S-1

As filed with the Securities and Exchange Commission on May 13, 2011

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MIDLAND STATES BANCORP, INC.
(Exact name of registrant as specified in its charter)

Illinois	6022	37-1233196
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)
133 West Jefferson Avenue Effingham, Illinois 62401 (217) 342-2141 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices)

Jeffrey G. Ludwig
Executive Vice President and Chief Financial Officer
Midland States Bancorp, Inc.
133 West Jefferson Avenue
Effingham, Illinois 62401
(217) 342-2141
(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Robert M. Fleetwood
Zack S. Christensen
Barack Ferrazzano Kirschbaum & Nagelberg LLP
200 West Madison Street
Suite 3900
Chicago, Illinois 60606
(312) 984-3100 Douglas J. Tucker
Senior Vice President and
Corporate Counsel
Midland States Bancorp, Inc.
133 West Jefferson Avenue
Effingham, Illinois 62401
(217) 342-2141 Timothy J. Melton
Christopher H. Anderson
Jones Day
77 West Wacker
Chicago, Illinois 60601
(312) 782-3939

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this registration statement.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer ý
(Do not check if a smaller
reporting company) Smaller reporting company o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common stock, $0.01 par value per share	$75,000,000	$8,707.50

(1)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended, and includes the offering price of shares of common stock that the underwriters have the option to purchase to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED MAY 13, 2011

                Shares

Common Stock

This is the initial public offering of shares of the common stock of Midland States Bancorp, Inc., the holding company for Midland States Bank, an Illinois-chartered commercial bank headquartered in Effingham, Illinois.

We are offering                        shares of our common stock. No public market currently exists for our common stock. We have applied to list our common stock on the NASDAQ Stock Market under the symbol "MSBI."

We anticipate that the initial public offering price per share of our common stock will be between $            and $            .

Investing in our common stock involves risks. See "RISK FACTORS" beginning on page 20 of this prospectus to read about factors you should consider before investing in our common stock.

	Per share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to Midland States Bancorp, Inc.	$	$

We have granted the underwriters the option to purchase up to an additional            shares of our common stock from us within 30 days of the date of this prospectus on the same terms and conditions set forth above if the underwriters sell more than            shares of our common stock in this offering.

Neither the Securities and Exchange Commission, any state securities commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System nor any other regulatory authority has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

These securities are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and are subject to investment risks, including the possible loss of the entire amount you invest.

Sandler O'Neill + Partners, L.P., on behalf of the underwriters, expects to deliver the shares to purchasers on or about                        , 2011, subject to customary closing conditions.

SANDLER   O'NEILL + PARTNERS,  L. P. STIFEL  NICOLAUS  WEISEL

The date of this prospectus is                        , 2011.

      *    Highlighted communities represent communities in which the Company's offices are located.

TABLE OF CONTENTS

About This Prospectus	ii
Cautionary Note Regarding Forward-Looking Statements	iii
Prospectus Summary	1
The Offering	14
Summary Consolidated Financial Data	16
Risk Factors	20
Use of Proceeds	40
Dividend Policy	40
Reincorporation Transaction	42
Capitalization	43
Dilution	45
Selected Historical Consolidated Financial Data	47
Management's Discussion and Analysis of Financial Condition and Results of Operations	56
Business	98
Regulation and Supervision	131
Management	141
Compensation of Executive Officers	150
Certain Relationships and Related Party Transactions	172
Security Ownership of Certain Beneficial Owners and Management	176
Description of Our Capital Stock	180
Shares Eligible for Future Sale	188
Underwriting	189
Legal Matters	192
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	192
Experts	193
Where You Can Find More Information	193
Index to Consolidated Financial Statements	F-1

        For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

i

ABOUT THIS PROSPECTUS

        You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. We and the underwriters have not authorized anyone to provide you with different or additional information. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any different or additional information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it.

        This prospectus is not an offer to sell, nor is it seeking an offer to buy, shares of our common stock in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and growth prospects may have changed since that date.

        This prospectus includes statistical and other industry and market data that we obtained from industry publications, research, surveys and studies written or conducted by third parties. Our internal data, estimates and forecasts are based on information obtained from trade and business organizations and other contacts in the markets in which we operate and our management's understanding of industry conditions. Although we believe that this information (including the industry publications and third party research, surveys and studies) is reliable, we have not independently verified such information. In addition, estimates, forecasts and assumptions are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the "RISK FACTORS" section and elsewhere in this prospectus.

        Unless otherwise indicated or the context requires, all information in this prospectus:

•

assumes that the underwriters' option to purchase additional shares of our common stock to cover over-allotments is not exercised;

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assumes an initial offering price of $            per share, which is the mid-point of the estimated public offering price set forth on the cover page of this prospectus; and

•

gives effect to our reincorporation from the State of Delaware to the State of Illinois, which occurred on December 31, 2010, including the ten-for-one common share exchange that occurred as part of the reincorporation transaction. See "REINCORPORATION TRANSACTION."

ii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Certain statements contained in this prospectus that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain assumptions and estimates and describe our future plans, results, strategies and expectations, can generally be identified by the use of the words "may," "will," "should," "could," "would," "goal," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target," "aim" and similar expressions. These forward-looking statements include statements relating to our projected growth, anticipated future financial performance, financial condition, credit quality and management's long-term performance goals, as well as statements relating to the anticipated effects on our business, financial condition and results of operations from expected developments or events, our business, growth and acquisition strategies and any other statements that are not historical facts.

        These forward-looking statements are subject to significant risks, assumptions and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on our business, financial condition, results of operations and future growth prospects can be found in the "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" sections of this prospectus and elsewhere in this prospectus. These factors include, but are not limited to, the following:

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continued challenging or worsening business and economic conditions nationally, regionally and in our target markets, particularly in Illinois and the St. Louis metropolitan area;

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risks related to the continuing integration of acquired businesses and any future acquisitions, including, without limitation, exposure to potential asset and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, procedures and personnel of the acquired business, the need for additional capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions;

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historical growth rate and performance may not be a reliable indicator of future results;

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inability to find suitable acquisition candidates;

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dependence on our management team and our ability to attract, motivate and retain qualified personnel;

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concentration of our business in Illinois;

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risks of deteriorating asset quality and higher loan charge-offs;

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concentration in commercial and residential real estate lending and changes in the prices, values and sales volumes of commercial and residential real estate;

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failure of assumptions and estimates underlying the establishment of reserves for probable loan losses and other estimates;

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risks related to assets acquired from other organizations, including exposure to unrecoverable losses on loans acquired and certain provisions of our loss-sharing agreements with the FDIC;

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accounting treatment for loans acquired in connection with our acquisitions

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focus of our business on small and midsized businesses;

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time and effort necessary to resolve nonperforming assets;

iii

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risks inherent in real estate construction loans due to the need to estimate costs and values associated with completed projects;

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risks related to liquidity;

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regulatory requirements to maintain minimum capital levels;

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changes in interest rates that affect the pricing of our loans and deposits and the impact any such changes may have on our net interest income;

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risks related to securities held in our securities portfolio;

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burdens associated with operating as a public company;

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effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

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changes in economic and market conditions that affect the amount of assets we have under administration;

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impact of litigation pertaining to our fiduciary responsibilities;

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failure to keep pace with technological change or difficulties when implementing new technologies;

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system failures or failures to prevent breaches of our network security;

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fraudulent and negligent acts by our customers, employees or vendors;

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data processing system failures and errors;

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continued or worsening market conditions affecting the financial industry generally;

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impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act;

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governmental monetary and fiscal policies;

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changes in the scope and cost of Federal Deposit Insurance Corporation, or FDIC, insurance and other coverages;

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the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornadoes and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes; and

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other factors and risks described under the "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" sections herein.

        Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this prospectus. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We are not undertaking an obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. We qualify all of our forward-looking statements by these cautionary statements.

iv

PROSPECTUS SUMMARY

This summary highlights selected information contained in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" sections, the historical financial statements and the accompanying notes included in this prospectus, as well as the other documents to which we refer you. In this prospectus, "we," "our," "us," "Midland States" or "the Company" refers to Midland States Bancorp, Inc., an Illinois corporation, and our consolidated banking subsidiary, Midland States Bank, an Illinois state chartered bank, unless the context indicates that we refer only to the parent company, Midland States Bancorp, Inc. In this prospectus, "Bank" refers to Midland States Bank.

Our Company

        We are a 130-year-old financial institution and the fourth largest bank holding company in Illinois headquartered outside of the Chicago metropolitan area (based on deposits, as reported to the FDIC as of June 30, 2010). As of December 31, 2010, we had total consolidated assets of $1.6 billion, total deposits of $1.4 billion and total common shareholders' equity of $59.2 million. We have been headquartered in Effingham, Illinois for our entire 130-year history.

        We currently operate 29 banking offices in 23 communities, primarily in central and northern Illinois. These include seven branch offices serving the St. Louis metropolitan area, one in Chesterfield, Missouri and six in southwestern Illinois. We have demonstrated our ability to grow through various expansion efforts. Specifically, since 2007, we have completed a traditional bank holding company acquisition, two FDIC-assisted acquisitions, one in-market branch acquisition and one large branch acquisition from a troubled institution. These transactions are summarized below under "—Acquisition Strategy and Recent Acquisitions." We have also opened a full-service de novo branch office and a de novo wealth management office since 2007. The following graph shows the timeline of certain key events, including our recent acquisitions, and the corresponding growth in our total assets and core pre-tax, pre-provision earnings over time, which is detailed under "—Our Recent Growth" below:

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        Through the Bank, we deliver a comprehensive range of banking products and services to individuals, businesses, not-for-profit organizations, municipalities and other entities throughout our market areas. We believe many of our customers find our locally-managed, community-focused style of banking to be particularly attractive. The Bank also delivers, under the Midland Financial Strategies name, a comprehensive offering of trust and wealth management services out of seven offices in central and northern Illinois and in the St. Louis metropolitan area. As of December 31, 2010, we had $702.5 million of trust and wealth management assets under administration.

Our Recent Growth

        In late 2007, our board of directors and management team adopted an initiative driven strategic plan that envisioned organic growth and acquisitions, as well as the development of a more robust banking platform and a performance oriented culture. Since that time, we have grown significantly, both organically and through five acquisitions. The following table illustrates certain aspects of our growth since December 31, 2007:

									Compounded annual growth rate through December 31, 2010(4)
	As of and for the Year Ended December 31,
(dollars in thousands, except per share data)	2007		2008		2009		2010
Core pre-tax, pre-provision earnings(1)(2)	$	3,377	$	3,793	$	11,791	$	24,676		94.1	%
Net income		2,105		2,139		18,337		12,070		79.0
Diluted earnings per common share(1)		0.50		0.52		3.11		1.62		48.3
Total assets		382,053		441,027		1,113,752		1,634,322		62.3
Total loans (gross)		284,233		337,220		624,456		1,047,144		54.4
Total deposits		301,389		351,865		918,092		1,364,517		65.4
Core deposits(1)		229,601		246,407		523,278		1,058,370		66.4
Total shareholders' equity		35,935		37,301		73,292		106,535		43.7
Total common shareholders' equity		35,935		37,301		49,692		59,165		18.1
Book value per share(1)		8.90		9.25		11.99		14.21		16.9
Book value per share—as converted(1)		8.90		9.25		11.90		14.80		18.5
Tangible book value per share(1)(3)		8.45		8.28		9.90		9.21		2.9
Tangible book value per share—as converted(1)(3)		8.45		8.28		10.99		12.19		13.0
Trust and wealth management assets under administration		99,605		94,828		265,707		702,516		91.8

(1)

This measure is set forth in the table under "SUMMARY CONSOLIDATED FINANCIAL DATA" beginning on page 16 of this prospectus and in the table under "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" beginning on page 47 of this prospectus. See the notes to those tables for a description of how we calculate this measure.

(2)

Core pre-tax, pre-provision earnings is a financial measure that is not recognized under U.S. generally accepted accounting principles, or GAAP. Financial measures that are not recognized under GAAP, such as core pre-tax, pre-provision earnings, are referred to as non-GAAP financial measures. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(3)

Tangible book value is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(4)

The compounded annual growth rate, or CAGR, represents the annualized percentage increase over the three-year period from December 31, 2007 to December 31, 2010.

        In addition to the significant growth of our balance sheet and earnings, since 2007 we have also expanded our operations from six branch offices to 29 branch offices today, and we have carried our brand into ten new counties in Illinois. Our number of employees has also grown rapidly, from 96 at December 31, 2007 to 397 at December 31, 2010. Approximately 200 of these new employees were employed at the locations we have acquired, while the remainder represent newly created positions. During this time, we have also transformed our trust department into a full-service wealth management

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group operating under the Midland Financial Strategies name and are aggressively pursuing further expansion of this business by providing a comprehensive suite of trust and wealth management products and services, including financial and estate planning, trustee and custodial services, investment management, tax and insurance planning, business planning and corporate retirement plan consulting and administration. Midland Financial Strategies also offers retail brokerage services through a nationally recognized third party broker-dealer. Our trust and wealth management assets under administration have increased from $99.6 million at December 31, 2007 to $702.5 million at December 31, 2010.

        As part of our growth, we have expanded our operations into new markets. In February 2008, we entered the Illinois side of the St. Louis metropolitan area by acquiring a community banking organization with six branch offices in Monroe County, which experienced population growth of over 20% during the past decade, and St. Clair County. In May 2009, we expanded into the Champaign-Urbana, Illinois metropolitan area, home of the University of Illinois and approximately 226,000 residents, through an FDIC-assisted acquisition of a community banking organization with an attractive wealth management business. In March 2010, we expanded into the northern Illinois market through the acquisition of 12 branch offices from a publicly traded regional banking organization located in eight communities with an aggregate population of approximately 93,000, all of which are within an approximate 80-mile radius of Rockford, Illinois, and in June 2010, we opened a wealth management office in Rockford. The Rockford metropolitan area, located approximately 90 miles northwest of Chicago, has a population of approximately 359,000 and is a major commercial center in the northwest Illinois-south-central Wisconsin corridor. In May 2010, we opened a banking and wealth management office in Joliet, Illinois, which is located 40 miles southwest of Chicago and is the fourth largest city in Illinois. The Rockford and Champaign-Urbana metropolitan areas experienced the second and fifth highest population growth rates, respectively, among the 34 metropolitan areas in Illinois over the past decade, with reported population growth of 12.2% and 7.6%, respectively.

        In addition to our expansion into new markets, we have grown significantly in our existing markets. Prior to 2007, nearly all of our deposits were attributable to customers from smaller, rural communities located in Effingham and the greater central Illinois area. Since then, however, we have grown our presence in the St. Louis metropolitan area, which has a population of approximately 2.9 million, by expanding our operations in Chesterfield, Missouri, an affluent western suburb of St. Louis with a population of approximately 47,000, and by acquiring a community banking organization located on the Illinois side of the St. Louis metropolitan area. In October 2010, we completed an FDIC-assisted acquisition of a community bank in Chesterfield to further grow our banking business in the St. Louis metropolitan area. Between December 31, 2007 and December 31, 2010, our deposits in the St. Louis metropolitan area grew from $22.6 million to $174.5 million. We have also grown in our core central Illinois market through organic growth strategies, which have contributed to an increase in our deposits in central Illinois from $271.2 million at December 31, 2007 to $500.8 million at December 31, 2010.

        As discussed below under "—Our Strategy," we believe we have significant opportunities for further growth through additional conventional and FDIC-assisted acquisitions of banks, branches, wealth management firms, trust departments of community banks, selective de novo opportunities, continued expansion of our wealth management group, the hiring of commercial banking and wealth management professionals from other organizations and organic growth within our existing branch network. We also believe we have the necessary experience, management and infrastructure to take advantage of these growth opportunities.

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Our Strategy

        The initiative driven strategic plan that our board of directors and management team developed in late 2007 includes the following five strategic initiatives:

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Performance Banking.  Our performance banking initiative is focused on accelerating organic growth through our existing branch network and business lines, building a sales and service minded staff and developing a constructive, accountable and performance driven culture. We seek to develop bankers who create dynamic relationships through innovative solutions, and to provide a superior customer experience and industry leading customer service. Toward these ends, we have developed a comprehensive training program for our employees. This program includes personal development training through the Investment in Excellence® program developed by The Pacific Institute, and performance training that focuses on exceeding client expectations. We have also streamlined our teller and back office operations, allowing our banking professionals more time to focus on serving our customers. We believe continual investment in our people is a key driver to superior financial performance, with respect to both our intended organic growth and integrating and growing acquired operations. A primary objective of our performance banking initiative is to generate core deposits from both existing and new customers, thereby lowering our cost of funding and enhancing the stability of our primary funding source. Since December 31, 2007, our deposits, excluding deposits assumed in acquisitions and brokered deposits, have grown by $222.6 million, and we believe this performance banking initiative has been a significant contributing factor to this deposit growth.

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Accretive Acquisitions.  Our accretive acquisition initiative is based upon our determination that we can strengthen our long term franchise value by capitalizing on opportunities to increase our earnings through acquisitions in our existing market areas and in the broader Midwestern region. We believe there continues to be numerous small to midsized publicly traded and privately held banking organizations that will become available for acquisition, either because of financial weakness, scale and operational challenges, regulatory pressure, management succession issues or because their principal shareholders will seek liquidity. We are confident that we can play an important role in serving as a platform for these organizations, some of which may also be finding it difficult to compete with more efficient competitors. To date, all five of our acquisitions since 2008 (which are described below) have been accretive to our earnings per share, and we believe we will have opportunities in the future to make acquisitions that are also accretive to our earnings per share in the year of acquisition, enhance shareholder returns and strengthen our business and franchise value over the long term. We also believe that, as a result of our recent acquisitions, we have developed an experienced acquisition and integration team capable of identifying acquisition candidates, conducting due diligence, determining if a business case exists for the acquisition and achieving a smooth post-closing transition. We have been successful to date in integrating acquired banking operations into our organization and applying our performance banking initiative to organically grow these operations following the acquisition, and we believe that our acquisition experience positions us to generate incremental growth following any future acquisitions.

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Wealth Management.  Our wealth management initiative is based upon our determination that trust and wealth management services can generate stable and recurring revenue and enhance banking customer loyalty, which can result in increased core deposits and greater cross-selling opportunities. Since 2007, we have added a president and a chief investment officer for this group, added to our staff of financial advisors, expanded our wealth management product offerings and increased the offering of wealth management services from two to seven locations. Our trust and wealth management assets under administration grew from $99.6 million to $702.5 million between December 31, 2007 and December 31, 2010, a CAGR of 91.8%, and we have been successful in our efforts to retain a large percentage of the trust and wealth

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management accounts that we have acquired in recent years. We expect growth in our wealth management operations to continue over the next several years, including through the possible acquisition of trust and other wealth management accounts from community banks seeking to exit this specialized, scale-dependent business, the opening of new wealth management offices and the hiring of wealth management professionals with established client rosters.

•

De Novo Growth.  Our de novo growth initiative is focused on growing our market presence through de novo branch offices in new communities within our existing market areas and potential new market areas. As part of our strategic plan, we determined that we would have opportunities to grow though additional de novo locations in select markets by building upon our experience with establishing a de novo branch office in Chesterfield, Missouri in the St. Louis metropolitan area in 2003. We have been successful in developing our Chesterfield branch office into a full-service office and establishing deposit-based relationships with our customers of that office. We have also established de novo operations in Joliet, Illinois with the opening of a branch office in May 2010, and in Rockford, Illinois with the opening of a wealth management office and the hiring of a team of wealth management professionals in June 2010. We intend to continue seeking de novo opportunities for both our community banking business and wealth management group. However, we expect to limit our de novo strategy to those communities and market areas where our management team has business relationships and knowledge of the market's customer base and competition. We believe that our experience in establishing de novo operations will serve us particularly well in the future as we seek to complement our acquisition and organic growth strategy.

