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Law firms headquartered in Chicago and the Midwest matched or exceeded the revenue growth across the legal industry for the first nine months of 2019, according to a recent report from Citi Private Bank's law firm lending and consulting unit.

The news wasn't all positive, however. Chicago firms saw expenses grow faster than revenue—5.3% for expenses versus 5.1% for revenue—and demand for their services, measured by the total hours logged by Chicago lawyers, dropped half a percent in the same period.

Gretta Rusanow, head of advisory services for Citi's Law Firm Group, isn't sounding the alarm just yet, pointing to the inventory of unpaid bills those Windy City firms are sitting on, as well as an increase in Chicago rates.

"Chicago is one of the most popular legal markets in the country. From a revenue point of view, they're matching where we're at for the industry. On top of that, they're sitting on pretty healthy inventory levels going into year-end," Rusanow said. "I'm pretty optimistic about what the top-line stories will be for Chicago through the end of the year"

For now, numbers are rosier for the midwest region outside of Chicago. Law firms headquartered throughout the midwest reported their revenue is 7.8% higher this year when compared to last year, Citi found. Demand Is up 1.6%, which is higher than the industrywide average of 0.9%, and rates have gone up 5.8%—more than anywhere across the U.S., Rusanow said.

"It's a very positive set of numbers for them," Rusanow said, adding that midwest-headquartered firms have also managed to increase their head counts by 1.6% while keeping their productivity up. Chicago-centered firms saw only a 0.8% increase in head count while seeing a drop in productivity.

Rusanow said law firms across the country are grappling with longer collection cycles, and the impact on revenue figures that entails—although notably, Citi found that the collections lag for midwestern firms actually shrank by 2.3% over the past nine months.

A primary source of collections delays are the e-billing systems the firms' large corporate clients have been using. Those systems will flag certain bills for various reasons and send them back to the law firms, Rusanow said.

But Rusanow said she has also heard from law firms that clients are delaying payment on their own. In response to this, Rusanow said firms have begun sending out bills faster and following up more assiduously.

The important thing is that the inventory is in place, Rusanow said. She noted that these bills are "just waiting" to be converted into dollars for Chicago law firms: "All you need to do is speed up collections, and it will help that revenue number accelerate through the end of the year."

"I'm not down on these numbers. I think you'll see a good story through year-end," she said.

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