M & I correspondent services expands reach as it buys banks

Northwestern Financial Review, Oct 1-Oct 14, 2002 by Regan, Shawn

[correspondent banking]

As Marshall &Ilsley Corp., pursues its acquisition growth strategy, it moves more correspondent products - of greater sophistication - into the markets served by the purchased banks.

With 214 offices in Wisconsin, the Milwaukee diversified financial services company is the state's largest bank. M&I also has 24 locations in Arizona, with 20 of them gained through acquisitions during the last two years, notably by branches bought from Fifth Third Bank of Cincinnati.

Last year, M&I announced the acquisition of three Minnesota banks:

* In April, National City Bancorp., Minneapolis, with $1.2 billion in assets, price $250 million;

* In November, Richfield Bank & Trust, with $735 million in assets, price $150 million;

* In December, Century Bancshares, Eden Prairie, with $325 million in assets, price $66 million.

With the NCB deal having closed in July of last year, and the Richfield and Century deals in February and March of this year, respectively, M&I now has 11 locations in the Twin Cities.

These acquisitions helped bring M&I's assets to $29.1 billion at the end of this year's second quarter, a one-year increase of $3.2 billion.

But the deal-making isn't done. In June, M&I announced plans to buy Mississippi Valley Bancshares Inc. - the holding company for Southwest Bank - with assets of $2 billion, for $502 million. Southwest has eight locations in St. Louis, Belleville, Ill., and - coming full circle - Phoenix.

Don't count on M&I taking a breather from buying, as it integrates recently acquired banks into its system. "The acquisitions will continue if the right opportunity arises," says William Kline, president of M&I's Minnesota market.

The newly acquired banks can draw upon a whole new world of resources and offer much more advanced correspondent products and services. "The acquisition's done a couple things," says Scott Thorson, senior vice president of commercial banking at M&I's Minneapolis location, the former NCB. "It's afforded us a larger geographical footprint. We've added a [correspondent] calling officer so that allows us to reach a wider market that now covers the Dakotas, Minnesota, parts of Iowa and Western Wisconsin.

"And it increases what we can handle both in terms of size of deals and in terms of the array and sophistication of products offered," Thorson says. "We have our calling officers here and access to greater departmental expertise in Milwaukee. That's something you get when you go from being a $1 billion to a $30 billion bank."

Thorson says the three correspondent products in greatest demand are: treasury investment services, bank stock lending, and loan participations.

Regarding participations, since its acquisition by M&I, the former NCB's lending limit has increased from $13 million to $500 million.

"With our buying the overline, the community bank can play in a larger arena of deals," Thorson says. "Also, but only at the bank's request, we can provide additional products and solutions to support the relationships our client bank has with its customers, as those customers grow into needs that might exceed the bank's capacity."

Paragon Bank, Wells, Minn., has been availing itself of M&I's correspondent products since the mid1990s. Pat Hart, its chairman and CEO, was buying out his family members' stake in the bank when he was approached by Dave Andreas, then president and co-owner of NCB. With $33.4 million in assets and a branch in Shakopee, Minn., Paragon uses M&I for wire and investment services, a stock loan, and the clearing of its outgoing cash letter.

"M&I has more correspondent services than NCB had," Hart says. "But I think one reason M&I bought them is because they have such a good-- group of correspondent bankers. Larry Kraayenbrink [vice president of correspondent banking at M&I, Minneapolis] has been around forever. He's well known and easy to get along with."

M&I expects to win more satisfied customers as its acquisition strategy energizes its growth rates. "M&I has a significant market share of correspondent services in Wisconsin and a much smaller share in Minnesota," Thorson says. "But Minnesota's growth rate is about twice Wisconsin's. Just like it is for the commercial portfolio, we expect to significantly grow our correspondent business and get penetration in our five-state market."