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Enterprise-Wide Risk Management.  Our enterprise-wide risk management initiative is designed to ensure that we are using best practices in enterprise-wide risk management. It is also designed to ensure that all of our employees are fully engaged in these efforts, and that we have in place a solid foundation for organic growth and for integrating future acquisitions. One significant tool we have implemented is a risk management dashboard that monitors key risk factors within eight broad risk categories across our entire business. This dashboard, which summarizes the current risk level, risk limit, risk trend and the action steps to improve or maintain our risk position for the identified risks, is reviewed monthly by our risk management team and senior management risk committee, and quarterly by our board of directors. To ensure that our risk management initiative is ingrained throughout our organization, the compensation committee of our board of directors has based annual performance bonuses for our executive officers and other employees on the achievement of certain risk-based metrics, including exceeding "well capitalized" regulatory standards and maintaining specified asset quality ratios. We believe we have been successful in this area to date and intend to continue investing in this initiative.

        These strategic initiatives, coupled with our long standing focus on forming strong relationships in the communities that we serve, form our current business strategy.

Acquisition Strategy and Recent Acquisitions

        We have completed five acquisitions since we implemented our strategic plan in 2007, and we expect growth through acquisitions to remain an integral part of our strategy going forward. Our acquisition strategy focuses on acquiring organizations that enhance our strategic growth plans, both in terms of markets served and products and services offered. We expect our acquisitions to provide significant long-term operating synergies and attractive economic returns to our shareholders. Each of the five acquisitions we have completed since 2007 has been accretive to our earnings in the year of acquisition and has enhanced the long-term growth prospects of our franchise.

        Key considerations in analyzing acquisition opportunities include a careful assessment of the risks involved in completing the transaction, effective integration of the acquired entity's operations and culture and the likelihood of realizing the perceived benefits and value of the acquired assets,

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particularly with respect to the acquired loan portfolio. Furthermore, in analyzing acquisition opportunities, we evaluate whether the specific acquisition opportunity fits within our overall initiative driven strategic plan. Our risk management process for acquisitions focuses on three elements: pre-transaction due diligence; prudent negotiation of price and other terms and conditions of the acquisition; and post-closing integration. We believe we have built a strong acquisition and integration team and have developed a set of acquisition and integration processes that can serve as the foundation for further significant growth through acquisitions in the future.

        We have grown our business during a time of significant turmoil in the banking sector. The unprecedented levels of disruption in the banking sector provided strong banks with an opportunity to grow, including through the acquisition of assets and liabilities of failed banking organizations from the FDIC. In this regard, two of our acquisitions were acquired from the FDIC out of receivership and substantially all of the assets acquired in these transactions are covered by FDIC loss-sharing agreements. In general, under these FDIC loss-sharing agreements, the FDIC agrees to reimburse, up to a certain amount, losses the acquirer may incur with respect to the acquired assets. Additionally, the failed institution's assets are typically purchased from the FDIC at a discount to their book value. These loss-sharing agreements and asset pricing discounts are designed to mitigate the potential risks faced by the purchaser. Both of our FDIC-assisted acquisitions were accretive to our total shareholders' equity because we recognized bargain purchase gains in connection with these acquisitions due to the purchase prices being less than the fair value of the net assets acquired.

        We believe we may have further opportunities to make FDIC-assisted acquisitions in the markets in which we seek to grow. We also believe that our experience in consummating two FDIC-assisted acquisitions gives us a competitive advantage over other institutions bidding on an institution held in receivership by the FDIC, in part because of our established due diligence process and in part because of our proven ability to successfully transition these institutions to our organization with no interruption in service.

        The five acquisitions we have completed since adopting our strategic growth plan in late 2007 are described below. The following table summarizes the fair value of the assets and loans acquired and deposits assumed in each of our five recent acquisitions:

				Fair Value at Date of Acquisition
		Date of Acquisition
(dollars in millions)				Assets		Loans		Deposits
WestBridge Bank & Trust Company			10/15/10	$	84.7	$	48.1	$	61.1
AMCORE Bank, N.A. Branch Acquisition			03/26/10		499.5		407.2		493.4
Strategic Capital Bank			05/22/09		546.2		143.1		467.5
Waterloo Bancshares, Inc.			02/12/09		116.1		71.5		98.1
People's National Bank, N.A. Branch Acquisition			11/14/08		29.6		27.9		23.6
	Total			$	1,276.1	$	697.8	$	1,143.7

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FDIC-Assisted Acquisition of WestBridge Bank & Trust Company.  On October 15, 2010, we acquired WestBridge Bank & Trust Company, or WestBridge, in Chesterfield, Missouri from the FDIC out of receivership. We acquired assets totaling $84.7 million, including $48.1 million of loans, and assumed liabilities of $80.2 million, including $61.1 million of deposits. In connection with this acquisition, we entered into a loss-sharing agreement with the FDIC pursuant to which the FDIC has agreed to reimburse 80% of any losses we incur on $72.6 million of covered assets. Upon consummation of the transaction, we recognized a bargain purchase gain of $4.5 million. This acquisition increased our deposits in St. Louis County, Missouri by approximately 66% and expanded the presence we originally established in the Chesterfield market in 2003. Because WestBridge's sole office was located within a few blocks of our existing Chesterfield office, we were able to realize cost efficiencies by consolidating WestBridge's

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operations into our existing office and terminating the WestBridge lease. We consider Chesterfield to be a strategic hub for future growth. Chesterfield is an affluent suburb in the St. Louis metropolitan area, as evidenced by its median household income of approximately $98,000.

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AMCORE Bank, N.A., Branch Acquisition.  On March 26, 2010, we purchased 12 branch offices, two stand-alone drive-up facilities and certain other assets and deposit liabilities from AMCORE Bank, N.A., or AMCORE. In the transaction, we acquired assets totaling $499.5 million, including $407.2 million of loans, and assumed $493.4 million of deposits. The acquired loans consisted of $184.5 million of loans to in-market borrowers and $222.7 million of out-of-market loans, including $44.3 million of indirect automobile loans. All of the acquired loans were performing, pass-graded credits and were selected following a rigorous due diligence process, including a third-party loan review. We also acquired approximately $400 million in trust and wealth management account relationships that were attributable to the acquired branches. We paid a 1.5% premium for the deposits and a $1.5 million trust and wealth management account premium. Upon consummation of the transaction, we recognized a bargain purchase gain of $4.2 million. As a result of this transaction, we established a presence in the northern Illinois market in what we believe to be a significant and high profile manner due to the number of locations acquired and the amount of loans, deposits and trust and wealth management accounts acquired. Prior to joining the Company in 2007, Leon J. Holschbach, our Chief Executive Officer and President, was employed by AMCORE for ten years, the last seven of which he served as Region Market President for the locations that we acquired. Following the AMCORE acquisition, we also hired the individual who succeeded Mr. Holschbach as the Region Market President at AMCORE for the locations that we acquired to serve as the Region Market President of our northern Illinois market. These individuals have extensive knowledge of and significant business relationships in the northern Illinois market and we are leveraging their knowledge and relationships in this new market area to grow our business. The acquired branches are located in Dixon, Freeport, Mendota, Oregon, Peru, Princeton, Rock Falls and Sterling, Illinois, all of which are within an approximate 30-mile radius of each other and an approximate 80-mile radius of Rockford. Rockford is the third largest city in Illinois. The Rockford metropolitan area has a population of approximately 359,000 and is a major commercial center in the northwest Illinois-south-central Wisconsin corridor.

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FDIC-Assisted Acquisition of Strategic Capital Bank.  On May 22, 2009, we acquired Strategic Capital Bank, or Strategic Capital, in Champaign, Illinois from the FDIC out of receivership. We acquired assets totaling $546.2 million, including $143.1 million of loans and $263.1 million of investment securities, and assumed liabilities of $521.2 million, including $413.7 million of brokered deposits and $53.8 million of non-brokered deposits. We paid the FDIC a 1.0% deposit premium for the non-brokered deposits of Strategic Capital. In connection with the acquisition, we entered into a loss-sharing agreement with the FDIC pursuant to which the FDIC has agreed to reimburse us 80% of the first $167.0 million of losses incurred, and 95% of any losses in excess of that threshold, on $420.0 million of covered assets, which include loans, other real estate owned and nonagency mortgage-backed securities. Additionally, we retained wealth management assets of $146.4 million. Upon consummation of the transaction, we recognized a bargain purchase gain of $25.0 million. Strategic Capital operated one banking office in Champaign, which is approximately 75 miles north of our Effingham headquarters. This acquisition established our first branch office in the Champaign-Urbana metropolitan area, which is the home of the University of Illinois and has a population of approximately 226,000. As a result of the Strategic Capital acquisition, our brokered deposits increased by $413.7 million. Our post-acquisition strategy has been to systematically reduce the level of brokered deposits through our organic deposit growth and with cash generated from the acquisition. As of December 31, 2010, we had significantly reduced our level of brokered deposits to $159.5 million from $286.7 million at December 31, 2009.

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•

Acquisition of Waterloo Bancshares, Inc.  On February 12, 2009, we acquired Waterloo Bancshares, Inc., the holding company for Commercial State Bank of Waterloo. Commercial State Bank of Waterloo was headquartered in Waterloo, Illinois, which is located on the Illinois side of the St. Louis metropolitan area, approximately 25 miles southeast of St. Louis. It operated six branch offices in Monroe and St. Clair counties. Monroe County has a median household income of approximately $71,000 and, between 2000 and 2010, experienced the eighth highest population growth in Illinois (among 102 counties) at 20.1%. In this transaction, we acquired assets totaling $116.1 million, including $71.5 million of loans, and assumed liabilities of $108.1 million, including $98.1 million of deposits. This acquisition established our first presence on the Illinois side of the St. Louis metropolitan area and contributed core deposits to our St. Louis-area operations.

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People's National Bank Branch Acquisition.  On November 14, 2008, we purchased two branch facilities of People's National Bank, N.A., located in the central Illinois market. In this transaction, we acquired assets totaling $29.6 million, including $27.9 million of loans, along with $23.6 million of deposits. This acquisition extended our presence in the central Illinois market by establishing a third branch office in Effingham and our first branch office in the community of Vandalia, Illinois, which is approximately 30 miles southwest of Effingham.

        We are continually evaluating potential expansion opportunities in markets where we believe we can leverage our initiative driven strategic plan and community banking platform to gain market share and operate profitably. We intend, however, to remain a community banking organization focused on less concentrated markets outside of major urban areas. In general, we intend to focus our future expansion efforts on the market areas that we already serve and on other market areas in Illinois, eastern Missouri and western Indiana that have demographics similar to the market areas in which we currently operate, although it is possible one or more acquisition targets could have a presence in other areas of the Midwest.

        We believe the banking landscapes in Illinois, Missouri and Indiana provide significant opportunities due to the large number of small community banks currently operating in these states. According to publicly available information from the FDIC, these three states have a total of 993 banks and thrifts with assets of less than $1.0 billion—552 in Illinois (second highest in the United States); 312 in Missouri (sixth highest in the United States); and 129 in Indiana. We believe these fragmented markets and large number of potential targets will provide us with significant organic growth and consolidation opportunities.

Our Competitive Strengths

        We believe our competitive strengths include the following:

•

Experienced Senior Management Team.  Our core senior management team has extensive and varied experience in managing community banking organizations or advising community banks at a professional services firm. Our Chief Executive Officer and President has 31 years of experience in the industry, including 18 years as president of a Wisconsin-based community bank and ten years as Region Market President in northern Illinois for a multi-billion dollar publicly traded regional banking organization. Our Executive Vice President and Chief Financial Officer has 9 years of public accounting experience at a Big Four firm, including significant experience working with financial institutions, and has substantial financial reporting and accounting experience with two publicly traded companies. Our Senior Vice President—Corporate Counsel served as our lead outside counsel for each of our acquisitions and capital raising transactions from 2008 through 2010 and has almost 15 years experience advising banking organizations, including a number of publicly traded companies. Each of our Senior Vice President—Community Banking, Senior Vice President—Chief Credit Officer and Senior Vice President—

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Banking Services has extensive community banking experience. As we have grown over the past several years, we have been successful in attracting management talent to central Illinois from areas outside of our primary market areas, including from areas outside of the Midwest. In addition to the important additions we have made to our senior level management team, we also have built a deep, but streamlined, bench of talent below the senior level in areas such as finance, treasury, loan and deposit operations, risk management, information technology, human resources, marketing and special assets. Our senior management team has a demonstrated track record of managing profitable growth, successfully executing acquisitions, implementing a rigorous enterprise-wide risk management system and instilling a company-wide entrepreneurial culture.

•

Proven Ability and Demonstrated Success in Acquisition Execution and Integration.  As a result of the five acquisitions that we have completed since we implemented our initiative driven strategic plan, we believe we have developed an experienced acquisition and integration team capable of identifying acquisition candidates, conducting thorough due diligence, determining if an acquisition opportunity fits within our overall strategic plan and will enhance shareholder returns, integrating the acquired operations into our existing operational platform and retaining a high percentage of the acquired entity's customer base. We believe this acquisition experience positions us to continue to capitalize on additional acquisition opportunities.

•

Robust, Stable Core Funding Base.  We focus on relationship banking with our customers and on generating core deposits. Because a majority of our operations are outside of major metropolitan areas such as Chicago, we believe we generally experience less competition from large national and super-regional banks than do community banks located in more urban areas. This enables us to better compete for core deposits primarily through service as opposed to pricing and we have been successful in generating core deposits to fund our liquidity needs, thus avoiding excessive reliance on brokered deposits and other sources of non-core funding. We also consider core deposits to be an important driver of value in any acquisition we consider. At December 31, 2010, core deposits represented 77.6% of our total deposits and our net non-core funding ratio was 24.6%. Based on the new regulatory classification for certificates of deposit of up to $250,000 being includible in core deposits, which went into effect in the first quarter of 2011, core deposits would have represented 87.0% of our total deposits at December 31, 2010. We also benefit from an improving concentration of non-interest bearing deposits, which represented 12.7% of our total deposits at December 31, 2010. This stable core funding base provides us with a less expensive funding source than if we had to rely more heavily on brokered deposits or other forms of higher cost deposits, and provides us with a more stable funding base to support our growth initiatives. Our five recent acquisitions have contributed significantly to our core funding base since December 31, 2007. Of the $828.8 million in core deposit growth we have experienced since 2007, we estimate that $606.2 million has come through acquisitions while $222.6 million has been generated organically.

•

Diversified Loan Portfolio.  We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic location and industries in which our business customers are engaged. No loan product represented more than one-third of our total loan portfolio at December 31, 2010. Non-owner-occupied commercial real estate loans, our largest category, represented approximately 31% of our total loan portfolio at December 31, 2010. Our next largest categories were commercial loans at approximately 17% and owner-occupied commercial real estate loans at approximately 13%. Construction and land development loans comprised less than 10% of our total loan portfolio. At December 31, 2010, our total loan portfolio was spread across our primary market areas as follows: central Illinois—39%; northern Illinois—30%; St. Louis metropolitan area—23%; and other areas—8%. We have established industry concentration limits to ensure that our loan portfolio is not overexposed to a particular

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industry. Our largest industry concentration at December 31, 2010 was assisted living facilities, at approximately 35% of the Bank's total risk-based capital (after adjusting for FDIC loss-sharing protection). We also manage risk by limiting exposures to individual borrowers. As of December 31, 2010, we had only five borrower relationships with outstanding balances of $8 million or greater, all of which represented performing pass-rated credits. Furthermore, the risk exposure of our loan portfolio is mitigated by the fact that, at December 31, 2010, 13.1% of our loan portfolio was covered by our loss-sharing agreements with the FDIC.

•

Growing and Profitable Wealth Management Group.  We have grown our wealth management group significantly since 2007, increasing our assets under administration from $99.6 million at December 31, 2007 to $702.5 million at December 31, 2010, a CAGR of 91.8%. Wealth management is a scale-dependent business, and our recent growth has given us the scale to operate this business profitably. Our wealth management operations provide us with stable, recurring fee revenue that we expect to continue growing as we expand the size and scope of our operations and enhance our ability to cultivate banking customer loyalty by developing deeper financial relationships with our customers.

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History of Sustained Profitability and Steadily Increasing Dividends.  We focus on long-term financial performance and have a long history of profitability despite the turmoil in the banking industry. Since 2007, our net income available to common shareholders has increased four-fold from $2.1 million to $8.4 million in 2010 and our core pre-tax, pre-provision earnings have increased more than seven-fold from $3.3 million to $24.7 million in 2010. Furthermore, between 2007 and 2010, our return on average assets increased from 0.55% to 0.79% and our return on average common equity improved from 5.97% to 13.63% despite significant investments in our franchise. Our profitability has enabled us to consistently increase dividends to our common shareholders over the past several years.

•

Well Positioned to Capitalize on Market Opportunities.  We continually evaluate potential acquisitions of loan and securities portfolios, banks or bank branches in unassisted and FDIC-assisted transactions, wealth management firms, trust departments of community banks and other financial services-related businesses. Many financial institutions in our primary market, Illinois, are significantly distressed, as evidenced by Illinois experiencing the third highest number of bank failures in the United States since 2007. Furthermore, we believe that there are numerous small to midsized family-owned community banking organizations in our existing markets and surrounding areas that will become available for acquisition due to succession issues or because of their inability to compete with more efficient competitors in an increasingly competitive and heavily regulated environment. We believe that this is also true of a significant number of publicly traded and privately held community banking organizations operating in our market areas. Our ability to raise capital from our existing shareholder base and strong liquidity position, coupled with our risk management procedures, have allowed us to grow our business profitably at a time when the broader banking sector has experienced significant losses and balance sheet contraction. We believe our scalable operational platform and demonstrated success in acquisition execution and integration, coupled with the capital to be raised in this offering, will allow us to take advantage of additional acquisition opportunities.

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High-Capacity, Efficient Operating Platform.  To support our rapid growth, we have made significant investments in our operational infrastructure, including hiring additional personnel in key operational areas. One major component of our performance banking initiative is our "Future Bank" project, which is discussed in more detail below. As part of our Future Bank project, we are preparing to transition in the second half of 2011 to a new core processing system provided by one of the largest information technology and data processing providers to the financial institutions industry. We also are in the process of constructing a new 79,500 square foot corporate headquarters facility, with occupancy expected in September 2011. We believe

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that these investments in our infrastructure and operational personnel will create the capacity to grow our asset base significantly in the near term, and that this growth capacity is a significant competitive advantage over many of our competitors. We believe these investments provide us with the scale to grow in the near term without incurring significant incremental noninterest expenses, thereby enhancing our return on assets and equity.

•

Board of Directors Comprised of Successful Entrepreneurs.  Our six non-executive directors are all successful entrepreneurs and business owners with long-standing ties to the communities in which we operate, particularly in our primary central Illinois market. The collective professional background of our directors contributes to our organization-wide entrepreneurial culture and provides us with valuable insight to the business and banking needs of our customer base. Our six non-executive directors and their affiliated entities, collectively, have a substantial ownership interest in the Company of 19.3% (on an as-converted basis and excluding any shares to be issued in this offering) and invested approximately 10% of the aggregate $63.7 million of new capital we raised in 2009 and 2010 to support our growth objectives.

