With its deal for Piedmont Bancshares Inc. of Atlanta, PrivateBancorp Inc. is following through on its pledge to expand outside the Midwest and into fast-growing southern and western markets.
The Chicago company, which targets wealthy households, agreed to pay $47 million in cash and stock for the $217 million-asset Piedmont. Ralph B. Mandell, its chairman, president, and chief executive, said in an interview Friday that even before making the Piedmont deal, his $3.7 billion-asset company had the "internal muscle" - capital, staff, back-office capability - to pursue expansion to new markets by acquisitions or bank start-ups.
Those markets include Phoenix/Scottsdale and Florida "for sure," Mr. Mandell said. PrivateBancorp currently has offices in its home market and the Milwaukee, St. Louis, and Detroit markets.
PrivateBancorp has the currency to make acquisitions. Its assets have nearly doubled in the last two years and its market capitalization is now close to $1 billion. After it announced the Piedmont deal Thursday, its stock price soared to a 52-week high, though it retreated some in profit-taking on Friday.
But Mr. Mandell said that when it comes to buying or building in a new market "we can go in either direction."
The key, he said, is finding bankers expert in their markets. In some cases - as it did in St. Louis and Milwaukee - PrivateBancorp will hire teams of bankers to open offices in new markets.
But "if the people are in an established bank, then we are more than willing to make an acquisition," Mr. Mandell said.
PrivateBancorp's last purchase was in June 2005, when it paid $64 million in cash for the $314 million-asset Bloomfield Hills Bancorp Inc. of Michigan.
Mr. Mandell said demographics were among the qualities his company liked about the five-year-old Piedmont. Atlanta is precisely the type of market PrivateBancorp wants to enter - it has more 135,000 households with annual incomes over $150,000. Mr. Mandell said he is also looking for opportunities in cities that attract young people, because that is a good indicator a market will be strong over the long term.
Brian D. Schmitt, Piedmont's CEO, said his bank, which has focused on small- and middle-market business lending, needed to make a move to take care of its larger borrowers. Managing their wealth and assets "is something that has always intrigued us, but to be honest, we didn't have the people, talent, and capital to invest in it," he said.
Piedmont, which is to be renamed The PrivateBank, also wants the capability to make larger loans, Mr. Schmitt said.
The bank has been forced to share large loans to some of its best customers with other banks. After it merges with PrivateBancorp, it will be able to keep those loans in-house, Mr. Schmitt said.
"I'm getting tired working hard and giving away a lot of it," he said. "I'd rather ship it up to Chicago and keep it under the same umbrella, because we all benefit."
Daniel E. Cardenas, the director of research at Howe Barnes Hoefer & Arnett Inc., in Chicago, said PrivateBancorp is selective about where it expands and has made good choices so far.
Bloomfield Hills Bancorp "had a lot of similarities to PrivateBank," so that deal "made good strategic sense," Mr. Cardenas said.
Piedmont Bancshares is small, he said, but buying it would give the Chicago company a good growth platform in one of the nation's fastest-growing markets.
Investors seemed to favor the deal, which is expected to close next quarter. PrivateBancorp's stock closed at $47.51 on Thursday before dropping 4% Friday.
Kevin K. Reevey, an analyst at BankAtlantic Bancorp's Ryan Beck & Co. Inc., said he advised people to sell after the company reached its new high.
PrivateBancorp has shown it can successfully expand into new markets, so there is no reason to worry that it will struggle integrating Piedmont, Mr. Reevey said.
But, he said, "We're just telling investors that while the stock has had a great run, it's just very rich here."
Mr. Mandell, who was reached while on vacation, said he was not concerned about the selling on Friday.
"That is going to happen when you outperform the market," he said. "Certain people are going to say, 'Hey, take some profit.' "
PrivateBancorp's stock was trading at $45.25 late Monday.
