Departure from conservative origins doomed M&I Bank

SCOTTSDALE, Ariz. - In an empty desert terrain covered with holes of snakes, cacti and scraggly brush lies the clearest clues to the disappearance of Marshall & Ilsley Corp., Wisconsin, once a major bank shot by the company's expansion in red-hot real estate markets in the worst possible time. </ P> The lot sold for $ 225 000 times, financed by a loan $ 180 000 M & I went wrong in 2008. Victor and Rita Lockwood recently purchased the lot for $ 20 000 - they are looking for a place to park a trailer if they default on their loans M & I $ 586 000 and lose their house across the road.</ P> Two pieces of property in the desert, two term loans, could cost hundreds of M & I of thousands of dollars - and the same scenario was played several times with no end in sight </. p> <p "Everything just went to hell," Victor Lockwood said with a sigh in an interview room in the couple's spacious living. "I just want out of this mess." </ P> Welcome to the Arizona, Death Valley real estate.This is where M & I Bank and many other lenders have lost billions of dollars during the housing bubble burst, throwing countless homes in foreclosure, some with mortgages to millions of dollars. </ P> M & A, I cases, loan losses - concentrated heavily in Arizona and Florida - has become unbearable, totaling $ 4.8 billion in its portfolio as of December December 31, 2007, through last year, with 4.7 billion in write-offs is likely. The situation left with little choice but to be absorbed by the Canadian parent of Harris Bank last week in a $ 4.1 billion through share swap deal.</p><p> A fixture in Wisconsin since 1847 and by far the largest bank based in Wisconsin before the deal closed, M&#38;I will see its name fade away as it is re-branded BMO Harris Bank in the next year and a half.</p><p> The sale price amounted to $7.75 a share, down from nearly $50 four years ago.</p><p> "It's an ignominious ending for what was once a proud and distinguished bank," said Bernie Hlavac, 75, a retired Stevens Point, Wis., financial executive and longtime M&#38;I shareholder.</p><p> The story of how M&#38;I went from being the "gold standard" of banking - a term repeated by several bankers - to the latest victim of the mortgage meltdown was written in the corporation's headquarters on Water Street in downtown Milwaukee. But it played out in Arizona and Florida, where the once-staid bank went looking for profits and growth it couldn't find in the Midwest.</p><p> The markets it targeted were known for huge and rapid fluctuations in property values - movements that are difficult for Midwest bankers to fathom, said Jeffrey Gaia, chairman and chief executive officer of the Biltmore Bank in Phoenix.</p><p> "The variations between the highs and lows are minuscule in the Midwest," said Gaia, a native of St. Louis who has been in Arizona since 1988. "In Arizona, they are as high and deep as the Grand Canyon."</p><p> So are the risks.</ P> "Making a mistake at the top of the market in Milwaukee and it will not kill you," said Gaia. "Do it here, and it could kill you." </ P> </ p> industry observers and insiders point <p> three actions that led to the fall of M & I: </ p > <p>-M & As I moved into the 21st century, its leaders - and, more importantly, his management style - has changed. Lusting for growth that couldn't be found in the Midwest, the company's new leaders moved away from the conservative approach that had been the bank's hallmark and became more aggressive lenders - a strategy that impressed Wall Street for several years. Leading the charge were Dennis Kuester, then chief executive officer and chairman, and Mark Furlong, Kuester's chief financial officer and eventual successor.</p><p> -In 2006, M&#38;I purchased Kansas City's Gold Banc Corp., an institution with considerable baggage, including a chief executive officer who was ousted before the acquisition and went to prison afterward. But its presence on the west coast of Florida gave M&#38;I a coveted beachhead there, although many of the loans in the Gold Banc portfolio ultimately went bad.</p><p> -M&#38;I drove hard for business in Arizona in the first half of the past decade, a move that also initially was praised by observers and competitors alike because of the skill and efficiency M&#38;I showed in closing mortgage deals.</ P> "M & I has become the place to go for construction loans and lot loans," said Jay Luber, owner of the group loan Galaxy, a large mortgage broker Phoenix. "They were very aggressive. They had good rates and good programs. "</ P> </ p> Unfortunately, M & I targeted two market segments that are particularly volatile, said Jay Josephs, owner of a business assessment Phoenix do not work for M & I.</p><p> "The worst segment of them all is the custom lot, and the second-worst is the luxury home, and (M&#38;I's) strategy focused on those two strategies," Josephs said. </p><p> "It's no wonder they're in the positions they're in."</p><p> M&#38;I's prowess in writing loans stood out in some undeveloped areas of metro Phoenix because many other lenders - with the exception of the National Bank of Arizona - shunned those areas. M&#38;I, which went from having 14 branches in Maricopa County in 2000 to 45, needed the loan revenue.</p><p> "They decided, 'We're going to grow in Arizona - we have a bunch of branches, now we need the loans,' " said Michael Thorell, president and CEO at the Pinnacle Bank in Scottsdale. "They had to support that growth, and the only way banks can make revenue is with loans."</p><p> Some of the areas targeted by M&#38;I are desolate - a few homes scattered amid dirt roads and undeveloped lots.</p><p> "I go out there, and I see vultures. ... You really see vultures," Brett Barry, a Realtor with about 20 years' experience, said after reviewing one area north of Scottsdale that has properties foreclosed by M&#38;I and other lenders.</p><p> </p><p> It's quite a change from a few years ago, when some areas outside Phoenix were flooded with people like the Lockwoods, driving prices up in their search for the perfect piece of land.</p><p> "People, many of them wealthy, were saying, 'Hey, let's buy a piece of land, and when our kids are out of the house, we could build a house there,' " Barry said.