Our "Future Bank" Project: Building Our Banking Platform for the Future

        As part of our growth strategy, our management team developed a strategic plan for our "Future Bank." Future Bank is our project to build an efficient, technology-driven banking operation with significant capacity for growth, and encompasses all aspects of our strategic plan. Our Future Bank project began with an intensive assessment of all phases of the Bank's operations, which was performed by a prominent financial services consulting organization. The recommendations from this assessment led us to make significant operational modifications, ranging from, among other things, expedited teller operations and document imaging to a streamlined small business lending approval process. Our Future Bank project has been designed to, among other things, both reduce operating expenses by streamlining processes and making other efficiency enhancements and enhance revenue by improving our customers' banking experiences and developing improved data reporting systems to facilitate cross-selling opportunities. We expect our Future Bank project to generate a combined $2.0 to $3.0 million of cost savings and revenue enhancements annually.

        As noted above, as part of our Future Bank project, we are preparing to transition in the second half of 2011 to a new core processing system provided by one of the largest information technology and data processing providers to the financial institutions industry. By upgrading to a more robust and sophisticated core processing system, we believe we will be better positioned to streamline our operations, grow our asset and deposit base in a cost-efficient manner and seamlessly integrate acquired operations into our existing organization.

        We believe our Future Bank project will contribute to the processes by which we ensure our banking platform has the size, breadth, scope, scale and agility to meet future demands as we continue to grow well into the future.

Our Market Areas

        We operate primarily in three market areas—central Illinois, northern Illinois and the St. Louis metropolitan area. Many of our branch offices are located in communities where agriculture and agricultural-related businesses are particularly important to the local economy. The communities that we serve tend to be smaller and generally are not serviced by large national and super-regional banks. For example, based on information reported to the FDIC as of June 30, 2010, in Effingham County, where we are headquartered, no large national or super-regional bank (which we define as having more than $10.0 billion in total assets) had a deposit market share ranking in the top five in the county. In addition, only two of the counties that we serve in our northern Illinois market area have a large

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national or super-regional bank among the top five in deposit market share, and in each such case the large competitor had a deposit market share of less than 10%.

        As of December 31, 2010, we were diversified among our market areas, as illustrated by the following table:

(dollars in thousands)		Branch Offices(1)		Loans		%			Deposits		%
Central Illinois			8	$	410,698		39.2	%	$	500,836		36.7	%
Northern Illinois			14		315,876		30.2	%		499,596		36.6	%
St. Louis metropolitan area			7		238,556		22.8	%		174,518		12.8	%
Other			—		82,014		7.8	%		189,567		13.9	%
	Total			$	1,047,144		100.0	%	$	1,364,517		100.0	%

(1)

The Rockford, Illinois office in our northern Illinois market is a wealth management office and does not currently offer banking services.

        We also believe that our operations are not dependent on the strength of any particular industry. In addition to agriculture, other industries of importance to our market areas include transportation and logistics, higher education (particularly in Champaign-Urbana in our central Illinois market), healthcare services, hospitality and tourism and technology. We benefit from significant market share in many of the communities we serve, while we expect to capitalize on opportunities for growth in others.

        We currently have a presence in 11 banking markets for purposes of the Herfindahl-Hirschman Index, or HHI, which is a commonly used index for measuring the concentration of an industry in a particular banking market. According to the HHI for each of these banking markets, three of our markets are considered to be unconcentrated and six are considered to be moderately concentrated. We therefore believe that we have opportunities to gain market share, either through organic growth or through acquisitions, in the market areas in which we operate. For detail on the HHI for each of our banking markets, see "BUSINESS—Our Market Areas" in this prospectus.

        Additional information about our three primary market areas is set forth below:

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Central Illinois—We have been headquartered in Effingham, Illinois for 130 years. Effingham is located at the intersection of Interstates 57 and 70 in south-central Illinois. Interstate 57 runs from the Chicago metropolitan area to southeastern Missouri, serving as a primary route for travelers headed from the southern United States, such as Memphis and New Orleans, to Chicago and enabling them to bypass the St. Louis metropolitan area. Interstate 70 is a major east-west transportation route, running from Baltimore to Utah, and connects Indianapolis with St. Louis in the Midwest. Effingham, which has a population of approximately 13,000, is centrally located between Chicago (approximately 210 miles to the north), Indianapolis (approximately 140 miles to the east) and St. Louis (approximately 100 miles to the west) and, because of its location at the intersection of Interstates 57 and 70, serves as a major transportation route. After Effingham, our Champaign office is our second largest office in terms of deposits in central Illinois. As previously noted, the Champaign-Urbana metropolitan area is the home of the University of Illinois, which has in excess of 41,000 students. The Champaign-Urbana metropolitan area also serves as a major healthcare center for much of central Illinois and western Indiana, and has a population in excess of 226,000.

Other offices in our central Illinois market area are in Centralia, Greenville, Vandalia and Farina, the largest of which is Centralia with a population of approximately 13,500. As of June 30, 2010, the most recent date for which FDIC data is available, we ranked in the top four in deposit market share in four of the five central Illinois counties that we serve—first in Effingham County with a 30.8% market share; second in Fayette County with a 19.3% market

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share; second in Bond County with a 17.7% market share; and fourth in Marion County with a 10.3% market share. We ranked first in market share in the community of Effingham with a 40.8% market share.

•

Northern Illinois—We entered the northern Illinois market area in March 2010 with our acquisition from AMCORE of 12 branch offices, a portfolio of $407.2 million of performing loans, $493.4 million of deposits and approximately $400 million of trust and wealth management accounts. All of the branch offices that we acquired are within an approximate 80-mile radius of Rockford, Illinois, which is the third largest metropolitan area in Illinois with a population of approximately 359,000. The size, demographics and economies of the communities served by these branch offices are similar to those of the predominantly rural communities served in our central Illinois market area. Furthermore, most of the communities served in our northern Illinois market area are located along Interstates 80 or 88, both of which serve as major transportation routes between Chicago and the Quad Cities metropolitan area in western Illinois and eastern Iowa. We also opened a wealth management office in Rockford in May 2010, and a branch office in Joliet, Illinois, which is located at the intersection of Interstates 55 and 80 approximately 40 miles southwest of Chicago, in June 2010. After Joliet and Rockford, the largest community served in this region is Freeport, which has a population of approximately 25,000 and is approximately 30 miles west of Rockford. Other offices in our northern Illinois market area acquired from AMCORE are in Dixon, Mendota, Oregon, Peru, Princeton, Rock Falls and Sterling. As of June 30, 2010, we ranked in the top five in deposit market share in three northern Illinois counties that we serve—first in Lee County with a 22.8% market share; fourth in Bureau County with a 7.7% market share; and fifth in Whiteside County with a 10.2% market share. In addition, we ranked in first or second in deposit market share in three of the communities that we serve—first in Dixon with a 35.7% market share; second in Princeton with a 15.3% market share; and second in Rock Falls with a 16.7% market share.

•

St. Louis Metropolitan Area—We entered the St. Louis metropolitan area in 2003 with the establishment of a de novo branch office in Chesterfield, Missouri. Chesterfield, which has a population of approximately 47,000, is an affluent suburb in the St. Louis metropolitan area, as evidenced by its median household income of approximately $98,000. We significantly expanded our Chesterfield operations in October 2010 with the acquisition of WestBridge from the FDIC, as receiver. As of December 31, 2010, Chesterfield had grown to be our fourth largest office in terms of deposits. Prior to our WestBridge acquisition, in February 2009, we acquired Waterloo Bancshares, the holding company for Commercial State Bank of Waterloo, and its six branch offices located in Monroe and St. Clair counties in Illinois. The communities served by these banking offices are smaller, rural communities located in the southeast portion of the St. Louis metropolitan area, but have been growing over the past decade due to their status as bedroom communities to St. Louis with lower costs of living than in many of the suburban St. Louis communities in Missouri. For example, Monroe County had the eighth highest population growth in Illinois (among 102 counties) between 2000 and 2010 with reported population growth of 20.1%. As of June 30, 2010, we ranked fourth in deposit market share in Monroe County, with an 11.4% market share.

Our Corporation Information

        Our principal executive offices are located at 133 West Jefferson Avenue, Effingham, Illinois 62401, and our telephone number is (217) 342-2141. We maintain an Internet website at www.midlandstatesbank.com. The information contained on or accessible from our website does not constitute a part of this prospectus and is not incorporated by reference herein.

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THE OFFERING

        The following summary of the offering contains basic information about the offering and our common stock and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of our common stock, please refer to the section of this prospectus entitled "DESCRIPTION OF OUR CAPITAL STOCK."

Common stock offered by us	shares.
	shares if the underwriters' option is exercised in full.
Common stock to be outstanding after this offering	shares.
	shares if the underwriters' option is exercised in full.
	See the additional discussion below regarding the shares of common stock to be outstanding after this offering.
Use of proceeds	We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and commissions and offering expenses, will be approximately $         million, or approximately $         million if the underwriters' option is exercised in full. We intend to use the net proceeds from this offering to support our long-term growth by enhancing our capital ratios to permit future strategic acquisitions and growth initiatives, and for general working capital and other corporate purposes. We have no present agreement or plan concerning any specific acquisition or similar transaction. See "USE OF PROCEEDS."
Dividend policy	It has been our policy to pay a dividend to our common shareholders. Dividends historically have been declared and paid in the month following the end of each calendar quarter. Our dividend policy and practice may change in the future, however, and our board of directors may change or eliminate the payment of future dividends at its discretion, without notice to our shareholders, and any future determination to pay dividends to our shareholders will be dependent upon our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board may deem relevant. See "DIVIDEND POLICY."
Proposed NASDAQ listing	We have applied to list our common stock on the NASDAQ Stock Market under the symbol "MSBI."

        The number of shares of common stock to be outstanding after this offering is based on 4,249,777 shares outstanding at April 30, 2011 and excludes:

•

573,870 shares of our common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $13.99 per share;

•

2,008,510 shares of our common stock issuable upon conversion of the outstanding shares of our Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, or Series C Preferred Stock;

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•

1,033,478 shares of our common stock issuable upon conversion of the outstanding shares of our Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, or Series D Preferred Stock;

•

536,170 shares of our common stock issuable upon conversion of the 630 shares of our Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, or Series E Preferred Stock. This Series E Preferred Stock may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes;

•

217,391 shares of our common stock issuable upon conversion of the 500 shares of our Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, or Series F Preferred Stock. This Series F Preferred Stock may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes; and

•

1,374,310 shares of our common stock available for future issuance under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan, or 2010 LTIP, out of which options to purchase 125,000 shares of our common stock will become effective upon the consummation of this offering.

        As described in more detail later in this prospectus under "DESCRIPTION OF OUR CAPITAL STOCK—Conversion Rights—Preferred Stock: Reduction of Conversion Price Due to Certain Subsequent Common Stock Issuances," the conversion price of our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock will be reduced if the initial offering price of common stock in this offering is less than the applicable conversion price of the respective series. As any such reduction, if ultimately required, will not be determinable until after the consummation of this offering, the number of shares of our common stock listed above as being issuable upon conversion of our preferred stock is based upon a conversion price of $11.75 for the Series C Preferred Stock and Series E Preferred Stock and $23.00 for the Series D Preferred Stock and Series F Preferred Stock, which are the applicable conversion prices prior to the consummation of this offering.

        Unless otherwise indicated, or the context otherwise requires, other references in this prospectus to the number of shares of our common stock issuable upon conversion of our preferred stock are based upon the applicable conversion prices prior to the consummation of this offering, as set forth above.

Risk Factors

        An investment in shares of our common stock involves a high degree of risk. You should carefully read and consider the risks discussed in the "RISK FACTORS" section of this prospectus and all other information in this prospectus before making a decision to invest in shares of our common stock.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following summary consolidated financial data as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006 has been derived from our audited consolidated financial statements. The summary balance sheet data as of December 31, 2010 and 2009 and the summary income statement data for the years ended December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary balance sheet data as of December 31, 2008, 2007 and 2006 and the summary income statement data for the years ended December 31, 2007 and 2006 have been derived from our audited consolidated financial statements that are not included in this prospectus.

        You should read the following financial data in conjunction with other information contained in this prospectus, including the information set forth under "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and the financial statements and related accompanying notes included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

        As described elsewhere in this prospectus, we have consummated several acquisitions in recent fiscal periods. The results and other financial data of these acquired operations are not included in the table below for the periods prior to their respective acquisition date and, therefore, the results and other financial data for these prior periods are not comparable in all respects and may not be predictive of our future results.

				As of and for the Years Ended December 31,
(dollars in thousands, except per share data)				2010		2009		2008		2007		2006
Summary Balance Sheet Data
	Total assets			$	1,634,322	$	1,113,752	$	441,027	$	382,053	$	409,487
	Non-covered loans				910,103		492,716		337,220		284,233		288,625
	Covered loans(1)				137,041		131,740		—		—		—
	Allowance for loan losses				28,488		19,766		3,718		3,232		3,766
	Non-covered investment securities				257,713		147,043		72,536		71,743		84,795
	Covered investment securities(2)				134,029		151,619		—		—		—
	Indemnification asset due from FDIC				67,538		72,699		—		—		—
	Deposits				1,364,517		918,092		351,865		301,389		320,832
	Short-term and FHLB borrowings				127,997		90,161		38,144		31,975		40,737
	Subordinated debt				16,300		11,300		—		—		—
	Junior subordinated debt related to trust preferred securities				10,000		10,000		10,000		10,000		10,000
	Preferred shareholders' equity				47,370		23,600		—		—		—
	Common shareholders' equity				59,165		49,692		37,301		35,935		35,259
			Total shareholders' equity	$	106,535	$	73,292	$	37,301	$	35,935	$	35,259
Summary Income Statement Data
	Interest income			$	83,319	$	49,401	$	22,437	$	24,406	$	24,301
	Interest expense				25,124		20,579		9,888		12,516		11,361
		Net interest income			58,195		28,822		12,549		11,890		12,940
	Provision for loan losses				13,580		20,728		1,051		497		1,361
	Gain on bargain purchase				8,704		25,031		—		—		—
	Noninterest income (excluding gain on bargain purchase)				10,173		18,094		3,437		2,800		4,945
	Noninterest expense				46,845		23,610		12,193		11,427		12,269
	Income before taxes				16,647		27,609		2,742		2,766		4,255
	Provision for income taxes				4,577		9,272		603		661		1,072
	Net income				12,070		18,337		2,139		2,105		3,183
	Preferred stock dividends				3,668		2,291		—		—		—
	Net income available to common shareholders			$	8,402	$	16,046	$	2,139	$	2,105	$	3,183

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			As of and for the Years Ended December 31,
(dollars in thousands, except per share data)			2010			2009			2008			2007			2006
Credit Quality Data
	Loans 30-89 days past due		$	9,926		$	11,177		$	3,227		$	2,048		$	1,861
	Loans 30-89 days past due to total loans			0.95	%		1.79	%		1.96	%		0.72	%		0.65	%
	Nonperforming loans(3)		$	26,270		$	11,539		$	4,161		$	4,452		$	4,244
	Nonperforming loans to total loans(3)			2.51	%		1.85	%		1.23	%		1.57	%		1.47	%
	Nonperforming assets to total assets(4)			1.79	%		1.16	%		1.24	%		1.20	%		1.06	%
	Allowance for loan losses to total loans(3)			2.72	%		3.17	%		1.10	%		1.14	%		1.30	%
	Allowance for loan losses to nonperforming loans(3)			108.44	%		171.28	%		89.35	%		72.60	%		88.74	%
	Net charge-offs to average loans			0.51	%		0.88	%		0.28	%		0.37	%		0.42	%
Per Share Data (Common Stock)
	Earnings:
		Basic	$	1.99		$	3.83		$	0.52		$	0.50		$	0.77
		Diluted(5)		1.62			3.11			0.52			0.50			0.76
	Dividends declared			0.392			0.424			0.296			0.268			0.242
	Book value(6)			14.21			11.99			9.25			8.90			8.60
	Book value—as converted(6)(8)			14.80			11.90			9.25			8.90			8.60
	Tangible book value(7)			9.21			9.90			8.28			8.45			8.11
	Tangible book value—as converted(7)(9)			12.19			10.99			8.28			8.45			8.11
	Weighted average shares outstanding:
		Basic		4,214,820			4,180,620			4,134,710			4,103,090			4,121,950
		Diluted		6,824,310			5,665,850			4,134,780			4,125,650			4,173,690
	Shares outstanding at year end			4,164,030			4,143,640			4,031,540			4,036,250			4,101,990
Selected Performance Metrics
	Core pre-tax, pre-provision earnings(10)		$	24,676		$	11,791		$	3,793		$	3,377		$	4,253
	Return on average assets			0.79	%		2.01	%		0.55	%		0.55	%		0.78	%
	Return on average shareholders' equity			11.78	%		28.38	%		6.66	%		5.84	%		9.24	%
	Return on average common shareholders' equity			13.63	%		39.05	%		6.66	%		5.97	%		9.27	%
	Yield on earning assets			6.25	%		6.32	%		6.21	%		6.90	%		6.60	%
	Cost of average interest bearing liabilities			1.97	%		2.65	%		3.11	%		3.98	%		3.38	%
	Net interest spread			4.28	%		3.67	%		3.10	%		2.92	%		3.22	%
	Net interest margin(11)			4.44	%		3.81	%		3.57	%		3.59	%		3.74	%
	Efficiency ratio(12)			61.03	%		62.15	%		76.04	%		73.21	%		70.40	%
	Common stock dividend payout ratio(13)			19.70	%		10.68	%		56.92	%		53.39	%		31.47	%
	Loan to deposit ratio			76.74	%		68.02	%		95.84	%		94.31	%		89.96	%
	Core deposits / total deposits(14)			77.56	%		57.00	%		70.03	%		76.18	%		74.29	%
	Net non-core funding dependence ratio(15)			24.62	%		44.92	%		35.11	%		27.74	%		29.81	%
Regulatory and Other Capital Ratios—Consolidated
	Tier 1 leverage ratio			5.86	%		6.86	%		10.07	%		11.68	%		10.61	%
	Tier 1 capital to risk-weighted assets			8.43	%		11.27	%		11.37	%		14.11	%		13.81	%
	Total capital to risk-weighted assets			11.13	%		13.86	%		12.35	%		15.14	%		15.00	%
	Tangible common equity to tangible assets(16)			2.38	%		3.71	%		7.64	%		8.97	%		8.16	%
	Tier 1 common capital to risk-weighted assets(17)			3.38	%		6.36	%		8.72	%		10.91	%		10.66	%
Regulatory Capital Ratios—Bank Only
	Tier 1 leverage ratio			6.93	%		7.67	%		9.38	%		8.42	%		7.94	%
	Tier 1 capital to risk-weighted assets			9.98	%		12.56	%		10.27	%		10.21	%		10.28	%
	Total capital to risk-weighted assets			11.24	%		13.83	%		11.26	%		11.24	%		11.46	%

(1)

Covered loans are loans that are covered by a loss-sharing agreement with the FDIC.

(2)

Covered investment securities are investment securities that are covered by a loss-sharing agreement with the FDIC.

