Building Momentum

For Midland States Bank, the last two years have been ones for the history book..The period began with a big decision, one that many long-standing banks face. Midland had been in the same downtown Effingham, Ill., building for almost a century. It was running out of space; parts of the headquarters team sat in a second building, and loan originators had to do business with loan processors by courier. The main bank building had been renovated in 1959 and again the early 1980s. Now Midland State's management team was talking again, as it had done from time to time, about building a new headquarters. The bank had recently purchased two branches from another community bank. It was growing, and it needed more space.By the spring of 2008 the bank had begun interviewing a handful of architecture firms. It eventually selected the Waukesha, Wis.-based Redmond Company, a firm that had 600 financial services buildings to its credit already and was in the middle of nine other bank projects throughout the Midwest.."Then the economy started to go sideways," said Leon Holschbach, Midland State's president and CEO..Any banker who lived through 2008 knows that plans made in the first half of the year were subject to re-examination and even revision as the year unfolded. Such was the case with the building plans at Midland States. The board and management said "let's not go. We all agreed we would be better off to see what kind of storm was brewing," Holschbach said..The bank's building plans weren't the only things that were about to change. .Growing time. As 2009 began, Holschbach and his team became increasingly confident in the bank's ability to steer through the sagging economy. In February Midlands bought Commercial State Bank in Waterloo, Ill., a $110-million community bank with five branches..The acquisition was one manifestation of a focused growth plan led by Holschbach, a plan that ended up causing a couple of revisions to the building blueprints. The bank's drive impressed Redmond.."We do a lot of bank projects and meet with a lot of different boards, but Leon and his team had a clear, very concise growth plan," said Martin Steinert, a co-owner of Redmond and the company's EVP of consulting and business development. "He made it crystal clear to us when we were going through the interviewing process that he was going to reach these goals.".With the Commercial State Bank acquisition completed, Midland States and Redmond settled on plans for a two-story headquarters building with more than 30,000 square feet. By April of last year the bank had grown to more than $500 million in assets..Then "the mix really started to get crazy," Holschbach said. Midland States Bank had contacted the FDIC in April to express interest in bidding on banks that were about to be shut down. A fateful call came about a month later..On May 22, the Illinois Department of Financial and Professional Regulation, Division of Banking, closed Strategic Capital Bank of Champaign, Ill., appointing the FDIC as receiver. Midland States Bank agreed to purchase nearly all of the $536 million bank's assets, under a $420 million loss share agreement with the FDIC. Midland States also picked up all of Strategic Capital Bank's $471 million in deposits..The transaction more than doubled Midland State's assets, vaulting the bank into the billion-dollar club..Bob Rowe, Redmond's design studio manager, noted wryly that "suddenly the project we were looking at doing with them became undersized. They needed more space.".But Midland States wasn't done growing. The bank had raised about $30 million in new capital before it bid on Strategic Capital Bank, a bidding precondition by which the FDIC judged whether the bank could support a larger balance sheet. "When we won the bid, we ended up putting another $25 million into our capital through the gain on the transaction," Holschbach said. "The result was…we were capitalized for the next deal."The next deal wasn't long in coming. This past New Year's Eve, just seven months after landing the deal that doubled the size of his bank, Holschbach inked a $550-million purchase agreement to buy 12 branches from Rockford, Ill.-based Amcore Bank, where Holschbach had worked before moving into the top job at Midland States.."We'll be bringing over 50,000 accounts, so we just hired 48 loan ops and deposit ops people," Holschbach said. The bank is also opening its first call center. "Imagine how powerful it is for a community bank…to be hiring in this environment," he said.."We are going to be $1.7 billion after this acquisition; we were $400 million three years ago," Holschbach said. The bank will soon have locations in 20 Illinois communities and one on the west side of St. Louis..It didn't take long to see that a two-story headquarters building wasn't going to cut it. .Bigger building plansEarly next month, Midland States Bank will break ground on a four-story building with nearly 80,000 square feet of space, and a plan that allows for a 13,000 square-foot expansion if or when it's needed. With its prominent location at the intersection of Interstates 57 and 70, Holschbach envisions a building that will impress even from a distance.."We're not putting up a pole building here; it's going to be class-A office space; it's going to be a complement to our community; it's going to be a powerful place for our employees to work," Holschbach said.Architecturally, the building will feature a 70-foot-high open tower with interior views to each of the four floors. The tower's height required a variance on Effingham's community standard of 35 feet. The fourth floor will feature floor-to-ceiling windows and lots of natural light.."Whether you're in a cubicle or an office you get a direct line of view into daylight," said Rowe, who added that "views and day lighting" were very important to Holschbach and his team. Natural light management also counts toward certification for Leadership in Energy and Environmental Design (LEED) — the industry standard for green building — which the bank is trying to achieve..Other LEED-oriented elements include a white roofing membrane to cut down on the "heat island" effect, shading devices on the south side exterior, a veneer stone system that cuts down on weight as well as shipping and handling costs. Redmond also is using energy modeling to find areas of the building that could benefit from high performance glazing, different insulation values and other energy-efficient products or building practices..The fourth floor will also feature pass-throughs to large, open balconies where employees can relax during work hours, and where the bank can host events for community groups.."Even though they're becoming a large community bank, Leon has said he wants to maintain that community bank focus. Having a patio like this would allow them to have after-hours events," Steinert said..Redmond conducted more than 35 interviews with Midland staff members, covering everything from work styles and wished-for amenities to what desk chairs would be most comfortable. Besides yielding practical information for the design plan, the interview process inspired a sense of excitement and engagement among employees.."It matters, all of that stuff really matters when it gets down to your personal workspace," Holschbach said. "[Employees] will have participated in their workspace design and color, they're going to be sitting in this beautiful building with a view of the world … it's going to be a gigantic bonus in terms of employee relations and culture building.".The building's many amenities, which also will include an onsite exercise facility, "will be advantageous for the retention of employees and the hiring of future employees," Steinert said..He added that Redmond really understands how renovations or new construction can affect a bank's staff.."A lot of our key people have worked at banks," Steinert said. "I think it's great to listen, but you also have to know what questions to ask to get to the relevant information." Leading the recovery.Holschbach said that in addition to being an obvious symbol of Midland State's growth, the headquarters building project signifies the strength of Effingham. ."Instead of being frozen in the headlights during this longest, deepest recession in all of our lifetimes — and especially during a crisis in our own industry — to be a financial institution that can choose to move forward with something … is going to be a great sign of confidence in our community.".He said that a dental company in town has since announced its own large-scale building project, a new hotel is in the works and the town's convention center is scheduled to be redone.."If it's appropriate … a community bank taking the lead on jump starting its local economy can be a powerful thing," Holschbach said..Steinert also sounded a hopeful note, not just for his client but for Effingham.."You don't see, in a town of 12,000, these types of projects go up. It's really a testament to the city leaders and the businesses that are there," he said.