</p><p> The Lockwoods' dream began to collapse in 2009 when Victor, 71, a tool and die maker, had health problems that prevented him from working. And Rita, 61, who deals poker at a casino, lost several months of work because of a broken wrist. M&#38;I has rejected an extension of a loan modification, so when their interest rate and payments increase next year, they expect to lose the home - and move into a trailer across the dirt road.</p><p> "What other choice do we have?" Rita asks.</p><p> M&#38;I will lose, too - the Maricopa County assessor values the home now at $390,000, about $200,000 less than the mortgage.</p><p> In addition to custom lots and homes worth hundreds of thousands of dollars, M&#38;I was writing multimillion-dollar loans in exclusive neighborhoods known for huge estates, celebrity homes and gated lots.</p><p> Some of those, too, went south.</p><p> In August 2007, M&#38;I wrote a $6.75 million loan for an 18,700-square-foot home - complete with basketball court, baseball field, theater and separate guesthouse - on a five-acre property in north Scottsdale. When that loan went bad, the bank took the property back last year and put it up for sale, asking $4.99 million.</p><p> The gated home was bought this year for $3.6 million by a limited liability corporation; it is now the home of former Arizona Cardinals quarterback Kurt Warner, according to three real estate sources. Warner's agent declined to comment.</ P> In the category of "No Good Deed goes unpunished," M & I is praised by some in the community of Phoenix for loans to be effective in closing deals in the last decade - when he was writing loans aggressive - and today, as it sells foreclosed properties, although some fear that the pace is to contribute to housing prices in the region depressed.</p><p> M&#38;I had a good team of loan officers who quickly closed deals, said Chris Nowack, a Realtor and investor in Paradise Valley, a pricey suburb near Scottsdale - which meant M&#38;I got stuck with loans on hundreds of properties when the Arizona market crashed.</p><p> </p><p> M&#38;I has had a presence in Arizona for decades - it had a trust company there in the 1970s and bought Phoenix's Thunderbird Bank in 1986.The big push, however, did not begin until a decade ago, after the death of John "Jack" Puelicher, the last of three generations of Puelichers who led the banking company. </ P> "After Jack died, that's when the drumbeat of Arizona has really started," said Frederic J. "Fritz" Ruf, a banker from Milwaukee and Chicago for over 40 years including about 18 with M & I.</p><p> Known for a low-key public image, a disdain for Wall Street and a rigid commitment to credit quality, Puelicher retired as chairman in 1992, but insiders say he continued to have a strong physical and philosophical presence at the bank until his death in 1999.</p><p> Veteran bankers often point to the simple letter to shareholders that Puelicher published in the company's 1983 annual report as an example of his aversion to the spotlight.</p><p> "Your company had a very good year in 1982," Puelicher wrote. "Some of it was due to good luck; some of it was due to good planning and management. We hope you enjoy the numbers and the pictures."</p><p> And that was it.</p><p> Puelicher groomed longtime protege James Wigdale to take the reins, instilling in him the same respect for strong credit standards that had made M&#38;I an iconic institution. Wigdale became CEO and chairman in 1992.</p><p> "It starts at the top," said one former M&#38;I executive, who now works at another Milwaukee-area bank. "Wigdale was a lender from the beginning of time."</p><p> Contacted at his Milwaukee-area home, the affable Wigdale, who retired as CEO in 2002 and as chairman in 2004, declined to comment.</p><p> In addition to grooming Wigdale, Puelicher also had his eye on Kuester, who had come to the bank from IBM Corp. in the 1970s and was praised for his sales skills and for building M&#38;I's data processing division into the profitable Metavante Corp., which M&#38;I spun off in 2007 in a $4.25 billion transaction.</p><p> Kuester was known as an extraordinary salesman. But he "never had written a loan," said Jon Bruss, chief executive of Fortress Partners Capital Management, a Hartland company that targets banks for investments.</p><p> "Jack really liked him and really was impressed with him," Ruf said. "He had taken a fairly modest data processing division and turned it into something that was a huge revenue producer."</p><p> But "he didn't have experience in credit," said Ruf, who also served on the cabinet of former Wisconsin Gov. Tommy Thompson.</ P> <p> Kuester declined to comment, saying it would be inappropriate. </ P> <p> Kuester has been promoted to president of CEO in 2002, adding the title of president in 2005. </ P> He retired from the company last fall. </ P> </ p> Several banks have reported seeing changes in M ​​& I in the post-Puelicher, despite the assurances of the new team that credit quality remains paramount. </ P> <p> Furlong joined M & I in 2001 and rose through the ranks of management until it replaces Kuester as CEO in 2007 and as president last year.</p><p> Through a spokesman, Furlong declined repeated requests for comment.</p><p> Furlong has come under some criticism from shareholders because he will collect $24 million - a combination golden parachute and a retention bonus - as a result of the BMO deal. He is now the president and CEO of BMO Harris Bank, which is absorbing M&#38;I.</p><p> "In Japan, a guy would have committed hara-kiri," said Tom Weggel, 69, a retired printer and maintenance man who saw the value of his M&#38;I stock plummet by more than 80 percent. "Here they get rewarded."</p><p> In a January 2004 meeting, Furlong assured analysts that M&#38;I remained committed to credit quality.</p><p> "For those who know a lot about M&#38;I, they know this is the backbone of M&#38;I," said Furlong, who was CFO at the time.</p><p> But Michael Hatfield, a top M&#38;I executive who was with the bank for 33 years, said he started seeing the change before he retired in 2003, after Kuester became CEO.