(3)

Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings. Nonperforming loans exclude loans acquired in the Waterloo Bancshares, Strategic Capital and WestBridge transactions that had evidence of credit deterioration since origination and for which it was probable at the date of acquisition that we would not collect all contractually required principal and interest payments. These loans are referred to as purchased credit-impaired, or PCI, loans. PCI loans had a carrying value of $83.1 million as of December 31, 2010 and $81.5 million as of December 31, 2009. Prior to 2009, we did not have any PCI loans. Furthermore, PCI loans, as well as other loans acquired in a business combination, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. Accordingly, our ratios that are computed using nonperforming loans and/or allowance for loan losses may not be comparable to similar ratios of our peers.

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(4)

Nonperforming assets include nonperforming loans, other real estate owned and other repossessed assets. Nonperforming assets exclude covered other real estate owned that is related to the Strategic Capital and WestBridge FDIC-assisted transactions. As discussed in note 3, above, nonperforming loans exclude PCI loans. This ratio may therefore not be comparable to a similar ratio of our peers.

(5)

Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per share common share computation plus the dilutive effect of: (i) restricted stock and stock options using the treasury method; (ii) shares of our common stock issuable upon conversion of our outstanding shares of our Series C Preferred Stock and Series D Preferred Stock; and (iii) shares of our common stock issuable upon conversion of shares of our Series E Preferred Stock and Series F Preferred Stock that may be acquired upon exercise of outstanding warrants held by the holder of our outstanding subordinated notes. In addition, earnings used in the numerator of the computation are increased by: (i) dividends paid on our Series C Preferred Stock and Series D Preferred Stock; and (ii) interest paid on $11.3 million of our outstanding subordinated notes. Prior to July 1, 2013, the warrant to purchase shares of Series E Preferred Stock may only be exercised by the surrender of that portion of an $11.3 million subordinated note equal to the aggregate exercise price (which will be $6.3 million if the warrant is exercised in full); after that date, the warrant may be exercised by surrender of the subordinated note, a cash payment or cashless exercise. The warrant to purchase shares of Series F Preferred Stock may only be exercised by surrender of that portion of a $5.0 million subordinated note equal to the aggregate exercise price (which will be $5.0 million if the warrant is exercised in full). See "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS—Subordinated Notes and Warrants to Acquire Preferred Stock."

(6)

For purposes of computing book value per common share, book value equals total common shareholders' equity.

(7)

Tangible book value and tangible book value per share are non-GAAP financial measures. We calculate tangible book value (also referred to as "tangible common shareholders' equity" or "tangible common equity") as total common shareholders' equity less goodwill and other intangible assets (except mortgage servicing rights). As we calculate it, tangible book value's most directly comparable GAAP financial measure is total common shareholders' equity. We calculate tangible book value per share as tangible book value divided by shares of common stock outstanding. As we calculate it, tangible book value per share's most directly comparable GAAP financial measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(8)

Book value per share—as converted gives effect to: (i) for December 31, 2010, the conversion of all of the issued and outstanding shares of Series C Preferred Stock and Series D Preferred Stock into an aggregate of 3,041,988 shares of our common stock and the conversion of the shares of Series E Preferred Stock and Series F Preferred Stock that could be acquired upon exercise of outstanding warrants held by the holder of our outstanding subordinated notes into an aggregate of 753,560 shares of our common stock; and (ii) for December 31, 2009, the conversion of all of the issued and outstanding shares of Series C Preferred Stock at such time into 2,008,510 shares of our common stock and the conversion of the shares of Series E Preferred Stock that could be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes into an aggregate of 536,170 shares of our common stock. We did not have any convertible preferred stock or warrants to acquire convertible preferred stock outstanding in 2008 or 2007.

(9)

Tangible book value per share—as converted is tangible book value per share (see note 7 above) after giving effect to the same conversion scenarios set forth in note 8 above.

(10)

Core pre-tax, pre-provision earnings is a non-GAAP financial measure. We calculate core pre-tax, pre-provision earnings as net income, adjusted to exclude bargain purchase gains and acquisition and integration expenses recognized in connection with our acquisitions, without regard to the provision for loan losses and income tax expense. As we calculate it, the most directly comparable GAAP financial measure to core pre-tax, pre-provision earnings is income before income taxes. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(11)

Net interest margin is presented on a fully taxable equivalent, or FTE, basis.

(12)

Efficiency ratio represents noninterest expenses, excluding loan loss provision, divided by the sum of net interest income and noninterest income, excluding bargain purchase gains recognized in connection with certain of our acquisitions and realized gains or losses from sales of investment securities.

(13)

Common stock dividend payout ratio represents dividends per share divided by basic earnings per share. See "DIVIDEND POLICY."

(14)

Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $100,000. Effective in the first quarter of 2011, the federal banking agencies changed the classification for certificates of deposit greater than $100,000 but less than or equal to $250,000 from non-core to core deposits in response to the Dodd-Frank Act permanently increasing the deposit insurance limit to $250,000. Based on this new classification, our core deposits as of December 31, 2010 would have represented 86.98% of total deposits.

(15)

Net non-core funding dependence ratio represents the degree to which the Bank is funding longer-term assets with non-core funds. We calculate this ratio as non-core liabilities, less short-term investments, divided by long-term assets.

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(16)

Tangible common equity to tangible assets is a non-GAAP financial measure. For purposes of computing tangible common equity to tangible assets, we calculate tangible common equity as total shareholders' equity less preferred equity, goodwill and other intangible assets (except mortgage servicing rights), and we calculate tangible assets as total assets less goodwill and other intangible assets (except mortgage servicing rights). As we calculate it, the most directly comparable GAAP financial measure is total shareholders' equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(17)

For purposes of computing Tier 1 common capital to total risk-weighted assets, we calculate Tier 1 common capital as Tier 1 capital less preferred stock and trust preferred securities. As we calculate it, most directly comparable GAAP financial measure to Tier 1 common capital is total shareholders' equity. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

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RISK FACTORS

Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should carefully consider the risks described below, together with all other information included in this prospectus, including our historical financial statements and accompanying notes. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects could be materially and adversely affected. In that case, you could experience a partial or complete loss of your investment.

Risks Related to Our Business

Continued or worsening general business and economic conditions and regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.

        Our business and operations are sensitive to general business and economic conditions in the United States, generally, and Illinois and the St. Louis metropolitan area, specifically. If the national, regional and local economies are unable to overcome the muted growth, high unemployment rates and depressed real estate markets resulting from the economic recession that began in 2007 or experience worsening economic conditions, our growth and profitability could be constrained. Weak economic conditions are characterized by, among other indicators, deflation, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines and lower home sales and commercial activity. All of these factors are generally detrimental to our business. Our business is significantly affected by monetary and other regulatory policies of the U.S. federal government, its agencies and government-sponsored entities. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control, are difficult to predict and could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Our strategy of pursuing acquisitions exposes us to financial, execution and operational risks that could have a material adverse effect on our business, financial position, results of operations and growth prospects.

        Since late 2007, we have been pursuing a strategy of leveraging our human and financial capital by acquiring other financial institutions, including FDIC-assisted acquisitions of failed depository institutions, in our target markets. We have completed several acquisitions since late 2008, including Strategic Capital in an FDIC-assisted transaction and the AMCORE branch and asset acquisition, and we may continue pursuing this strategy. There are significant risks associated with an acquisition strategy, however, including the following:

•

We are exposed to potential asset and credit quality risks and unknown or contingent liabilities of the banks or businesses we acquire. If these issues or liabilities exceed our estimates, our earnings and financial condition may be materially and adversely affected.

•

The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity. This integration process is complicated and time consuming and can also be disruptive to the customers and employees of the acquired business and our business. If the integration process is not conducted successfully, we may not realize the anticipated economic benefits of acquisitions within the expected time frame, and we may lose customers or employees of the acquired business. We may also experience greater than anticipated customer losses even if the integration process is successful.

20

•

To finance an acquisition, we may borrow funds or pursue other forms of financing, such as issuing convertible preferred stock, which may have high dividend rights or may be highly dilutive to holders of our common stock, thereby increasing our leverage and diminishing our liquidity, or issuing capital stock, which could dilute the interests of our existing shareholders.

•

We may be unsuccessful in realizing the anticipated benefits from acquisitions. For example, we may not be successful in realizing anticipated cost savings. We also may not be successful in preventing disruptions in service to existing customer relationships of the acquired institution, which could lead to a loss in revenues.

        In addition to the foregoing, we may face additional risks in acquisitions of failed depository institutions in FDIC-assisted transactions, such as the Strategic Capital and WestBridge acquisitions, because FDIC-assisted transactions are typically conducted by the FDIC in a manner that does not allow the time or access normally associated with preparing for the integration of an acquired institution. These risks include, among other things, the loss of customers, strain on management resources related to collection and management of problem loans and problems related to integration of personnel and operating systems. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions, including FDIC-assisted transactions. Our inability to overcome risks associated with acquisitions could have an adverse effect on our ability to successfully implement our acquisition strategy and grow our business and profitability.

We may not be able to continue growing our business, particularly if we cannot make acquisitions, either because of an inability to find suitable acquisition candidates, constrained capital resources or otherwise.

        We have grown our consolidated assets from $382.1 million as of December 31, 2007 to $1.6 billion as of December 31, 2010 and our deposits from $301.4 million as of December 31, 2007 to $1.4 billion as of December 31, 2010. Most of this growth has resulted from several acquisitions that we have completed since late 2008 and, because our central and northern Illinois markets are comprised primarily of mature, rural communities with limited population growth, we anticipate that much of our future growth will be dependent on our ability to successfully implement our acquisition strategy. A risk exists, however, that we will not be able to identify suitable additional candidates for acquisitions. In addition, even if suitable targets are identified, we expect to compete for such businesses with other potential bidders, many of which may have greater financial resources than we have, which may adversely affect our ability to make acquisitions at attractive prices. Furthermore, acquisitions are subject to approvals by bank regulatory authorities, and we cannot predict whether any targeted acquisitions will receive the required regulatory approvals. In this regard, in light of our rapid growth since the end of 2007, our board of directors recently directed our management team to adopt a written growth plan and a capital plan, each of which will have an impact on our acquisition and growth strategy. Among other things, the board of directors has directed that the capital plan require the Bank to achieve a Tier 1 leverage ratio of at least 8.0% by December 31, 2011 and thereafter require the Bank to maintain such heightened Tier 1 leverage ratio. We anticipate that bank regulatory authorities will consider any acquisition proposal in light of our written growth plan and capital plan and will not approve any acquisition that would result in the Bank's Tier 1 leverage ratio falling below 8.0%. In light of the foregoing, our ability to grow successfully will depend to a significant extent on our capital resources. It also will depend, in part, upon our ability to attract deposits, identify favorable loan and investment opportunities, open new branch offices and on whether we can continue to fund growth while maintaining cost controls and asset quality, as well on other factors beyond our control, such as national, regional and local economic conditions and interest rate trends.

21

We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.

        Our success is dependent, to a large degree, upon the continued service and skills of our existing executive management team, particularly Mr. Leon J. Holschbach, our Chief Executive Officer and President, and Mr. Jeffrey G. Ludwig, our Executive Vice President and Chief Financial Officer.

        Our business and growth strategies are built primarily upon our ability to retain employees with experience and business relationships within their respective market areas. The loss of Mr. Holschbach, Mr. Ludwig or any of our other key personnel could have an adverse impact on our business and growth because of their skills, years of industry experience, knowledge of our market areas and the difficulty of finding qualified replacement personnel, particularly in light of the fact that we are headquartered outside of a major metropolitan area. In addition, although we have non-competition agreements with each of our six named executive officers, we do not have any such agreements with any of our other employees. Thus, employees such as our loan officers and wealth management professionals could leave the Company and immediately begin soliciting our customers. The departure of any of our personnel who are not subject to non-competition agreements could have a material adverse impact on our business, results of operations and growth prospects.

Our business concentration in Illinois imposes risks and may magnify the adverse effects and consequences of any regional or local economic downturn or adverse weather affecting Illinois.

        We conduct our operations almost exclusively in Illinois and the adjacent St. Louis metropolitan area. Substantially all of the real estate loans in our loan portfolio are secured by properties located in Illinois and the St. Louis metropolitan area. Likewise, substantially all of the real estate loans in our loan portfolio are made to borrowers who live and conduct business in Illinois and the St. Louis metropolitan area. This geographic concentration imposes risks from lack of diversification. Our financial condition and results of operations are highly dependent on the economic conditions of Illinois and the St. Louis metropolitan area, where adverse economic developments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects Illinois and the St. Louis metropolitan area or existing or prospective property or borrowers in such areas may affect us and our profitability more significantly and more adversely than our competitors that are less geographically concentrated.

        Furthermore, we conduct a substantial portion of our business in central and northern Illinois. Central and northern Illinois are primarily agricultural areas and therefore their economies can be greatly affected by severe weather conditions, including droughts, storms, tornadoes and flooding. Unfavorable weather conditions may decrease agricultural productivity or could result in damage to our branch offices, the property of our customers or property securing our loans, which could have a material adverse impact on our business, results of operations and growth prospects.

We must effectively manage our credit risk.

        There are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt and risks resulting from changes in economic and market conditions. We cannot assure you that our credit risk approval and monitoring procedures will reduce these credit risks, and they cannot be expected to completely eliminate our credit risks. If the overall economic climate in the United States, generally, or our market areas, specifically, fails to improve, or even if it does improve, our borrowers may experience difficulties in repaying their loans, and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for loan losses, which would cause our net income and return on equity to decrease.

22

A significant portion of our loan portfolio is comprised of residential and commercial real estate loans, which involve risks specific to real estate values and the real estate and mortgage markets in general, all of which have been experiencing significant weaknesses during the past several years.

        At December 31, 2010, approximately 77% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, additional adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that would adversely affect profitability. Adverse changes in the economy affecting real estate values and liquidity in our primary market area could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses would have a material adverse impact on our business, results of operations and growth prospects.

Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.

        We establish our allowance for loan losses and maintain it at a level considered adequate by management to absorb probable loan losses based on an analysis of our portfolio and market environment. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is based upon relevant information available to us. The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified. Additions to the allowance for loan losses, which are charged to earnings through the provision for loan losses, are determined based on a variety of factors, including an analysis of the loan portfolio, historical loss experience and an evaluation of current economic conditions in our market areas. The actual amount of loan losses is affected by changes in economic, operating and other conditions within our markets, which may be beyond our control, and such losses may exceed current estimates.

        As of December 31, 2010, our allowance for loan losses as a percentage of total loans was 2.72% and as a percentage of total nonperforming loans was 108.4%. Although management believes that the allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we may be required to take additional provisions for loan losses in the future to further supplement the allowance for loan losses, either due to management's decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our allowance for loan losses and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to adjust our determination of the value for these items. These adjustments may adversely affect our business, financial condition and results of operations.

We may be exposed to unrecoverable losses on the loans acquired.

        Although we have generally acquired the loan assets of our recent acquisitions at substantial discounts to their unpaid principal balances and, in the case of our two FDIC-assisted acquisitions, have entered into loss-sharing agreements which provide that the FDIC will bear at least 80% of losses on such assets, we are not protected from all losses that we may incur on acquired loans. For example, with respect to loans covered by the FDIC loss-sharing agreements, the FDIC has the right to refuse or delay payment for such loan losses if the loss-sharing agreements are not managed in accordance with

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their terms. Additionally, the loss-sharing agreements have limited terms; therefore, any losses that we experience after the terms of the loss-sharing agreements have ended will not be recoverable from the FDIC, which would negatively impact our net income. Furthermore, the acquisition of assets and liabilities of failed depository institutions in FDIC-assisted transactions involves risks similar to those faced in unassisted acquisitions, even though the FDIC might provide assistance to mitigate certain risks (e.g., by entering into loss-sharing arrangements). However, because such acquisitions are structured in a manner that does not allow the time normally associated with evaluating and preparing for the integration of an acquired institution, we face the additional risk that the anticipated benefits of such an acquisition may not be realized fully or at all, or within the time period expected.

The accounting for loans acquired in connection with our acquisitions is based on numerous subjective determinations that may prove to be inaccurate and have a negative impact on our results of operations.

        Loans acquired in connection with our acquisitions have been recorded at estimated fair value on their acquisition date without a carryover of the related allowance for loan losses. In general, the determination of estimated fair value of acquired loans requires management to make subjective determinations regarding discount rate, estimates of losses on defaults, market conditions and other factors that are highly subjective in nature. A risk exists that our estimate of the fair value of acquired loans will prove to be inaccurate and that we ultimately will not recover the amount at which we recorded such loans on our balance sheet, which would require us to recognize losses.

        Loans acquired in connection with acquisitions that have evidence of credit deterioration since origination and for which it is probable at the date of acquisition that we will not collect all contractually required principal and interest payments are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (previously known as AICPA Statement of Position 03-3, Accounting for Certain Loans Acquired in a Transfer), or ASC 310-30. These credit-impaired loans, like non-credit-impaired loans acquired in connection with our acquisitions, have been recorded at estimated fair value on their acquisition date, based on subjective determinations regarding risk ratings, expected future cash flows and fair value of the underlying collateral, without a carryover of the related allowance for loan losses. We evaluate these loans quarterly to assess expected cash flows. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income. Because the accounting for these loans is based on subjective measures that can change frequently, we may experience fluctuations in our net interest income and provisions for loan losses attributable to these loans. These fluctuations could negatively impact our results of operations.

Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans, and our small to midsized business target market may have fewer financial resources to weather the current downturn in the economy.

        At December 31, 2010, we had $860.4 million of commercial loans, consisting of $562.8 million of commercial real estate loans, $199.2 million of operating commercial loans for which real estate is not the primary source of collateral and $98.4 million of construction and land development loans. Commercial loans represented 82.2% of our total loan portfolio at December 31, 2010. Commercial loans are often larger and involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the real estate market or the general economy. Accordingly, the prevailing downturn in the real estate market and the challenging economy generally has heightened our risk related to

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commercial loans, particularly commercial real estate loans. Unlike residential mortgage loans, which generally are made on the basis of the borrowers' ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers' ability to make repayment from the cash flow of the commercial venture. Our operating commercial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. Most often, this collateral consists of accounts receivable, inventory and equipment. Inventory and equipment may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. If the cash flow from business operations is reduced, the borrower's ability to repay the loan may be impaired. Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on our financial condition and results of operations.

        Furthermore, we target our business development and marketing strategy primarily to serve the banking and financial services needs of businesses with $500,000 to $50 million in annual revenue. These small to midsized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If these businesses are unable to generate sufficient revenue, our business, financial condition and results of operations may be adversely affected.

Real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our other real estate owned fair value appraisals.

        As of December 31, 2010, we had $13.9 million of other real estate owned, of which 78.4% was covered by a loss-sharing agreement with the FDIC. Our other real estate owned portfolio consists of properties that we obtained through foreclosure or through an in-substance foreclosure in satisfaction of loans. Properties in our other real estate owned portfolio are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the "fair value," which represents the estimated sales price of the properties on the date acquired less estimated selling costs. Generally, in determining "fair value," an orderly disposition of the property is assumed, except where a different disposition strategy is expected. Significant judgment is required in estimating the fair value of other real estate owned property, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility, as we have experienced during the past several years.

        In response to market conditions and other economic factors, we may utilize alternative sale strategies other than orderly disposition as part of our other real estate owned disposition strategy, such as immediate liquidation sales. In this event, as a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from such sales transactions could differ significantly from appraisals, comparable sales and other estimates used to determine the fair value of our other real estate owned properties.

Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.

