts. Mr. O'Meara said buying Bank Calumet would boost First Midwest's trust assets by 33%.
Daniel E. Cardenas, the director of research at Howe Barnes Investments Inc. in Chicago, said the deal makes sense on many levels.
His only concern was whether First Midwest could continue to build on Bank Calumet's success in deposit growth. In its conference call, First Midwest said deposits had grown 22% at Bank Calumet over the last five years.
Mr. Cardenas said that growth might not be sustainable, because deposits often run off after a local bank is acquired by an out-of-town bank. "You bring a new player into the market, it's always a concern," he said.
Looking ahead, Mr. O'Meara said that though this deal would occupy First Midwest's attention for the immediate future, it will look at strengthening itself in DuPage and Kane counties, both west of Chicago. Both are attractive markets, but DuPage is a mature market that is expensive to buy into.
"Kane County is a fast-growing county that we have begun to enter in a modest kind of way," Mr. O'Meara said. First Midwest agreed in October to buy a branch from the $232 million-asset Elgin State Bancorp of Elgin, Ill. It expects to close that deal before January.