</p><p> "Dennis was more focused on a sales culture," said Hatfield, who was M&#38;I secretary."He pushed more sales and development and was not as tight on credit." </ P> Hatfield said Puelicher preached his bank conservatively so firmly and frequently that the team rarely lost cap . Bad debts - some were in Arizona in the 1980s - were dealt with quickly, said Hatfield </ p> However, Hatfield said, when I started M & accumulating losses in the second quarter of 2008 ,.'s management team regularly told shareholders that the problems have been addressed and would be solved.</p><p> "After the third quarter of losses, I lost confidence whether there was a true understanding of where the bottom was," Hatfield said.</p><p> M&#38;I posted a loss of more than $2 billion in 2008.</p><p> A second former executive, who declined to be named because he remains active in banking circles, said he knew something had changed in 2007 when - in a disclosure that received little media attention - M&#38;I said it was placing $282 million in loans to Franklin Credit Corp. under review. M&#38;I and other lenders provided funds to Franklin, which then originated loans, many of which were subprime mortgage loans.</p><p> "It was out of the norm for M&#38;I," the executive said. "It was the first tangible evidence that something had changed."</p><p> Bruss, of Fortress Partners, said it became apparent to him that things had changed at M&#38;I somewhat earlier, in November 2005, when M&#38;I said it was buying Gold Banc Corp., a Kansas City bank that owned a dozen branches in Florida.</p><p> M&#38;I agreed to buy Gold Banc a year after a deal to sell to a different suitor fell through when lawsuits filed against Gold Banc came to light, according to an article in the American Banker. In 2003, Gold Banc ousted its longtime CEO amid allegations that he pocketed $3.5 million in bank funds.</p><p> Bruss didn't know its history, but he had met some Gold Banc executives, and they didn't strike him as M&#38;I quality.</p><p> "These guys were dripping in gold bracelets and gold rings, and it wasn't the stuff that came out of Tiffany's," Bruss said. "That was so unlike a group that M&#38;I would do business with."</p><p> M&#38;I paid about $700 million in cash and stock for Gold Banc, but the real costs of the acquisition mounted as its Florida loan portfolio struggled during the housing collapse. By 2008, M&#38;I was admitting that the deal had become more costly, as Furlong acknowledged that there were millions of dollars in Florida loans that had looked good in 2005 but had since gone bad.</p><p> Ken Evason, chief executive officer of Windermere Wealth Advisors LLC in Pewaukee, Wis.Said M & I should have spotted the problems in its review of due diligence. </ P> "You hire a consultant real great, and you sniff these portfolios," said Evason. </ P> <p> Evason also chastised the board of M & I administration for failing to monitor more closely on activities such as culture of the bank shifted. </ p> Council <p> M & I includes some of the most trusted names in business in Wisconsin, including Ted D. Kellner, executive chairman of Fiduciary Management Inc., John W. Daniels Jr., chairman of Quarles &#38; Brady LLP; Katherine Lyall, retired president of the University of Wisconsin System; David J. Lubar, president of Lubar & Co.; and San W. Orr Jr., chairman of Wausau Paper Corp.</p><p> Kellner, a board member since 2000, said he understood why some are blaming the board, but he declined to comment further. The others either declined to comment or did not return calls.</p><p> </p><p> Today, many M&#38;I employees are wondering whether they will lose their jobs under the new owners.</p><p> Shareholders have received BMO shares that will pay a much bigger dividend than M&#38;I's did at the end, but the decline in M&#38;I's stock still stings.</p><p> For some families, M&#38;I stock was as revered as Green Bay Packers season tickets and, like the tickets, was handed down from generation to generation.</p><p> "I've had clients say, 'Dad said don't sell the M&I; it's been good to us,'" said Mark Zalewski, a former banker who is now a broker at Robert W. Baird &#38; Co. "People looked at it as really a sure thing."</p><p> Meanwhile, Gaia, the veteran Phoenix banker, sits back and waits for the economy to improve. When it does, he expects he'll watch another generation of out-of-state bankers invade Arizona, frantically writing mortgage loans, and making some fast profits - only to take huge losses when the bubble bursts.</p><p> "There are many ways to quickly grow a bank," Gaia said, "and most of them are bad."</ P> Leadership <p> changes: </ p> John" the bank's third generation of the family to run Puelicher M & I, Puelicher was known for his strong leadership and conservative Jack "Puelicher. Style that it took over in 1963, 43 years after his grandfather was named president, he retired in 1992 and died in 1999 at age 78 </ p> James B. Wigdale: .. The graduate Stanford joined M &; I in 1962 and was treated by his successor Puelicher Wigdale became president and CEO in 1992, he retired from management in 2002 and as president two years later .. .</p><p> -Dennis J. Kuester: He left a sales job with IBM in the 1970s to join M&#38;I, becoming president of the bank's data processing division. The division became Metavante Corp., which had $1.7 billion in revenue when it was spun off in 2007. Known as a skilled salesman, Kuester has said that he and Wigdale launched the strategy of seeking growth through expansions in other states. He was named CEO in 2002 and chairman in 2005. He retired in October 2010.</p><p> -Mark F.Furlong: With commercial experience more diverse than its predecessors, Furlong joined M & I in 2001 as CFO and was appointed CEO in 2007. Previous employers include Deloitte & Touche, First Executive Corp., which according to press reports, he was fired in 1991 for failing to cooperate with regulators who had seized control of its insurance subsidiary (Furlong declined to comment on the subject); HF Ahmanson, a major savings and loan, and Old Kent Financial Corp. Furlong was appointed chairman of M & I last year and this year became president and CEO of BMO Harris Private Banking.</ P> (Paul Gores of the Milwaukee Journal Sentinel contributed to this report.