        As of December 31, 2010, our nonperforming loans (which consist of nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings) totaled $26.3 million, or 2.51% of our loan portfolio, and our nonperforming assets (which include nonperforming loans plus other real estate owned that is not covered by a loss-sharing agreement with the FDIC) totaled $29.3 million, or 1.79% of total assets. In addition, we had $9.9 million in accruing loans that were 31-89 days delinquent as of December 31, 2010. Our ratio of nonperforming loans to total loans has increased from 1.85% and 1.23% at December 31, 2009 and 2008, respectively, and our

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ratio of nonperforming assets to total assets has similarly increased from 1.16% and 1.24% at December 31, 2009 and 2008, respectively.

        Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio. When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and other real estate owned also increase our risk profile and the capital our regulators believe is appropriate in light of such risks. The resolution of nonperforming assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities. If we continue experiencing increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity.

Real estate construction loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects.

        Real estate construction loans comprised approximately 9.4% of our total loan portfolio as of December 31, 2010, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project. If we are forced to foreclose on a project prior to or at completion due to a default, we may not be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.

Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.

        Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of checking and savings, negotiable order of withdrawal and money market deposit account balances and other forms of customer deposits. Such account and deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income and net income.

        Other primary sources of funds consist of cash from operations, investment maturities and sales, and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is provided by brokered deposits, repurchase agreements and the ability to borrow from the Federal Reserve Bank and the Federal Home Loan Bank. We also may borrow from third-party lenders

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from time to time. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.

        Regional and community banks generally have less access to the capital markets than do national and super-regional banks because of their smaller size and limited analyst coverage. Since mid-2007, the financial services industry and the credit markets generally have been materially and adversely affected by significant declines in asset values and by a lack of liquidity. The liquidity issues have been particularly acute for regional and community banks, as many of the larger financial institutions have significantly curtailed their lending to regional and community banks to reduce their exposure to the risks of other banks. In addition, many of the larger correspondent lenders have reduced or even eliminated federal funds lines for their correspondent customers.

        As a result, we rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, pay dividends to our shareholders or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.

        The Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. We face significant capital and other regulatory requirements as a financial institution. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

        Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. When interest rates rise, the rate of interest we pay on our liabilities rises more quickly than the rate of interest that we receive on our interest-bearing assets, which may cause our profits to decrease. The impact on earnings is more adverse when the slope of the yield curve flattens, that is, when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates.

        Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default. At the same time, the marketability of the underlying property may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on the loans underlying our

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participation interests as borrowers refinance their mortgages at lower rates. At December 31, 2010, total gross loans were 72% of our total earning assets and exhibited a positive 5.8% sensitivity to rising interest rates in a 100 basis point parallel shock.

        Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.

        Rising interest rates will result in a decline in value of our fixed-rate debt securities. The unrealized losses resulting from holding these securities would be recognized in other comprehensive income and reduce total shareholders' equity. Unrealized losses do not negatively impact our regulatory capital ratios; however, tangible common equity and the associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios.

        If short-term interest rates remain at their historically low levels for a prolonged period, and assuming longer term interest rates fall further, we could experience net interest margin compression as our interest earning assets would continue to reprice downward while our interest bearing liability rates could fail to decline in tandem. This would have a material adverse effect on our net interest income and our results of operations.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

        As of December 31, 2010, the fair value of our securities portfolio was approximately $391.7 million. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities, defaults by the issuer or individual mortgagors with respect to the underlying securities, and continued instability in the credit markets. Any of the foregoing factors could cause an other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations.

Downgrades in the credit rating of one or more insurers that provide credit enhancement for our state and municipal securities portfolio may have an adverse impact on the market for and valuation of these types of securities.

        We invest in tax-exempt state and local municipal securities, some of which are insured by monoline insurers. As of December 31, 2010, we had $116.6 million of municipal securities, which represented 29.8% of our total securities portfolio. Since the economic crisis unfolded in 2008, several of these insurers have come under scrutiny by rating agencies. Even though management generally

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purchases municipal securities on the overall credit strength of the issuer, the reduction in the credit rating of an insurer may negatively impact the market for and valuation of our investment securities. Such downgrade could adversely affect our liquidity, financial condition and results of operations.

The obligations associated with being a public company will require significant resources and management attention, which may divert from our business operations.

        As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting and other expenses that we did not previously incur.

        Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management's attention from implementing our growth strategy, which could prevent us from successfully implementing our strategic initiatives and improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses.

        Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and will require a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. We may not be able to remediate any future deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price.

We face strong competition from financial services companies and other companies that offer banking and wealth management services, which could harm our business.

        We conduct our operations almost exclusively in Illinois and the adjacent St. Louis metropolitan area. In addition, we currently offer trust and wealth management services, which accounts for a significant portion of our noninterest income. Many of our competitors offer the same, or a wider variety of, banking and wealth management services within our market areas. These competitors include national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in our market areas. Increased competition in our markets may result in reduced loans, deposits and commissions and brokers' fees, as well as reduced net interest margin and profitability. Ultimately, we may not be able to compete successfully against current and future competitors. If we are unable to attract and retain banking and wealth management customers, we may be unable to continue to grow our loan and deposit portfolios and our commissions and brokers' fees, and our business, financial condition and results of operations may be adversely affected.

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Our wealth management operations may be negatively impacted by changes in economic and market conditions or by an inability to retain or attract wealth management professionals.

        Our wealth management operations may be negatively impacted by changes in general economic conditions and the conditions in the financial and securities markets, including the values of assets held under management, as well as by an inability to retain or attract wealth management professionals. Our management contracts generally provide for fees payable for wealth management services based on the market value of assets under administration. Because most of our contracts provide for a fee based on market values of securities, fluctuations in securities prices will have an adverse effect on our results of operations from this business. If the financial and securities markets were to experience a significant decline, such as what occurred during the second half of 2008 and the first half of 2009, the values of the assets that we manage generally would decline and result in a corresponding decline in the performance of our customers' portfolios. Market declines and reductions in the value of our customers' wealth management accounts could result in us losing wealth management customers, including those who are also banking customers. Furthermore, wealth management is a highly relationship-driven business. In general, wealth management customers have a higher likelihood of moving their accounts if their wealth management professional moves to another firm and there historically has been a fairly high level of mobility among professionals in the wealth management business. Accordingly, our wealth management operations also may be negatively impacted if we are unable to retain our current wealth management professionals, none of which currently are subject to long-term employment agreements, or attract new wealth management professionals with established customer bases.

We are subject to claims and litigation pertaining to our fiduciary responsibilities.

        Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our customers and others. From time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities. If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability and/or our reputation could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have a harmful effect on our business and, in turn, on our financial condition and results of operations.

We have a continuing need for technological change and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.

        The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area. In this regard, we are in the process of implementing our Future Bank project, which involves a significant amount of investment in technology enhancements, including implementing a new core processing system. We may experience operational challenges as we implement these new technology enhancements, which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.

        Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior products to those that we will be able to offer, which would put us at a competitive disadvantage. Accordingly, a risk exists that

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we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

        The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, a risk exists that these security measures will be unsuccessful. In addition, advances in computer capabilities could result in a compromise or breach of the systems we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.

        Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

        We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.

        We depend to a significant extent on a number of relationships with third-party service providers. Specifically, we receive core systems processing, essential web hosting and other Internet systems, deposit processing and other processing services from third-party service providers. If these third-party service providers experience difficulties or terminate their services and we are unable to replace them with other service providers, our operations could be interrupted. As previously discussed, as part of our Future Bank project, we are transitioning to a new provider for our core processing system. Such transition is a time-consuming and complex process, and a risk exists that we may experience challenges during and following this conversion. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace them, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.

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Risks Related to the Business Environment and Our Industry

Difficult market conditions have affected the financial industry and may adversely affect us in the future.

        Dramatic declines in the U.S. housing market over the past few years, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities as well as major commercial banks and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other derivative and cash securities, in turn, have caused many financial institutions to seek additional capital from private and government entities, to merge with larger and stronger financial institutions and, in some cases, to fail.

        Reflecting concern about the stability of the financial markets in general and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, erosion of consumer confidence, increased market volatility and widespread reduction of business activity in general. The resulting economic pressure on consumers and erosion of confidence in the financial markets has already adversely affected our industry and may adversely affect our business, financial condition and results of operations. We cannot predict whether the difficult conditions in the financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and other financial institutions. In particular, we may face the following risks in connection with these events:

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Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select, manage and underwrite the loans become less predictive of future behaviors.

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The models used to estimate losses inherent in the credit exposure require difficult, subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of the borrowers to repay their loans, which may no longer be capable of accurate estimation and which may, in turn, impact the reliability of the models.

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Our ability to borrow from other financial institutions or to engage in sales of mortgage loans to third parties on favorable terms, or at all, could be adversely affected by further disruptions in the capital markets or other events, including deteriorating investor expectations.

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Competitive dynamics in the industry could change as a result of consolidation of financial services companies in connection with current market conditions.

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We expect to face increased regulation of our industry. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.

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We expect to face increased capital requirements, both at the Company level and at the Bank level. In this regard, the Collins Amendment to the Dodd-Frank Act requires the federal banking agencies to establish minimum leverage and risk-based capital requirements that will apply to both insured banks and their holding companies. Furthermore, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, recently announced an agreement to a strengthened set of capital requirements for internationally active banking organizations, known as Basel III. We expect U.S. banking authorities to follow the lead of Basel III and require all U.S. banking organizations to maintain significantly higher levels of capital, which may limit our ability to pursue business opportunities and adversely affect our results of operations and growth prospects.

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•

We may be required to pay significantly higher FDIC premiums because market developments have significantly depleted the Deposit Insurance Fund, or DIF, and reduced the ratio of reserves to insured deposits. Furthermore, the recently enacted Dodd-Frank Act requires the FDIC to increase the DIF's reserves against future losses, which will necessitate increased assessments on depository institutions. Although the precise impact on us will not be clear until implementing rules are issued, any future increases in assessments applicable to us and the Bank will decrease our earnings and could have a material adverse effect on the value of, or market for, our common stock.

        If current levels of market disruption and volatility continue or worsen, we could experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.

        We and our subsidiaries are subject to extensive regulation by multiple regulatory bodies. These regulations may affect the manner and terms of delivery of our services. If we do not comply with governmental regulations, we may be subject to fines, penalties, lawsuits or material restrictions on our businesses in the jurisdiction where the violation occurred, which may adversely affect our business operations. Changes in these regulations can significantly affect the services that we provide as well as our costs of compliance with such regulations. In addition, adverse publicity and damage to our reputation arising from the failure or perceived failure to comply with legal, regulatory or contractual requirements could affect our ability to attract and retain customers.

        Current economic conditions, particularly in the financial markets, have resulted in government regulatory agencies and political bodies placing increased focus and scrutiny on the financial services industry. The U.S. government has intervened on an unprecedented scale by temporarily enhancing the liquidity support available to financial institutions, establishing a commercial paper funding facility, temporarily guaranteeing money market funds and certain types of debt issuances and increasing insurance on bank deposits.

        These programs have subjected financial institutions to additional restrictions, oversight and costs. In addition, new proposals for legislation continue to be introduced in the U.S. Congress that could further substantially increase regulation of the financial services industry, impose restrictions on the operations and general ability of firms within the industry to conduct business consistent with historical practices, including in the areas of compensation, interest rates, financial product offerings and disclosures, and have an effect on bankruptcy proceedings with respect to consumer residential real estate mortgages, among other things. Federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied.

        In recent years, regulatory oversight and enforcement have increased substantially, imposing additional costs and increasing the potential risks associated with our operations. If these regulatory trends continue, they could adversely affect our business and, in turn, our consolidated results of operations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

        In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank deposits. These instruments are used in varying

33

combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

        The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

Legislative and regulatory reforms applicable to the financial services industry may, if enacted or adopted, have a significant impact on our business, financial condition and results of operations.

        On July 21, 2010, the Dodd-Frank Act was signed into law, which significantly changes the regulation of financial institutions and the financial services industry. The Dodd-Frank Act, together with the regulations to be developed thereunder, includes provisions affecting large and small financial institutions alike, including several provisions that will affect how community banks, thrifts and small bank and thrift holding companies will be regulated in the future.

        The Dodd-Frank Act, among other things, imposes new capital requirements on bank holding companies; changes the base for FDIC insurance assessments to a bank's average consolidated total assets minus average tangible equity, rather than upon its deposit base, and permanently raises the current standard deposit insurance limit to $250,000; and expands the FDIC's authority to raise insurance premiums. The legislation also calls for the FDIC to raise the ratio of reserves to deposits from 1.15% to 1.35% for deposit insurance purposes by September 30, 2020 and to "offset the effect" of increased assessments on insured depository institutions with assets of less than $10.0 billion. The Dodd-Frank Act also limits interchange fees payable on debit card transactions, establishes the Bureau of Consumer Financial Protection as an independent entity within the Federal Reserve, which will have broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards, and contains provisions on mortgage-related matters, such as steering incentives, determinations as to a borrower's ability to repay and prepayment penalties. The Dodd-Frank Act also includes provisions that affect corporate governance and executive compensation at all publicly traded companies and allows financial institutions to pay interest on business checking accounts.

        The Collins Amendment to the Dodd-Frank Act, among other things, eliminates certain trust preferred securities from Tier 1 capital, but certain trust preferred securities issued prior to May 19, 2010 by bank holding companies with total consolidated assets of $15 billion or less will continue to be includible in Tier 1 capital. This provision also requires the federal banking agencies to establish minimum leverage and risk-based capital requirements that will apply to both insured banks and their holding companies. Regulations implementing the Collins Amendment must be issued within 18 months of July 21, 2010.

        These provisions, or any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations. Our management is actively reviewing the provisions of the Dodd-Frank Act, many of which are to be phased-in over the next several months and years, and assessing its probable impact on our operations. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and us in particular, is uncertain at this time.

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        The U.S. Congress has also recently adopted additional consumer protection laws such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, and the Federal Reserve has adopted numerous new regulations addressing banks' credit card, overdraft and mortgage lending practices. Additional consumer protection legislation and regulatory activity is anticipated in the near future.

        The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, adopted Basel III in September 2010, which is a strengthened set of capital requirements for banking organizations in the United States and around the world. Basel III is currently supported by the U.S. federal banking agencies. As agreed to, Basel III is intended to be fully-phased in on a global basis on January 1, 2019. However, the ultimate timing and scope of any U.S. implementation of Basel III remains uncertain. As agreed to, Basel III would require, among other things: (i) an increase in the minimum required common equity to 7% of total assets; (ii) an increase in the minimum required amount of Tier 1 capital from the current level of 4% of total assets to 8.5% of total assets; (iii) an increase in the minimum required amount of total capital, from the current level of 8% to 10.5%. Each of these increased requirements includes 2.5% attributable to a capital conservation buffer to position banking organizations to absorb losses during periods of financial and economic stress. Basel III also calls for certain items that are currently included in regulatory capital to be deducted from common equity and Tier 1 capital. The Basel III agreement calls for national jurisdictions to implement the new requirements beginning January 1, 2013. At that time, the U.S. federal banking agencies will be expected to have implemented appropriate changes to incorporate the Basel III concepts into U.S. capital adequacy standards. Basel III changes, as implemented in the United States, will likely result in generally higher regulatory capital standards for all banking organizations.

        Such proposals and legislation, if finally adopted, would change banking laws, our operating environment and the operating environment of our subsidiaries in substantial and unpredictable ways. We cannot determine whether such proposals and legislation will be adopted, or the ultimate effect that such proposals and legislation, if enacted, or regulations issued to implement the same, would have upon our business, financial condition or results of operations.

Risks Related to this Offering and an Investment in Our Common Stock

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.

        Prior to this offering there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The initial public offering price for our common stock will be determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration.

The price of our common stock could be volatile following this offering.

        The market price of our common stock following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

•

actual or anticipated variations in our quarterly results of operations;

35

•

recommendations by securities analysts;

•

operating and stock price performance of other companies that investors deem comparable to us;

•

news reports relating to trends, concerns and other issues in the financial services industry, including the failures of other financial institutions in the current economic downturn;

•

perceptions in the marketplace regarding us and/or our competitors;

•

new technology used, or services offered, by competitors; and

•

changes in government regulations.

        In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

An investment in our common stock is not an insured deposit.

        An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.

If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.

        The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will cover us and our common stock or whether they will publish research and reports on us. If one or more equity analysts do cover us and our common stock and publish research reports about us, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

        If any of the analysts who elect to cover us downgrades our stock, our stock price would likely decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

Our dividend policy may change.

        Although we have historically paid dividends to our shareholders, we have no obligation to continue doing so and may change our dividend policy at any time without notice to our shareholders. Holders of our common stock are only entitled to receive such cash dividends as our board of directors may declare out of funds legally available for such payments. Furthermore, consistent with our strategic plans, growth initiatives, capital availability, projected liquidity needs, dividend obligations on our outstanding Series C Preferred Stock and Series D Preferred Stock (and on shares of our Series E Preferred Stock and Series F Preferred Stock that may be outstanding in the future) and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends paid to our common shareholders.

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Shares of certain shareholders may be sold into the public market in the near future. This could cause the market price of our common stock to drop significantly.

        In connection with this offering, we, our directors who have beneficial ownership over our shares, our executive officers and certain of our shareholders have each agreed to enter into lock-up agreements that restrict the sale of our common stock for a period of 180 days from the date of this prospectus, subject to an extension in certain circumstances. The underwriters, in their discretion, may release any of the shares of our common stock subject to these lock-up agreements at any time without notice. In addition, after this offering, approximately      shares of our common stock that are currently issued and outstanding will not be subject to lock-up. The resale of such shares could cause the market price of our stock to drop significantly, and concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be.

        In addition, the holder of our $16.3 million of subordinated notes has demand (beginning 180 days after the registration statement of which this prospectus is a part becomes effective) and piggyback registration rights pursuant to a registration rights agreement with respect to the shares of our common stock that this holder owns, including any securities convertible into or exercisable or exchangeable for shares of our common stock. As of the date of this prospectus, this holder owned 118,790 shares of our common stock, 370 shares of our Series C Preferred Stock (which are convertible into 314,893 shares of our common stock), a warrant to acquire 630 shares of our Series E Preferred Stock (which are convertible into 536,170 shares of our common stock) and a warrant to acquire 500 shares of our Series F Preferred Stock (which are convertible into 217,391 shares of our common stock). Any shares registered pursuant to the registration rights agreement would be freely tradable in the public market following customary lock-up periods. See "SHARES ELIGIBLE FOR FUTURE SALE." In addition, immediately following this offering, we intend to file a registration statement on Form S-8 registering under the Securities Act the shares of common stock reserved for issuance in respect of incentive awards issued under our equity incentive plan. If a large number of shares are sold in the public market, the sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital.

Our management will have broad discretion as to the use of proceeds from this offering, and we may not use the proceeds effectively.

        We have not designated the amount of net proceeds we will use for any particular purpose. Accordingly, our management will have broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated at the time of this offering. Our shareholders may not agree with the manner in which our management chooses to allocate and invest the net proceeds. We may not be successful in using the net proceeds from this offering to increase our profitability or market value and we cannot predict whether the proceeds will be invested to yield a favorable return.

You will incur immediate dilution as a result of this offering.

        If you purchase common stock in this offering, you will pay more for your shares than our existing net tangible book value per share. As a result, you will incur immediate dilution of $    per share, representing the difference between the initial public offering price of $    per share (the mid-point of the range set forth on the cover page of this prospectus) and our adjusted net tangible book value per share after giving effect to this offering. This represents     % dilution from the initial public offering price.

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Future equity issuances or the conversion of outstanding preferred stock or preferred stock that may be acquired upon exercise of our outstanding warrants could result in dilution, which could cause our common stock price to decline.

