After slamming on the brakes in 2006, Wintrust Financial Corp. in Lake Forest, Ill., is revving its growth engine once more.

The $12.8 billion-asset company on Friday purchased two of the seven banks that failed in the Chicago area the same day. While one of the pickups, Wheatland Bank in Naperville, fits with Wintrust's history of expanding into the outlying areas of the Windy City, the acquisition of Lincoln Park Savings Bank marks its first foray into the city of Chicago.

"Moving into the city was on tap in 2006 but it got shelved when we decided to move to the side," Edward J. Wehmer, Wintrust's president and chief executive, said in an interview. "It is nice to come out of a foxhole and see all the opportunities for us. Chicago is pretty fertile ground so there are countless opportunities for us to expand over the next 10 years."

As shown by last week's slew of takeovers, Chicago has been a hotbed of failures — particularly with the abundance of banks in Illinois, one of the last states to allow branch banking. Simply, there are more problem banks in Chicago partly because there are more banks.

In 2009, 21 banks failed in Illinois, with most of them in the Chicago area, and another 10 have failed so far this year. Experts have predicted at least another three dozen are in serious distress.

Wintrust had been on the list of possible consolidators of failed banks in the Chicago market but had not acted. However, analysts say that with the $210 million in capital it raised in the first quarter and the capital it continues to build from its profits, Wintrust is positioned to compete with companies like MB Financial Inc., First Midwest Bancorp and PrivateBancorp Inc. to make acquisitions.

Though the competition is stiff, analysts said there is adequate supply. "In Chicago there are enough problem children to go around," said Peyton Green, an analyst at Sterne Agee & Leach Inc. "It is not going to be one buyer."

Yet analysts expect Wintrust to be one of the winners. "Up until this point we hadn't seen them participate in the bank closures," said Daniel Cardenas, an analyst at Howe Barnes Hoefer & Arnett Inc. "But now that they've started, I wouldn't be surprised if we saw them emerge as one of the major acquirers."

Wehmer said acquisitions are one of the three reasons Wintrust raised the capital. The other two are decidedly more practical: paying back the $235 million it received through the Treasury Department's Troubled Asset Relief Program and having more capital in case the economic rebound stalls.

Wehmer said Wintrust has a large appetite for acquisitions — more failed-bank deals with the Federal Deposit Insurance Corp. and possible acquisitions of ailing banks. The criteria, Wehmer said, is that such acquisitions enhance the company's network of 15 community banks spread across suburban Chicago up to Milwaukee. "If the bidding gets stupid, we are not going to do it," he said.

The earlier move to the sidelines paid off. Wintrust has posted profits consistently for the past three years during the downturn. On Wednesday, it announced a first-quarter profit of $16 million, up 150% from a year earlier.

It also posted a decrease in its already relatively low problem credits. As of March 31, nonperforming loans totaled $141 million, or 1.55% of total loans, down 20% from a year earlier. "It is still lumpy, but we got it under control," Wehmer said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.