land banking 101: taking the guesswork out of smart land ownership ...

Capital Holdings, Inc. makes land affordable and available in one of the fastest growing regions in California: the Victor Valley/High Desert. From Hesperia, Victorville, Adelanto, Apple Valley to Barstow. Using strategic land banking, the latest development & building trends with good old fashioned research, we position you ten steps ahead of the game. DesertXpress gets the green light from the Department of Transportation (DOT) to proceed with engineering - a bold step forward in making high speed rail a reality not just between California and Nevada but for the nation. The Record of Decision (ROD) has been released and can be reviewed here . We're excited with this latest development that puts this project on a timeline that may see construction as early as the end of 2011. Read more about this development: The Golden Triangle in Apple Valley moves toward Annexation - talk about timing. As DesertXpress pushes forward with high speed rail in the region, the Town of Apple Valley is also moving along in its efforts to expand and annex more than 2,700 acres east of I-15, north of Johnson Road and bordered by Dale Evans Parkway.The area proposed for annexation is located directly across I-15 onto one of the stations proposed for DesertXpress.

The world who's who of women

Work pubis Mbrships incl: Nat Coun of Soc Work; Farm & Land Brokers Assn ... SD, USA Folk Singer Educ: Boston Univ. m David Victor Harris, 1968 (div.). ...

New West

Indeed, Fresno broker Ralph Strachan thinks there are still big bucks on the outskirts ... About 70000 people now live in the Victor Valley and the place, ...

Directory of shopping centers in the United States

... Hour Martinizing Office Putney Sprouse-Reitz State Farm Ins. Travel Broker Valley Nat'l ... DDS Glass Boutique, Gifts Home Land & Trust R/E Menagerie, ...

Directory of brokers and salesmen

Morgan, Myrtle M. (with MA Simon) S. ■ Morris, EF (with John Cavala) S. Pahre, ER, 224 W. Yosemite av Br. Dba San Joaquin Valley Land Co. ...

American Globe, Investors magazine ...

Victor Valley Irrigation Co., Los Angeles. Cal. ... Our Idea of a parasite Is that of a broker who hangs around a community, not producing anything, ...