        We are generally not restricted from issuing additional shares of our common stock up to the 40 million shares authorized in our articles of incorporation. We may issue additional shares of our common stock in the future pursuant to current or future employee stock option plans, upon conversions of preferred stock or debt, upon exercise of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

        We have outstanding 2,360 shares of our Series C Preferred Stock, which are convertible at the option of the holder into an aggregate 2,008,510 shares of our common stock at a price of $11.75 per share, and 2,377 shares of our Series D Preferred Stock, which are convertible at the option of the holder into an aggregate 1,033,478 shares of our common stock at a price of $23.00 per share. Furthermore, the holder of our outstanding $16.3 million of subordinated notes has a warrant to acquire 630 shares of our Series E Preferred Stock, which are convertible into an aggregate 536,170 shares of our common stock, and a warrant to acquire 500 shares of our Series F Preferred Stock, which are convertible into an aggregate 217,391 shares of our common stock. The conversion price of our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock will be reduced if the initial offering price of common stock in this offering, or the offering price of common stock in any subsequent offering by us, is less than the applicable conversion price of the respective series. Upon the conversion of our shares of our Series C Preferred Stock and Series D Preferred Stock (and upon conversion of shares of our Series E Preferred Stock and Series F Preferred Stock that may be outstanding in the future), the ownership interest of the holders of our common stock at such time will be diluted. Also, it is possible that the conversion price will be less than our net tangible book value, which would result in the holders of our common stock experiencing dilution in the net tangible book value of their shares.

The holders of our debt obligations and the shares of our Series C Preferred Stock and Series D Preferred Stock (and shares of our Series E Preferred Stock and Series F Preferred Stock that may be outstanding in the future) will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends.

        In any liquidation, dissolution or winding up of the Company, our common stock would rank below all claims of debt holders against us and claims of all of our outstanding shares of preferred stock. As of the date of this prospectus, our outstanding shares of Series C Preferred Stock and Series D Preferred Stock had a liquidation preference of approximately $47.4 million. In addition, we had outstanding $16.3 million of subordinated notes held by a significant shareholder and $10.3 million of junior subordinated debentures issued to a statutory trust that, in turn, issued $10.0 million of trust preferred securities. Furthermore, the holder of our subordinated notes has a warrant to acquire 630 shares of Series E Preferred Stock with an aggregate liquidation preference of $6.3 million and a warrant to acquire 500 shares of Series F Preferred Stock with an aggregate liquidation preference of $5.0 million.

        As a result, holders of our common stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the Company until after all of our obligations to our debt holders have been satisfied and holders of trust preferred securities and senior equity securities, including our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, have received any payment or distribution due to them. In addition, we are required to pay interest on our subordinated notes and dividends on our trust

38

preferred securities and preferred stock before we pay any dividends on our common stock. Furthermore, our board of directors may also, in its sole discretion, designate and issue one or more additional series of preferred stock from the authorized and unissued preferred stock, which may have preferences with respect to common stock in dissolution, dividends, liquidation or otherwise.

Certain provisions of the loss-sharing agreements the Bank entered into with the FDIC in connection with the Strategic Capital and WestBridge acquisitions may have anti-takeover effects and could limit our ability to engage in certain strategic transactions that our board of directors believes would be in the best interests of shareholders.

        The FDIC's agreement to bear qualifying losses on loans (and, in the case of the Strategic Capital transaction, investment securities) that we acquired from Strategic Capital and WestBridge is a significant advantage for us and a feature of those acquisitions without which we likely would not have entered into such transactions. The agreements with the FDIC require that we receive prior FDIC consent, which may be withheld by the FDIC in its sole discretion, prior to us or our shareholders engaging in certain transactions. If any such transaction is completed without prior FDIC consent, the FDIC would have the right to discontinue the loss-sharing arrangements.

        Among other things, prior FDIC consent is required for: (i) a merger or consolidation of the Company or the Bank with or into another company if our shareholders will own less than 66.66% of the combined company; (ii) the sale of all or substantially all of the assets of the Bank; and (iii) a sale of shares by a shareholder, or a group of related shareholders, that will effect a change in control of the Company, as determined by the FDIC with reference to the standards set forth in the Change in Bank Control Act of 1978, as amended, or the CBCA (generally, the acquisition of between 10% and 25% of our voting securities where the presumption of control is not rebutted, or the acquisition by any person, acting directly or indirectly or through or in concert with one or more persons, of more than 25% of our voting securities). Such a sale by shareholders may occur beyond our control. If we or any shareholder desired to enter into any such transaction, a risk exists that the FDIC would not grant its consent in a timely manner, without conditions, or at all. If one of these transactions were to occur without prior FDIC consent and the FDIC withdrew its loss-share protection, there could be a material adverse effect on our financial condition, results of operations and cash flows.

Provisions in our charter documents and Illinois law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.

        Provisions of our charter documents and the Illinois Business Corporation Act of 1983, or the IBCA, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, with certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be "acting in concert" from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve. Accordingly, prospective investors need to be aware of and comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Moreover, the combination of these provisions effectively inhibits certain mergers or other business combinations, which, in turn, could adversely affect the market price of our common stock.

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USE OF PROCEEDS

        We estimate that the net proceeds to us from this offering of shares, after deducting estimated underwriting discounts and commissions and offering expenses, will be approximately $     million, or approximately $     million if the underwriters' option is exercised in full, based on an assumed initial offering price of $    per share, which is the mid-point of the estimated public offering price range set forth on the cover page of this prospectus. Each $1.00 increase or decrease in the assumed initial public offering price of $    per share would increase or decrease the net proceeds to us from this offering by approximately $     million, or approximately $     million if the underwriters' option is exercised in full.

        We have not designated the amount of net proceeds we will use for any particular purpose and we intend to use the net proceeds to support our long-term growth by enhancing our capital ratios to permit future strategic acquisitions and growth initiatives and for general working capital and other corporate purposes. We have no present agreement or plan concerning any specific acquisition or similar transaction. Our management will retain broad discretion to allocate the net proceeds of this offering. The precise amounts and timing of our use of the proceeds will depend upon market conditions, among other factors.

DIVIDEND POLICY

Dividends

        It has been our policy to pay a dividend to holders of our common stock and we are obligated to pay certain dividends to holders of our preferred stock as described below. Dividends historically have been declared and paid in the month following the end of each calendar quarter. Our dividend policy and practice may change in the future, however, and our board of directors may change or eliminate the payment of future dividends at its discretion, without notice to our shareholders. Any future determination to pay dividends to holders of our common stock will be dependent upon our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions, including the restrictions discussed below, and any other factors that our board of directors may deem relevant.

        The following table shows recent quarterly dividends that have been paid on our common stock and preferred stock with respect to the periods indicated. The per share amounts set forth in the following table have been adjusted to give pro forma effect to our reincorporation transaction, which occurred on December 31, 2010, including the ten-for-one common share exchange that occurred as

40

part of the reincorporation transaction. Accordingly, the per share amounts are presented to the nearest tenth of a cent.

	Common Stock				Preferred Stock
Quarterly Period	Amount Per Share		Total Cash Dividend		Total Cash Dividend
First Quarter 2008	$	0.074	$	298,306	$	—
Second Quarter 2008		0.074		298,341		—
Third Quarter 2008		0.074		298,337		—
Fourth Quarter 2008		0.074		305,790		—
First Quarter 2009	$	0.074	$	305,860	$	33,932
Second Quarter 2009		0.074		311,059		138,815
Third Quarter 2009		0.074		311,110		138,815
Fourth Quarter 2009		0.074		412,566		1,144,050
Fourth Quarter 2009 Special Dividend		0.030		126,183		—
First Quarter 2010	$	0.098	$	413,032	$	—
Second Quarter 2010		0.098		412,833		1,455,708
Third Quarter 2010		0.098		412,757		—
Fourth Quarter 2010		0.098		408,075		2,123,460
First Quarter 2011	$	0.098	$	408,075	$	—

Dividend Restrictions

        Under the terms of the Series C Preferred Stock and Series D Preferred Stock that we issued in private placements to selected accredited investors in May 2009 and March 2010, respectively, we are obligated to pay a 9% per annum non-cumulative dividend on the stated liquidation preference of each share of this preferred stock. As long as shares of the Series C Preferred Stock and Series D Preferred Stock remain outstanding, we may not pay dividends on our common stock unless all declared and unpaid dividends on the preferred stock have been paid in full. The aggregate annual dividend payment on our Series C Preferred Stock and Series D Preferred Stock is $4.3 million. If the holder of the outstanding warrants to acquire 630 shares of our Series E Preferred Stock and 500 shares of our Series F Preferred Stock were to exercise these warrants in full, as described under "DESCRIPTION OF OUR CAPITAL STOCK," the aggregate annual dividend payment on our outstanding preferred stock would increase to $5.3 million.

        Under the terms of the credit agreement that we have entered into with the holder of our subordinated notes, we are not permitted to pay any dividends on our preferred or common stock if we are in default on any payments required to be made on the subordinated notes. Furthermore, we are not permitted to pay any extraordinary dividend without the prior consent of the holder of our subordinated notes.

        As a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. See "REGULATION AND SUPERVISION—The Company—Dividend Payments." In addition, because we are a holding company, we are dependent upon the payment of dividends by the Bank to us as our principal source of funds to pay dividends in the future, if any, and to make other payments. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. See "REGULATION AND SUPERVISION—The Bank—Dividend Payments."

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REINCORPORATION TRANSACTION

        In October 2010, Midland States Bancorp, Inc., a Delaware corporation, formed New Midland States, Inc., an Illinois corporation, as a wholly owned subsidiary. On December 31, 2010, Midland States Bancorp, Inc. merged with and into New Midland States, Inc., with New Midland States, Inc. continuing as the surviving corporation. New Midland States, Inc., the registrant, changed its name to Midland States Bancorp, Inc. immediately following the merger. In connection with the merger: (i) the registrant increased the number of authorized shares of preferred stock from 150,000 to 4,000,000; (ii) each outstanding share of Series C Preferred Stock and Series D Preferred Stock of the predecessor Delaware corporation was exchanged on a one-for-one basis into shares of the registrant's Series C Preferred Stock and Series D Preferred Stock, which have identical terms as the predecessor Delaware corporation's preferred stock (except that the conversion price has been appropriately adjusted to reflect the ten-for-one common share exchange referenced below); (iii) the registrant increased the number of authorized shares of common stock from 1,500,000 to 40,000,000; and (iv) each outstanding share of common stock of the predecessor Delaware corporation was exchanged on a ten-for-one basis into shares of the registrant's common stock. The merger caused the "reincorporation" of the predecessor Delaware corporation in Illinois.

        Prior to the merger, New Midland States, Inc. had not engaged in any business or other activities except in connection with its formation and held no assets and had no subsidiaries. The merger did not result in any change of the business, management, jobs, fiscal year, assets, liabilities or location of the principal facilities of the predecessor Delaware corporation.

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CAPITALIZATION

        The following table sets forth our capitalization and regulatory capital ratios as of December 31, 2010:

•

on an actual basis; and

•

on an as adjusted basis after giving effect to the receipt of the net proceeds to us from the sale in this offering of shares of our common stock at an assumed initial public offering price of $            per share, which is the mid-point of the estimated public offering price set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, and not reflecting the possible exercise of the underwriters' option to purchase additional shares.

        The following should be read in conjunction with "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" and our consolidated financial statements and accompanying notes that are included elsewhere in this prospectus.

				As of December 31, 2010
(dollars in thousands, except per share data)				Actual			As Adjusted
Cash and cash equivalents:				$	57,156		$
Borrowings and Obligations:
	15.0% Subordinated Notes due 2020			$	11,300		$
	12.0% Subordinated Notes due 2020				5,000
	Junior subordinated debentures related to trust preferred securities due 2034				10,000
		Total borrowings and obligations		$	26,300		$
Shareholders' Equity:
Preferred stock, $2.00 par value, 4,000,000 shares authorized:
		Series C Preferred Stock, 2,360 shares issued and outstanding (actual and as adjusted)		$	23,600		$
		Series D Preferred Stock, 2,377 shares issued and outstanding (actual and as adjusted)			23,770
Common stock, $0.01 par value; 40,000,000 shares authorized and 4,164,030 (actual) and (as adjusted) shares issued and outstanding(1)					50
Capital surplus					9,447
Retained earnings					56,949
Accumulated other comprehensive (loss)					(180	)
Treasury stock, at cost, 835,970 shares (actual and as adjusted)					(7,101	)
	Total shareholders' equity			$	106,535		$
			Total capitalization(2)	$	132,835		$
Capital Ratios—Consolidated(3):
	Tier 1 leverage ratio				5.86	%		%
	Tier 1 capital to risk-weighted assets				8.43	%		%
	Total capital to risk-weighted assets				11.13	%		%
	Tangible common equity to tangible assets(4)				2.38	%		%
	Tier 1 common capital to risk-weighted assets(5)				3.38	%		%
Common Stock Data:
	Book value per share(6)			$	14.21		$
	Book value per share—as converted(6)(8)				14.80
	Tangible book value per share(7)				9.21
	Tangible book value per share—as converted(7)(9)				12.19

(1)

Excludes: (i) 2,008,510 shares of our common stock issuable upon conversion of the outstanding shares of our Series C Preferred Stock; (ii) 1,033,478 shares of our common stock issuable upon conversion of the outstanding shares of our Series D Preferred Stock; (iii) 536,170 shares of our common stock issuable upon conversion of the 630 shares of our Series E Preferred Stock that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes; (iv) 217,391 shares of our common stock issuable upon conversion

43

of the 500 shares of our Series F Preferred Stock that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes; and (v) 1,374,310 shares of our common stock available for future issuance under the 2010 LTIP, out of which options to purchase 125,000 shares of our common stock will become effective upon the consummation of this offering.

(2)

Total capitalization includes the amount of debt that is included as capital for regulatory purposes.

(3)

The net proceeds from the sale of our common stock in this offering are presumed to be invested in securities which carry a    % risk weighting for purposes of all adjusted risk-based capital ratios. If the underwriters' option is exercised in full, net proceeds would be $     million and our Tier 1 leverage ratio, Tier 1 capital to risk-weighted assets, total capital to risk-weighted assets, tangible common equity to tangible assets and Tier 1 common capital to risk-weighted assets ratios would have been    %,    %,    %,    % and    %, respectively.

(4)

Tangible common equity to tangible assets is a non-GAAP financial measure. The most directly comparable GAAP financial measure is total shareholders' equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA."

(5)

For purposes of computing Tier 1 common capital to total risk-weighted assets, Tier 1 common capital is calculated as Tier 1 capital less preferred stock and trust preferred securities. As we calculate it, most directly comparable GAAP financial measure to Tier 1 common capital is total shareholders' equity. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(6)

For purposes of computing book value per share, book value equals total common shareholders' equity.

(7)

Tangible book value and tangible book value per share are non-GAAP financial measures. We calculate tangible book value (also referred to as "tangible common shareholders' equity" or "tangible common equity") as total common shareholders' equity less goodwill and other intangible assets (except mortgage servicing rights). As we calculate it, tangible book value's most directly comparable GAAP financial measure is total common shareholders' equity. We calculate tangible book value per share as tangible book value divided by shares of common stock outstanding. As we calculate it, tangible book value per share's most directly comparable GAAP financial measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA."

(8)

Book value per share—as converted gives effect to: (i) for December 31, 2010, the conversion of all of the issued and outstanding shares of Series C Preferred Stock and Series D Preferred Stock into an aggregate of 3,041,988 shares of our common stock and the conversion of the shares of Series E Preferred Stock and Series F Preferred Stock that could be acquired upon exercise of outstanding warrants held by the holder of our outstanding subordinated notes into an aggregate of 753,560 shares of our common stock; and (ii) for December 31, 2009, the conversion of all of the issued and outstanding shares of Series C Preferred Stock at such time into 2,008,510 shares of our common stock and the conversion of the shares of Series E Preferred Stock that could be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes into an aggregate of 536,170 shares of our common stock. We did not have any convertible preferred stock or warrants to acquire convertible preferred stock outstanding in 2008 or 2007.

(9)

Tangible book value per share—as converted is tangible book value per share (see note 7 above) after giving effect to the same conversion scenarios set forth in note 8 above.

44

DILUTION

        If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering. Our historical net tangible book value as of December 31, 2010 was $38.3 million, or $9.21 per share of common stock. Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding.

        After giving effect to our sale of        shares of common stock at an assumed initial public offering price of $    per share in this offering, which is the mid-point of the range on the cover of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses, our as adjusted net tangible book value as of December 31, 2010 would have been $     million, or $    per share. This amount represents an immediate increase in net tangible book value to our existing shareholders of $    per share and immediate dilution to new investors of $    per share. The following table illustrates this per share dilution:

Assumed initial public price per share			$
	Historical net tangible book value per share as of December 31, 2010	9.21
	Increase in net tangible book value per share attributable to investors purchasing shares in this offering
As adjusted net tangible book value per share after giving effect to this offering
Dilution in as adjusted net tangible book value per share to investors in this offering			$

        Each $1.00 increase or decrease in the assumed public offering price of $    per share would increase or decrease, respectively, our as adjusted net tangible book value by approximately $     million, or approximately $    per share, and the dilution per share to investors in this offering by approximately $    per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and offering expenses. We may also increase or decrease the number of shares we are offering. An increase of 1.0 million in the number of shares offered by us, together with a $1.00 increase in the assumed offering price of $    per share, would result in as adjusted net tangible book value of approximately $     million, or $    per share, and the dilution per share to investors in this offering would be $    per share. Similarly, a decrease of 1.0 million in the number of shares offered by us, together with a $1.00 decrease in the assumed public offering price of $    per share, would result in as adjusted net tangible book value of approximately $     million, or $    per share, and the dilution per share to investors in this offering would be $    per share. The as adjusted information discussed above is illustrative only and will adjust based on the actual public offering price and other terms of this offering determined at pricing.

        If the underwriters exercise their option to purchase additional shares in full in this offering, our as adjusted net tangible book value at December 31, 2010 would be $     million, or $    per share, representing an immediate increase in as adjusted net tangible book value to our existing shareholders of $    per share and immediate dilution to investors participating in this offering of $    per share.

        The following table summarizes as of December 31, 2010, on an as adjusted basis, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by our existing shareholders and by investors participating in this offering, based upon an assumed initial public offering price of $    per share, the mid-point of the range on the cover of

45

this prospectus, and before deducting estimated underwriting discounts and commissions and offering expenses payable by us.

	Shares Purchased				Total Consideration				Avg. Price Per Share
	Number	Percentage			Amount	Percentage
Existing shareholders			.	%	$		.	%	$	.
New investors			.	%			.	%	$	.
Total			100.0	%			100.0	%

        The above discussion and tables do not take into account 548,870 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2010 at a weighted average exercise price of $14.72 per share, 25,000 shares of common stock issuable upon the exercise of options that were granted subsequent to December 31, 2010 at an exercise price of $18.16 per share or the 125,000 shares of common stock that will be issuable upon exercise of options that will become effective upon the consummation of this offering at an exercise price equal to per share offering price. Furthermore, effective upon the completion of this offering, an aggregate 1,249,310 shares of our common stock will be reserved for future issuance under the 2010 LTIP. To the extent that any of our outstanding options are exercised, new options or other equity awards are issued under our equity incentive plan or we issue additional shares of common stock in the future, there will be further dilution to investors.

