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Can Chicago's PrivateBancorp Hire Its Way Into the Top Tier?

"Don't hang up. Just listen."

Karen Case, who oversaw $2 billion in real-estate loans at LaSalle Bank in Chicago, had plenty on her mind when she got the call in September 2007. LaSalle was just weeks away from being acquired by Bank of America for $21 billion. Case had been advising her 30-person staff, "There will be a place and a good place for all of us" with BofA. But acquisitions are often chaotic, and the caller, whom Case won't name, was persuasive. "I was intrigued," she says. "The opportunity to bring my team and my clients with me [to PrivateBancorp] was exciting."

Case met with PrivateBancorp's cofounder and chairman, Ralph Mandell, and became the 17th LaSalle defector to PrivateBancorp. Since then, her team has attracted $1.4 billion of loans, "largely" from former LaSalle clients, she says. Of the 26 people who work for her, 23 came from LaSalle.

You can build a business step by step, from the ground up. You can build one through acquisitions. Or you can just poach your competitors' best talent. That's what Mandell decided to do. He knew that PrivateBancorp couldn't outbid bigger banks on acquisitions. And it would take decades for its own lending officers to lure enough customers to turn it into a major player. But when he heard about the BofA deal, he recalls, "I thought to myself, This is going to be a once-in-a-lifetime opportunity": He could hire his way into the top tier of Midwest lenders.

Over the past two years, Mandell nearly doubled his banker ranks with more than 160 LaSalle émigrés, including LaSalle chief executive Larry Richman, now PrivateBancorp's CEO. (Richman says he himself did not recruit any of his former associates.) To make sure that PrivateBancorp knew which LaSalle players to recruit — and that LaSalle players knew whom to call at PrivateBancorp — Mandell hired a top human-resources executive from LaSalle. PrivateBancorp's CFO, chief strategy and marketing officer, and chief risk officer also came over from LaSalle.

Poaching is not new — teams of rainmakers often move from one law firm or investment bank to another — but a raid on this scale is almost unheard of. Signature Bank has built its business by hiring teams of bankers and winning over their clients. "You don't bank with a brand," says CEO Joseph DePaolo. "You bank with a person." But it has taken the New York bank eight years to accumulate a loan portfolio of $3.77 billion, significantly less than the $5 billion PrivateBancorp has snagged from the competition in less than two years.

LaSalle's customer base was rich in middle-market companies, those with revenue of $25 million to $2 billion, and which tend to have strong relationships with their bankers. Among these longtime clients was Crate & Barrel, the stylish housewares retailer with $1.3 billion in revenue. After the take-over, says Crate & Barrel's controller, Carol Okamoto, "we were turned over to new people. They didn't know us. They didn't care to know us. We weren't big enough." The company left BofA and opened accounts at PrivateBancorp.

"The bigness is a perception I spend 15 hours a day trying to beat down," says BofA's Eugene Godbold, head of corporate lending in the Midwest. "We fought a little bit of a market perception that we weren't interested." Godbold won't comment on Crate & Barrel or how many former LaSalle clients have followed their old bankers to PrivateBancorp, but says it has been "about what we expected." As for staff, he says, "We want people who want to be part of our company."

In making its wholesale talent raid, PrivateBancorp "bet the ranch," says former LaSalle chairman Norman Bobins, now chairman of PrivateBancorp's main bank unit. Making loans so rapidly could have led to big losses. To fund the new loans, PrivateBancorp loaded up on brokered deposits — those that are packaged by brokers who shop around for the highest rates — which are regarded as more volatile than deposits from loyal customers. And taking on big salaries to attract the LaSalle people ahead of the business they brought in — plus $26 million in stock bonuses — contributed to operating losses through 2008. Yet the gamble seems to be paying off. The bank returned to profitability in the first half of 2009.

Mandell says he's a little surprised at how smoothly the big poach has gone thus far. "Transformational," he says. "I think this will be a case study."

A version of this article appeared in the November 2009 issue of Fast Company magazine.