Cole Taylor Bank's pledge to beef up its commercial and industrial lending in the face of the real estate downturn has been made easier to fulfill as a result of the Chicago market upheaval caused by LaSalle Bank Corp.'s sale to Bank of America Corp.
In the last few weeks the $3.6 billion-asset unit of Taylor Capital Corp. has added 30 commercial bankers, including six senior vice presidents and a chief credit officer, roughly doubling the size of its commercial lending team. Most of the new bankers came from LaSalle, which B of A bought from ABN Amro Holding NV in October. Their new boss is Mark A. Hoppe, the former head of LaSalle's Michigan bank, who was hired as Cole Taylor's president and chief executive officer in January.
"There has been a disruption in the banking market in Chicago, and as a result, we were able to add some strong people," Mr. Hoppe said in an interview last week.
Taylor Capital is one of several Chicago-area banking companies to capitalize on the runoff of LaSalle bankers from B of A.
PrivateBancorp Inc. of Chicago has hired 95 managing directors over the last two quarters, most of whom came from LaSalle. The hires include LaSalle's former CEO, Larry Richman, now PrivateBancorp's president and CEO. MB Financial Inc. of Chicago has hired roughly two dozen commercial bankers in the last two quarters, most of them from LaSalle.
The disruption has arrived at a good time for banks like Cole Taylor that are renewing their commitment to commercial and industrial lending as the real estate market continues to weaken.
Last year Taylor Capital's net chargeoffs rose 147%, to $14.7 million, largely because of deterioration in its portfolio of residential construction loans. Its loan-loss provision for the year increased more than fivefold, to $31.9 million.
The company is expected to release its first-quarter earnings Wednesday, and the average estimate of analysts polled by Thomson Reuters calls for earnings of 17 cents a share. Taylor Capital reported earnings of 48 cents a year earlier.
At yearend commercial and industrial lending accounted for about a third of Cole Taylor's $2.5 billion loan portfolio, according to the parent company's annual report. Commercial real estate that is either income-producing or owner-occupied made up another third, with real estate construction loans making up about a quarter.
Ideally, Mr. Hoppe said, commercial and industrial loans will make up closer to 65% to 70% of the portfolio, but Cole Taylor has set no time line for reaching that goal.
Though adding more two dozen bankers is likely to increase its expenses in the short term, Brian Martin, an analyst with Howe Barnes Hoefer & Arnett Inc. in Chicago, said that the hires can only be seen as positive.
"They have brought on some high-profile, talented people with existing books of business," he said.
However, the expected increase in commercial loans will not be a mere re-slicing of the pie. Mr. Hoppe said his company remains committed to real estate lending and would prefer to expand the entire portfolio, rather than scaling back another department.
"We like the commercial real estate business," Mr. Hoppe said. "It's been good to us," even if "it has given us a little heartburn."
Mr. Hoppe and Robin Van Castle, Taylor Capital's chief financial officer, said it became more focused on commercial real estate lending in recent years, because that is where the growth was.
In the boom years in the middle of the decade, commercial loans increased at an average of 7% to 12% a year, while commercial real estate loans, which include residential construction loans, grew at an average of at 40%, Ms. Van Castle said. "It was a very hot industry. That is where the opportunity was, and we got our share of that business."
Commercial and industrial lending has picked up in the last two years — C&I loans rose 28%, to $850 million as of Dec. 31 — and Cole Taylor is counting on that growth to accelerate under Mr. Hoppe and its new team of commercial bankers.
"Talent is the key driver of sustainable growth and profitability," Bruce W. Taylor, Taylor Capital's chairman, said in a press release last week announcing the hiring of the 30 commercial bankers. "The best investment we can make to build our company is to expand our staff of high-quality, experienced, middle-market commercial bankers."