        The above discussion and tables also do not take into account the following:

•

2,008,510 shares of our common stock issuable upon conversion of the outstanding shares of our or Series C Preferred Stock;

•

1,033,478 shares of our common stock issuable upon conversion of the outstanding shares of our Series D Preferred Stock;

•

536,170 shares of our common stock issuable upon conversion of the 630 shares of our Series E Preferred Stock that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes; and

•

217,391 shares of our common stock issuable upon conversion of the 500 shares of our Series F Preferred Stock that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes.

        We estimate that, on a pro forma basis, giving effect to the conversion of all outstanding shares of our Series C Preferred Stock and Series D Preferred Stock into shares of our common stock and to the exercise of the warrants to acquire shares of our Series E Preferred Stock and Series F Preferred Stock and the subsequent conversion of those shares into shares of our common stock, our net tangible book value per share as of December 31, 2010 would have been $12.19 instead of $9.21. However, the preferred stock will not automatically convert upon consummation of this offering and we do not have the right to force conversion of the preferred stock until at least five years after the date of issuance. As described in more detail later in this prospectus under "DESCRIPTION OF OUR CAPITAL STOCK—Conversion Rights—Preferred Stock: Reduction of Conversion Price Due to Certain Subsequent Common Stock Issuances," the conversion price of our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock will be reduced if the initial offering price of common stock in this offering is less than the applicable conversion price. As any such reduction, if ultimately required, will not be determinable until after the consummation of this offering, this pro forma net tangible book value per share is based upon a conversion price of $11.75 for the Series C Preferred Stock and Series E Preferred Stock and $23.00 for the Series D Preferred Stock and Series F Preferred Stock, which are the applicable conversion prices prior to the consummation of this offering.

46

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following selected consolidated financial data as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006 has been derived from our audited consolidated financial statements. The selected balance sheet data as of December 31, 2010 and 2009 and the selected income statement data for the years ended December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2008, 2007 and 2006 and the selected income statement of income data for the years ended December 31, 2007 and 2006 have been derived from our audited consolidated financial statements that are not included in this prospectus.

        You should read the following financial data in conjunction with other information contained in this prospectus, including the information set forth under "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and the financial statements and related accompanying notes included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

        We have consummated several acquisitions in recent fiscal periods. In February 2009, we acquired Waterloo Bancshares and its subsidiary, Commercial State Bank of Waterloo, which included six offices in the St. Louis metropolitan area. At the time of acquisition, Waterloo Bancshares had total assets and deposits of $116.1 million and $98.1 million, respectively. In May 2009, we acquired Strategic Capital from the FDIC, as receiver, which included a single banking facility in Champaign in our central Illinois market area. We acquired $546.2 million of assets ($437.5 million of which were covered by a loss-sharing agreement with the FDIC) and assumed $467.5 million of deposits. In March 2010, we acquired 12 banking offices and certain assets and assumed certain deposits from AMCORE, which was our entry into the northern Illinois market area. We acquired $499.5 million of assets and assumed $493.4 million of deposits. In October 2010, we acquired WestBridge from the FDIC, as receiver, which included a single banking facility in Chesterfield, Missouri. We acquired $84.7 million of assets ($71.1 million of which were covered by a loss-sharing agreement with the FDIC) and assumed $61.1 million of deposits. The results and other financial data of these acquired operations are not included in the table below for the periods prior to their respective acquisition date and, therefore, the results and other financial data for these prior periods are not comparable in all respects and may not be predictive of our future results.

47

				As of and for the Year Ended December 31,
(dollars in thousands, except per share data)				2010			2009			2008			2007			2006
Selected Balance Sheet Data
	Assets:
		Cash and cash equivalents		$	57,156		$	83,937		$	12,714		$	17,151		$	26,038
		Non-covered investment securities			257,713			147,043			72,536			71,743			84,795
		Covered investment securities(1)			134,029			151,619			—			—			—
			Total investment securities		391,742			298,662			72,536			71,743			84,795
		Non-covered loans			910,103			492,716			337,220			284,233			288,625
		Covered loans(2)			137,041			131,740			—			—			—
			Total loans (gross)		1,047,144			624,456			337,220			284,233			288,625
		Allowance for loan losses			(28,488	)		(19,766	)		(3,718	)		(3,232	)		(3,766	)
			Total loans (net)		1,018,656			604,690			333,502			281,001			284,859
		Premises and equipment			32,521			10,904			5,343			4,251			5,026
		Non-covered other real estate owned			3,002			1,394			1,302			130			115
		Covered other real estate owned			10,904			4,319			—			—			—
			Total other real estate owned		13,906			5,713			1,302			130			115
		Goodwill			7,582			7,582			3,812			1,640			1,640
		Intangible assets			13,235			1,073			109			186			352
		Indemnification asset due from FDIC			67,538			72,699			—			—			—
		Other assets			31,986			28,492			11,709			5,951			6,662
		Total assets		$	1,634,322		$	1,113,752		$	441,027		$	382,053		$	409,487
	Liabilities:
		Non-interest bearing deposits		$	173,875		$	64,356		$	38,363		$	42,358		$	38,900
		Interest bearing deposits (non-brokered)			1,031,093			567,006			271,882			233,661			237,783
		Brokered deposits			159,549			286,730			41,620			25,370			44,149
		Short-term and FHLB borrowings			127,997			90,161			38,144			31,975			40,737
		Subordinated debt			16,300			11,300			—			—			—
		Junior subordinated debt related to trust preferred securities			10,000			10,000			10,000			10,000			10,000
		Other liabilities			8,973			10,907			3,717			2,754			2,659
		Total liabilities		$	1,527,787		$	1,040,460		$	403,726		$	346,118		$	374,228
	Shareholders' equity:
		Preferred stock		$	47,370		$	23,600		$	—		$	—		$	—
		Common stock and capital surplus			9,497			9,221			8,816			8,582			8,384
		Retained earnings			56,949			50,199			35,925			34,980			33,964
		Accumulated other comprehensive income (loss), net			(180	)		(2,559	)		410			(4	)		(611	)
		Treasury stock, at cost			(7,101	)		(7,169	)		(7,850	)		(7,623	)		(6,478	)
		Total shareholders' equity		$	106,535		$	73,292		$	37,301		$	35,935		$	35,259
	Total liabilities and shareholders' equity			$	1,634,322		$	1,113,752		$	441,027		$	382,053		$	409,487

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			As of and for the Year Ended December 31,
(dollars in thousands, except per share data)			2010			2009			2008			2007			2006
Selected Income Statement Data
	Interest income—loans		$	61,161		$	34,562		$	18,943		$	20,799		$	20,179
	Interest income—investment securities			22,158			14,839			3,494			3,607			4,122
	Interest expense			25,124			20,579			9,888			12,516			11,361
	Net interest income			58,195			28,822			12,549			11,890			12,940
	Provision for loan losses			13,580			20,728			1,051			497			1,361
	Net interest income after provision for loan losses			44,615			8,094			11,498			11,393			11,579
	Gain on bargain purchase			8,704			25,031			—			—			—
	Noninterest income (excluding gain on bargain purchase)			10,173			18,094			3,437			2,800			4,945
	Noninterest expense			46,845			23,610			12,193			11,427			12,269
	Income before income taxes			16,647			27,609			2,742			2,766			4,255
	Income tax expense			4,577			9,272			603			661			1,072
	Net income			12,070			18,337			2,139			2,105			3,183
	Preferred stock dividends			3,668			2,291			—			—			—
	Net income available to common shareholders		$	8,402		$	16,046		$	2,139		$	2,105		$	3,183
Credit Quality Data
	Loans 30-89 days past due		$	9,926		$	11,177		$	3,227		$	2,048		$	1,861
	Loans 30-89 days past due to total loans			0.95	%		1.79	%		1.96	%		0.72	%		0.65	%
	Nonperforming loans(3)			26,270			11,539			4,161			4,452			4,244
	Nonperforming loans to total loans(3)			2.51	%		1.85	%		1.23	%		1.57	%		1.47	%
	Nonperforming assets to total assets(4)			1.79	%		1.16	%		1.24	%		1.20	%		1.06	%
	Allowance for loan losses to total loans(3)			2.72	%		3.17	%		1.10	%		1.14	%		1.30	%
	Allowance for loan losses to nonperforming loans(3)			108.44	%		171.28	%		89.35	%		72.60	%		88.74	%
	Net charge-offs to average loans			0.51	%		0.88	%		0.28	%		0.37	%		0.42	%
Per Share Data (Common Stock)
	Earnings:
		Basic	$	1.99		$	3.83		$	0.52		$	0.50		$	0.77
		Diluted(5)		1.62			3.11			0.52			0.50			0.76
	Dividends declared			0.392			0.424			0.296			0.268			0.242
	Book value(6)			14.21			11.99			9.25			8.90			8.60
	Book value—as converted(6)(8)			14.80			11.90			9.25			8.90			8.60
	Tangible book value(7)			9.21			9.90			8.28			8.45			8.11
	Tangible book value—as converted(7)(9)			12.19			10.99			8.28			8.45			8.11
	Weighted average shares outstanding:
		Basic		4,214,820			4,180,620			4,134,710			4,103,090			4,121,950
		Diluted		6,824,310			5,665,850			4,134,780			4,125,650			4,173,690
	Shares outstanding at year end			4,164,030			4,143,640			4,031,540			4,036,250			4,101,990

49

		As of and for the Year Ended December 31,
(dollars in thousands, except per share data)		2010			2009			2008			2007			2006
Performance Ratios
	Core pre-tax, pre-provision earnings(10)	$	24,676		$	11,791		$	3,793		$	3,377		$	4,253
	Return on average assets		0.79	%		2.01	%		0.55	%		0.55	%		0.78	%
	Return on average shareholders' equity		11.78	%		28.38	%		6.66	%		5.84	%		9.24	%
	Return on average common shareholders' equity		13.63	%		39.05	%		6.66	%		5.97	%		9.27	%
	Yield on earning assets		6.25	%		6.32	%		6.21	%		6.90	%		6.60	%
	Cost of average interest bearing liabilities		1.97	%		2.65	%		3.11	%		3.98	%		3.38	%
	Net interest spread		4.28	%		3.67	%		3.10	%		2.92	%		3.22	%
	Net interest margin(11)		4.44	%		3.81	%		3.57	%		3.59	%		3.74	%
	Efficiency ratio(12)		61.03	%		62.15	%		76.04	%		73.21	%		70.40	%
	Common stock dividend payout ratio(13)		19.70	%		10.68	%		56.92	%		53.39	%		31.47	%
	Loan to deposit ratio		76.74	%		68.02	%		95.84	%		94.31	%		89.96	%
	Core deposits / total deposits(14)		77.56	%		57.00	%		70.03	%		76.18	%		74.29	%
	Net non-core funding dependence ratio(15)		24.62	%		44.92	%		35.11	%		27.74	%		29.81	%
Regulatory and Other Capital Ratios—Regulatory
	Tier 1 leverage ratio		5.86	%		6.86	%		10.07	%		11.68	%		10.61	%
	Tier 1 capital to risk-weighted assets		8.43	%		11.27	%		11.37	%		14.11	%		13.81	%
	Total capital to risk-weighted assets		11.13	%		13.86	%		12.35	%		15.14	%		15.00	%
	Tangible common equity to tangible assets(16)		2.38	%		3.71	%		7.64	%		8.97	%		8.16	%
	Tier 1 common capital to risk-weighted assets(17)		3.38	%		6.36	%		8.72	%		10.91	%		10.66	%
Regulatory Capital Ratios—Bank Only
	Tier 1 leverage ratio		6.93	%		7.67	%		9.38	%		8.42	%		7.94	%
	Tier 1 capital to risk-weighted assets		9.98	%		12.56	%		10.27	%		10.21	%		10.28	%
	Total capital to risk-weighted assets		11.24	%		12.83	%		11.26	%		11.24	%		11.46	%

(1)

Covered investment securities are investment securities that are covered by a loss-sharing agreement with the FDIC.

(2)

Covered loans are loans that are covered by a loss-sharing agreement with the FDIC.

(3)

Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings. Nonperforming loans exclude PCI loans acquired in the Waterloo Bancshares, Strategic Capital and WestBridge transactions. PCI loans had a carrying value of $83.1 million as of December 31, 2010 and $81.5 million as of December 31, 2009. Prior to 2009, we did not have any PCI loans. Furthermore, PCI loans, as well as other loans acquired in a business combination, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. Accordingly, our ratios that are computed using nonperforming loans and/or allowance for loan losses may not be comparable to similar ratios of our peers.

(4)

Nonperforming assets include nonperforming loans, other real estate owned and other repossessed assets. Nonperforming assets exclude covered other real estate owned that is related to the Strategic Capital and WestBridge FDIC-assisted transactions. As discussed in note 3, above, nonperforming loans exclude PCI loans. This ratio may therefore not be comparable to a similar ratio of our peers.

(5)

Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per share common share computation plus the dilutive effect of: (i) restricted stock and stock options using the treasury method; (ii) shares of our common stock issuable upon conversion

50

of our outstanding shares of our Series C Preferred Stock and Series D Preferred Stock; and (iii) shares of our common stock issuable upon conversion of shares of our Series E Preferred Stock and Series F Preferred Stock that may be acquired upon exercise of outstanding warrants held by the holder of our outstanding subordinated notes. In addition, earnings used in the numerator of the computation are increased by: (i) dividends paid on our Series C Preferred Stock and Series D Preferred Stock; and (ii) interest paid on $11.3 million of our outstanding subordinated notes. Prior to July 1, 2013, the warrant to purchase shares of Series E Preferred Stock may only be exercised by the surrender of that portion of an $11.3 million subordinated note equal to the aggregate exercise price (which will be $6.3 million if the warrant is exercised in full); after that date, the warrant may be exercised by surrender of the subordinated note, a cash payment or cashless exercise. The warrant to purchase shares of Series F Preferred Stock may only be exercised by surrender of that portion of a $5.0 million subordinated note equal to the aggregate exercise price (which will be $5.0 million if the warrant is exercised in full). See "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS—Subordinated Notes and Warrants to Acquire Preferred Stock."

(6)

For purposes of computing book value per share, book value equals total common shareholders' equity.

(7)

Tangible book value and tangible book value per share are non-GAAP financial measures. We calculate tangible book value (also referred to as "tangible common shareholders' equity" or "tangible common equity") as total common shareholders' equity less goodwill and other intangible assets (except mortgage servicing rights). As we calculate it, tangible book value's most directly comparable GAAP financial measure is total common shareholders' equity. We calculate tangible book value per share as tangible book value divided by shares of common stock outstanding. As we calculate it, tangible book value per share's most directly comparable GAAP financial measure is book value per common share. See below for our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

(8)

Book value per share—as converted gives effect to: (i) for December 31, 2010, the conversion of all of the issued and outstanding shares of Series C Preferred Stock and Series D Preferred Stock into an aggregate of 3,041,988 shares of our common stock and the conversion of the shares of Series E Preferred Stock and Series F Preferred Stock that could be acquired upon exercise of outstanding warrants held by the holder of our outstanding subordinated notes into an aggregate of 753,560 shares of our common stock; and (ii) for December 31, 2009, the conversion of all of the issued and outstanding shares of Series C Preferred Stock at such time into 2,008,510 shares of our common stock and the conversion of the shares of Series E Preferred Stock that could be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes into an aggregate of 536,170 shares of our common stock. We did not have any convertible preferred stock or warrants to acquire convertible preferred stock outstanding in 2008 or 2007.

(9)

Tangible book value per share—as converted is tangible book value per share (see note 7 above) after giving effect to the same conversion scenarios set forth in note 8 above.

(10)

Core pre-tax, pre-provision earnings is a non-GAAP financial measure. Core pre-tax, pre-provision earnings is net income, adjusted to exclude bargain purchase gains and acquisition and integration expenses recognized in connection with our acquisitions, without regard to the provision for loan losses and income tax expense. As we calculate it, the most directly comparable GAAP financial measure to core pre-tax, pre-provision earnings is income before income taxes. See below for our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

(11)

Net interest margin is presented on an FTE basis.

(12)

Efficiency ratio represents noninterest expenses, excluding loan loss provision, divided by the sum of net interest income and noninterest income, excluding bargain purchase gains recognized in connection with certain of our acquisitions and realized gains or losses from sales of investment securities.

(13)

Common stock dividend payout ratio represents dividends per share divided by basic earnings per share. See "DIVIDEND POLICY."

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(14)

Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $100,000. Effective in the first quarter of 2011, the federal banking agencies changed the classification for certificates of deposit greater than $100,000 but less than or equal to $250,000 from non-core deposits in response to the Dodd-Frank Act permanently increasing the deposit insurance limit to $250,000. Based on this new classification, our core deposits as of December 31, 2010 would have represented 86.98% of total deposits.

(15)

Net non-core funding dependence ratio represents the degree to which the Bank is funding longer-term assets with non-core funds. We calculate this ratio as non-core liabilities, less short-term investments, divided by long-term assets.

(16)

Tangible common equity to tangible assets is a non-GAAP financial measure. For purposes of computing tangible common equity to tangible assets, we calculate tangible common equity as total shareholders' equity less preferred equity, goodwill and other intangible assets (except mortgage servicing rights), and tangible assets as total assets less goodwill and other intangible assets (except mortgage servicing rights). As we calculate it, the most directly comparable GAAP financial measure is total shareholders' equity to total assets. See below for our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

(17)

For purposes of computing Tier 1 common capital to total risk-weighted assets, we calculate Tier 1 common capital as Tier 1 capital less preferred stock and trust preferred securities. The most directly comparable GAAP financial measure to Tier 1 common capital is total shareholders' equity. See below for our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

Non-GAAP Financial Measures

        The ratios of tangible common equity to tangible assets and Tier 1 common equity to risk-weighted assets and the adjusted earnings data included above are not financial measures recognized under GAAP and therefore are considered non-GAAP financial measures.

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share

        The tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders' equity less preferred equity, goodwill and other intangible assets (except mortgage servicing rights); (ii) tangible assets as total assets less goodwill and other intangible assets (except mortgage servicing rights); and (iii) tangible book value per share as tangible common equity (as described in clause (i)) divided by shares of common stock outstanding.

        Our management, banking regulators, many financial analysts and other investors use the tangible common equity to tangible assets ratio and tangible book value per share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of preferred equity and/or goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share or related measures should not be considered in isolation or as a substitute for total shareholders' equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names.

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        The following table reconciles, as of the dates set forth below, shareholders' equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets and calculates our tangible book value per share.

