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Midland States Bancorp expanding in Illinois, not stuck there

Effingham, Ill.-based Midland States Bancorp Inc. is ramping up its presence in northern Illinois with a deal all about "geographical overlay."

The company announced Jan. 26 it is buying Ottawa, Ill.-based Centrue Financial Corp. in a deal valued at approximately $175.1 million. Midland will expand in Illinois by 21 branches.

"As we combine that branch network, there will be some nice operational savings opportunities for us," Vice Chairman, President and CEO Leon Holschbach said. "Pro forma, the bank will have about $1.8 billion in assets across that northern Illinois footprint, making us the largest community bank presence outside of Chicago. From a branding and marketing point of view, that's very powerful."

Holschbach said the Centrue deal was an attractive opportunity because of the company's strong deposit base, core funding and loan portfolios.

He noted negotiations were "relatively quick" and resolved in time for the company's fourth-quarter 2016 earnings announcement. Though negotiations began in November, Holschbach said election results were not a catalyst.

"We are a bank acquirer, and they're a company that came to a crossroads about their future and decided to sell," he added. "There's lots of excitement and enthusiasm around that, and not much truth to it yet. [The election] had no real part in driving the deal."

But that doesn't mean he isn't excited about the prospect of lower corporate tax rates and fewer regulations.

"Dancing in the streets comes close to my view," he added. "Those are two sort of shiny objects out there that have everyone's attention. What we're hoping is that as much comes to fruition out of those possibilities as can."

Midland is planning to cut seven of its own branches for efficiency purposes, which Holschbach said was decided without the deal in mind.

"Do I think there will be similar kinds of opportunities as we look at the combined Midland and Centrue across northern Illinois?" he added. "Yeah, there probably will be some operating efficiencies of the same kind."

In the near term, Holschbach said the company will focus on integrating Centrue. He added that strategic M&A has been a part of the company's business plan for the last decade, with four live-bank acquisitions and two government-assisted purchases since 2008. When talking to investors about additional M&A prospects, the company generally considers its five contiguous states as well.

"It is a core part of our business plan, so we're looking for opportunities all the time," Holschbach said. "Illinois, along with Texas, have the most banks of any states in the union, so Illinois and contiguous states are a very rich target zone for banks under $1 billion, which is our primary focus for M&A."

He also said market observers shouldn't be surprised to see farther-reaching M&A deals in the future. As the company expands its lines of business, it plans to expand its footprint as well. The company already has a presence in Missouri, Wisconsin, North Carolina and New York, with services including wealth management, leasing and mortgages.

"Because our other business lines have expanded outside of that core geography, I think we'll see opportunities in banking, but also those other lines of business for other acquisition opportunities," he said.