CHICAGO -- The number of hometown banks here may be shrinking, but the competition for small businesses is not.
With hundreds of banks calling on each other's customers weekly, many banks have resorted to offering irrational credit terms to keep old relationships while making new ones.
"People do a lot of things to keep their customers," said Lamont Change, head of small business banking at Chicago-based LaSalle National Bank.
"Some of the truly aggressive transactions are done in the name of maintaining a customer's business."
Just as certain as BankAmerica Corp.'s acquisition of Continental Bank signals a realignment in the corporate banking business, smaller dealers have brought new out-of-town players into the small business market.
Everyone from Milwaukee-based Firstar to gaint Banc One Corp. are all working to make their presence felt.
Consider this: The investment bank Chicago Corp. estimates that the top three commercial banks control 31% of deposits in the market, while the 10 largest have about 53%.
"I can't imagine a more competitive market than we're in," said Bruce Taylor, president and chief executive of Cole Taylor Bank, based in suburban Wheeling, Ill. "Our customers have a lot of opportunities to bank elsewhere."
Both banks are finding their niche by combining centralized underwriting with a close-to-the-customer branch strategy.
LaSalle, a $9.5 billion-asset affiliate of Dutch giant ABN AMRO, maintains a unit banking network in an effort to remain close to its customers.
Through the bank's business banking unit, the bank serves companies with less than $5 million in revenues from its seven banks.
Conversely, Cole Taylor, which has $1.6 billion in assets, quickly lowered its overhead cost after a state law change in 1989 allowed Illinois banks to break away from unit banks.
The result is a consolidated back office that has helped the company increase profits.