		As of and for the Year Ended December 31,
(dollars in thousands, except per share data)		2010			2009			2008			2007			2006
Tangible common equity:
Total equity—GAAP		$	106,535		$	73,292		$	37,301		$	35,935		$	35,259
Adjustments:
	Preferred equity		(47,370	)		(23,600	)		—			—			—
	Goodwill		(7,582	)		(7,582	)		(3,812	)		(1,640	)		(1,640	)
	Other intangibles		(13,235	)		(1,073	)		(109	)		(186	)		(352	)
Tangible common equity		$	38,348		$	41,037		$	33,380		$	34,109		$	33,267
Tangible assets:
Total assets—GAAP		$	1,634,322		$	1,113,752		$	441,027		$	382,053		$	409,487
Adjustments:
	Goodwill		(7,582	)		(7,582	)		(3,812	)		(1,640	)		(1,640	)
	Other intangibles		(13,235	)		(1,073	)		(109	)		(186	)		(352	)
Tangible assets		$	1,613,505		$	1,105,097		$	437,106		$	380,227		$	407,495
Common shares outstanding			4,164,030			4,143,640			4,031,540			4,036,250			4,101,990
Tangible common equity to tangible assets ratio			2.38	%		3.71	%		7.64	%		8.97	%		8.16	%
Tangible book value per share		$	9.21		$	9.90		$	8.28		$	8.45		$	8.11

Tier 1 Common Equity to Risk-Weighted Assets Ratio

        The Tier 1 common equity to risk-weighted assets ratio is calculated by dividing (a) Tier 1 capital less non-common elements, including qualifying perpetual preferred stock and qualifying trust preferred securities, by (b) risk-weighted assets, which are calculated in accordance with applicable bank regulatory requirements. The Tier 1 common equity ratio is not required on a recurring basis by applicable bank regulatory requirements. However, this ratio was used by the Federal Reserve in connection with its stress test administered to the 19 largest U.S. bank holding companies under the Supervisory Capital Assessment Program, the results of which were announced on May 7, 2009. Management is currently monitoring this ratio, along with the applicable bank regulatory ratios, in evaluating our capital levels and believes that, at this time, the ratio may continue to be of interest to investors and analysts.

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        The following table reconciles shareholders' equity (on a GAAP basis) to Tier 1 common equity as of the dates set forth below:

		As of and for the Year Ended December 31,
(dollars in thousands, except per share data)		2010			2009			2008			2007			2006
Tier 1 common equity:
Total equity—GAAP		$	106,535		$	73,292		$	37,301		$	35,935		$	35,259
Adjustments:
	Qualifying preferred stock		(47,370	)		(23,600	)		—			—			—
	Unrealized (gain) loss on available-for-sale securities		92			2,343			(590	)		4			611
	Unrealized (gain) loss on swap		88			216			180			—			—
	Goodwill		(7,582	)		(7,582	)		(3,812	)		(1,640	)		(1,640	)
	Other intangibles		(13,235	)		(1,073	)		(109	)		(186	)		(352	)
	Other disallowed assets		(103	)		(60	)		—			—			—
Tier 1 common equity		$	38,425		$	43,536		$	32,970		$	34,113		$	33,878
Total risk-weighted assets:
On balance sheet		$	1,060,988		$	627,536		$	353,744		$	293,634		$	297,786
Off balance sheet			75,269			56,643			24,157			19,058			19,883
Total risk-weighted assets		$	1,136,257		$	684,179		$	377,901		$	312,692		$	317,669
Tier 1 common equity to risk-weighted assets ratio			3.38	%		6.36	%		8.72	%		10.91	%		10.66	%

Core Pre-Tax, Pre-Provision Earnings

        Management uses the earnings measure of core pre-tax, pre-provision earnings to assess the performance of our core business and the strength of our capital position. We believe that this non-GAAP financial measure provides meaningful additional information about us to assist investors in evaluating our operating results, exclusive of provisions for loan losses, bargain purchase gains recognized in connection with acquisitions, gain on sale of branches and integration and acquisition expenses recognized in connection with our acquisitions. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies.

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        The following table reconciles core pre-tax, pre-provision earnings to net income.

			As of and for the Year Ended December 31,
(dollars in thousands, except per share data)			2010			2009		2008		2007		2006
Income before income taxes—GAAP			$	16,647		$	27,609	$	2,742	$	2,766	$	4,255
Provision for loan losses				13,580			20,728		1,051		497		1,361
	Pre-tax, pre-provision earnings			30,227			48,337		3,793		3,263		5,616
Non-core other income:
	Gains on bargain purchases			8,704			25,031		—		—		—
	FDIC loss-sharing income, net			1,043			10,496		—		—		—
	(Amortization) accretion of FDIC indemnification asset			(1,232	)		1,912		—		—		—
	Gain on sale of branches			—			—		—		—		1,652
		Total non-core other income		8,515			37,439		—		—		1,652
Non-core other expense:
	Integration and acquisition expenses			2,964			893		—		114		289
Core pre-tax, pre-provision earnings—non-GAAP			$	24,676		$	11,791	$	3,793	$	3,377	$	4,253

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS," "RISK FACTORS" and elsewhere in this prospectus, may cause actual results to differ materially from those projected in the forward-looking statements. We assume no obligation to update any of these forward-looking statements.

Overview

        We offer locally-managed, community-focused banking in central and northern Illinois and the St. Louis metropolitan area. In addition to our traditional community banking business, we also deliver a comprehensive suite of trust and wealth management products and services to our customers and clients. Since late 2007, we have pursued a growth strategy, pursuant to which we have completed five acquisitions and grown our balance sheet from $382.1 million in assets and $301.4 million in deposits at December 31, 2007 to $1.6 billion in assets and $1.4 billion in deposits at December 31, 2010.

        Our principal business activity is lending to and accepting deposits from individuals, businesses, municipalities and other entities. We derive our income principally from interest charged on loans and, to a lesser extent, from interest and dividends earned on investment securities. We also derive income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; mortgage loan originations, sales and servicing; and, from time to time, gains on sales of assets. Under the loss-sharing agreements we have entered into with the FDIC, we recognize income and expense based on changes in loss estimates on covered assets. Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing fees, and FDIC insurance, provisions for loan losses and income tax expense.

Primary Factors Affecting Comparability

        Each factor listed below materially affects the comparability of our results of operations and financial condition in 2010, 2009 and 2008, and may affect the comparability of financial information we report in future fiscal periods.

Significant Strategic Acquisitions and Purchased Credit-Impaired (PCI) Loans

        Strategic acquisitions have been a significant component of our growth since late 2007, and we expect that they will be a source of future growth as well. During the past three years, we have completed two larger acquisitions, one in each of 2009 and 2010, and three smaller acquisitions, one in each of 2008, 2009 and 2010. Because the results of each of these acquisitions are not included in our results for the periods prior to each respective date of acquisition, our results of operations and other financial data for these prior periods are not comparable in all respects to our results of operations for periods after the dates of acquisition. Summary information about these acquisitions is presented below.

        PCI Loans.    In three of our acquisitions, Waterloo Bancshares, Strategic Capital and WestBridge, we acquired loans that had evidence of credit deterioration since origination and for which it was probable at the date of acquisition that we would not collect all contractually required principal and interest payments. These loans are referred to as purchased credit-impaired, or PCI, loans. We valued these PCI loans at fair value based on expected cash flows as of the date of acquisition. Subsequent decreases in expected cash flows result in provision for loan losses and increases result in reversal of

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the provision for loan losses to the extent of prior charges or a positive impact on future interest income. The expected cash flow changes on PCI loans during 2010 and 2009 impacted net interest margin, provision for loan losses and noninterest income. We acquired an aggregate of $126.1 million of PCI loans during 2010 and 2009 and had $83.1 million of PCI loans as of December 31, 2010. As of December 31, 2010, $75.2 million of our PCI loans were covered by loss-sharing agreements with the FDIC.

        Branch and Asset Acquisition from AMCORE.    On March 26, 2010, we completed the acquisition of a portfolio of loans, investment securities, trust and brokerage account relationships and certain other assets of, and assumed certain deposit liabilities from, AMCORE. In connection with this transaction, we also purchased 12 branch facilities and two stand-alone drive-up facilities from AMCORE, and hired approximately 120 employees that were employed at the acquired facilities.

        In the transaction, we acquired total assets with a fair value of $499.5 million, including loans with a fair value of $407.2 million (all of which were non-PCI loans), and assumed deposits with a fair value of $493.4 million. At closing, the acquired loans were recorded at their acquisition date fair value. Our assessment of fair value was based on expected cash flows and included an estimation of expected loan losses and loan prepayments. Expected cash flows were converted to their present value using a discount rate approximating the market rate of return for the same type of loan portfolio with an equivalent risk profile. The valuation resulted in a $3.5 million reduction in the historical carrying value of the loans, which is accretable into income based on expected cash flows. As of December 31, 2010, we realized $1.0 million of discount accretion, which is reported as a component of loan interest income. At closing, we recorded $14.2 million of core deposits and trust relationship intangibles associated with this transaction. These intangible assets are being amortized over a weighted average amortization period of 9.5 years. We recognized a bargain purchase gain of $4.2 million, reflecting the excess of the fair value of the net assets acquired over liabilities assumed.

        A further discussion of the purchase accounting used in our acquisitions is set forth below under the heading "—Critical Accounting Policies and Estimates."

        Strategic Capital.    On May 22, 2009, we acquired the banking operations, including substantially all of the assets and deposits and certain other liabilities, of Strategic Capital from the FDIC, as receiver. Under the terms of the agreement with the FDIC, we assumed deposits with a fair value of $467.5 million and acquired assets with a fair value of $546.2 million, including loans with a fair value of $143.1 million ($70.9 million of which were identified as PCI loans) and investment securities with a fair value of $263.1 million.

        At closing, we recorded $70.2 million of purchase discounts on loans and other real estate owned, including $51.6 million of nonaccretable discounts on PCI loans and $6.1 million of accretable discounts, which are expected to accrete to interest income using the constant effective yield method over the estimated life of certain acquired loans. The fair value of the loans was determined using methods similar to those described above. We recognized a bargain purchase gain of $25.0 million, reflecting the excess of the fair value of the net assets acquired over liabilities assumed.

        Investment securities acquired included $85.1 million of municipal securities and $178.0 million of covered nonagency mortgage-backed securities. At closing, we recorded $35.2 million of nonaccretable discounts related to the covered nonagency mortgage-backed securities.

        At closing, we recorded $1.0 million of customer relationship intangibles attributable to the trust and wealth management assets acquired in this transaction. Later in 2009, however, we assessed the customer relationship intangible for impairment due to the departure of two key principals of Strategic Capital's trust and wealth management business shortly after the acquisition and, as a result, recognized an impairment charge of $1.0 million (the remaining balance of the intangible). We also recorded a small core deposit intangible of $273,000, the amortization of which does not have a material impact on our results of operations.

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        All loans, other real estate owned and nonagency mortgage-backed securities acquired in connection with the Strategic Capital acquisition are subject to a loss-sharing agreement with the FDIC. Under this agreement, the FDIC has agreed to reimburse us for 80% of the first $167.0 million of net losses recognized on the disposition of loans, other real estate owned and nonagency mortgage-backed securities and 95% of net losses exceeding $167.0 million.

        Other Acquisitions.    In addition to the AMCORE and Strategic Capital acquisitions, we also have completed three smaller transactions over the past three years. In November 2008, we purchased two branch facilities of People's National Bank, N.A., pursuant to which we acquired assets with a fair value of $29.6 million, including loans with a fair value of $27.9 million, and assumed deposits with a fair value of $23.6 million. In February 2009, we acquired all of the outstanding stock of Waterloo Bancshares, pursuant to which we acquired assets with a fair value of $116.1 million, including loans with a fair value of $71.5 million ($20.9 million of which were identified as PCI loans) and investment securities with a fair value of $15.4 million, and assumed deposits with a fair value of $98.1 million. In October 2010, we acquired WestBridge from the FDIC, as receiver, pursuant to which we acquired assets with a fair value of $84.7 million, including loans with a fair value of $48.1 million ($34.3 million of which were identified as PCI loans), and assumed deposits with a fair value of $61.1 million. All loans and other real estate owned acquired in connection with the WestBridge acquisition are subject to a loss-sharing agreement with the FDIC. Under this agreement, the FDIC has agreed to reimburse us for 80% of any losses we incur on the covered assets.

Capital Raising Transactions

        During 2009 and 2010, we consummated several significant capital raising transactions to support our organic growth and acquisition activity. Each of the following capital raising transactions affected the comparability of our results of operations and financial condition of prior periods to post-transaction periods and may affect the comparability of financial information we report in future fiscal periods.

        Participation in TARP.    In January 2009, we issued $10.7 million aggregate liquidation preference of our Series A Preferred Stock and Series B Preferred Stock to the U.S. Treasury for aggregate gross proceeds of $10.2 million pursuant to the TARP Capital Purchase Program. In December 2009, we redeemed all shares of the Series A Preferred Stock and Series B Preferred Stock from the U.S. Treasury for 100% of their liquidation preference.

        2009 Capital Raising Transactions.    In May 2009, we issued $23.6 million aggregate liquidation preference of our Series C Preferred Stock and an $11.3 million subordinated note for aggregate gross proceeds of $34.9 million. As of the date of this prospectus, all shares of the Series C Preferred Stock issued remain outstanding and the outstanding principal balance of the subordinated note is $11.3 million. The Series C Preferred Stock has a stated dividend rate of 9.0% per annum and the subordinated note bears interest at a rate of 15.0% per annum. The subordinated note matures in 2020. In connection with the issuance of the subordinated note, we issued to this investor a warrant to acquire 630 shares of our Series C Preferred Stock, and this warrant was exchanged in April 2011 for a warrant to acquire 630 shares of our Series E Preferred Stock. The Series E Preferred Stock has substantially the same terms as the Series C Preferred Stock, including the dividend rate and conversion terms.

        2010 Capital Raising Transaction.    In March 2010, we issued $23.8 million aggregate liquidation preference of our Series D Preferred Stock and a $5.0 million subordinated note for aggregate gross proceeds of $28.8 million. The subordinated note was purchased by the same investor who purchased our $11.3 million subordinated note in May 2009. As of the date of this prospectus, all shares of the Series D Preferred Stock issued remain outstanding and the outstanding principal balance of the subordinated note is $5.0 million. The Series D Preferred Stock has a stated dividend rate of 9.0% per annum and the subordinated note bears interest at a rate of 12.0% per annum. The subordinated note matures in 2020. In connection with the issuance of the subordinated note, we issued to this investor a

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warrant to acquire 500 shares of our Series D Preferred Stock, and this warrant was exchanged in April 2011 for a warrant to acquire 500 shares of our Series F Preferred Stock. The Series F Preferred Stock has substantially the same terms as the Series D Preferred Stock, including the dividend rate and conversion terms.

Primary Factors Used to Evaluate Our Business

Results of Operations

        In addition to net income, the primary factors we use to evaluate and manage our results of operations include net interest income, noninterest income and noninterest expense.

        Net interest income.    Net interest income represents interest income less interest expense. We generate interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness. Net interest income typically is the most significant contributor to our revenues and net income. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest spread; (iv) our net interest margin; and (v) our provisions for loan losses. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and shareholders' equity, also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources.

        Changes in market interest rates and interest we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and non-interest-bearing liabilities and shareholders' equity, usually have the largest impact on periodic changes in our net interest spread, net interest margin and net interest income. We measure net interest income before and after the provision for loan losses we maintain.

        Noninterest Income.    Noninterest income includes, among other things: (i) service charges on deposit accounts; (ii) wealth management revenue, (iii) mortgage banking revenue; (iv) FDIC loss-sharing income; (v) accretion of indemnification asset due from the FDIC; and (vi) gains on sales of investment securities. In addition, in 2009, we recognized a significant bargain purchase gain on the Strategic Capital acquisition and, in 2010, we recognized smaller bargain purchase gains on the AMCORE and WestBridge acquisitions. A bargain purchase gain reflects the excess of the fair value of the net assets acquired over the net liabilities assumed.

        Noninterest income, particularly mortgage banking revenue, has been materially impacted by changes in market interest rates and housing market conditions. Lower interest rates have historically increased customer demand for loans to purchase homes and refinance existing loans, which, in turn, have generally resulted in higher mortgage banking revenue. Higher interest rates historically reduced customer demand for loans to purchase homes and refinance existing loans, which, in turn, have generally resulted in lower mortgage banking revenue.

        Additionally, our income from service charges on deposit accounts is largely impacted by the volume, growth and type of deposits we hold, which are impacted by prevailing market conditions for our deposit products, our marketing efforts and other factors. Our wealth management revenue is materially impacted by general economic conditions and the conditions in the financial and securities markets, including the value of assets held under administration.

        Noninterest expense.    Noninterest expense includes, among other things: (i) employees' salaries and benefits expense; (ii) occupancy and equipment expense; (iii) data processing fees; (iv) FDIC insurance expense; (v) professional fees, such as legal, accounting and consulting; (vi) expenses associated with

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other real estate owned; (vii) amortization of intangible assets; and (viii) other general and administrative expense.

        Employees' salaries and benefits expense includes compensation, employee benefits and tax expenses for our personnel. Occupancy expense includes depreciation expense on our owned properties, lease expense on our leased properties and other occupancy-related expenses. Equipment expense includes furniture, fixtures and equipment expenses. Professional fees include legal, accounting, consulting and other outsourcing arrangements. Data processing fees include expenses paid to our third-party data processing system provider and other data service providers. FDIC insurance expense represents the assessments that we pay to the FDIC for deposit insurance. Amortization of intangible assets primarily represents the amortization of our core deposit intangible, which we recognize in connection with our acquisitions. Other general and administrative expenses include expenses associated with other real estate owned and foreclosures and marketing and advertising costs. Noninterest expenses generally increase as we grow our business. Noninterest expenses have increased significantly over the past few years as we have grown organically and through the five acquisitions completed through December 31, 2010 and as we have built out and modernized our operational infrastructure and implemented our Future Bank project.

Financial Condition

        The primary factors we use to evaluate and manage our financial condition include asset quality, capital and liquidity.

        Asset Quality.    We manage the diversification and quality of our assets based upon factors that include the level, distribution, severity and trend of problem, classified, delinquent, nonaccrual, nonperforming and restructured assets, the adequacy of our allowance for loan losses, or the allowance, the diversification and quality of loan and investment portfolios, the extent of counterparty risks, credit risk concentrations and other factors. The extent to which our loans and investment securities are covered by loss-sharing agreements with the FDIC also significantly affects our analysis of asset quality.

        Capital.    We manage capital based upon factors that include: (i) the level and quality of capital and our overall financial condition; (ii) the trend and volume of problem assets; (iii) the adequacy of discounts and reserves; (iv) the level and quality of earnings; (v) the risk exposures in our balance sheet; (vi) the levels of Tier 1 (core), Tier 2 (supplemental) and tangible equity capital; (vii) the ratios of Tier 1 leverage, Tier 1 capital to risk-weighted assets, total capital to risk-weighted assets, tangible common equity to tangible assets and Tier 1 common capital to risk-weighted assets; and (viii) and other factors.

        Liquidity.    We manage liquidity based upon factors that include the amount of core deposits as a percentage of total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of nondeposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities and other factors.

Material Trends and Developments

Economic and Interest Rate Environment

        The results of our operations are highly dependent on economic conditions and market interest rates. Beginning in 2007, turmoil in the financial sector resulted in a reduced level of confidence in financial markets among borrowers, lenders and depositors, as well as extreme volatility in the capital and credit markets. In response to these conditions, the Federal Reserve began decreasing short-term interest rates, with eleven consecutive decreases totaling 525 basis points between September 2007 and December 2008. Continued economic uncertainty has resulted in a heightened unemployment rate,

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depressed consumer confidence and a stagnant real estate market. The Federal Reserve has maintained historically low interest rates in recent periods.

Significantly Increased Number of Troubled Banking Organizations

        In late 2007, the U.S. economy began to experience the effects of a severe recession, which continued through 2008 and the first half of 2009. Real estate markets in the United States remain impacted by these conditions and unemployment rates have remained at significantly elevated levels. Many banking organizations in the United States have been experiencing severe financial challenges attributable, in part, to these conditions. From January 1, 2007 through December 31, 2010, 322 depository institutions were placed in receivership and, according to the FDIC's Quarterly Banking Profile for the fourth quarter of 2010, the number of depository institutions on the FDIC's "problem list" increased to 884, or 11.5% of all depository institutions, at year-end 2010, which is the highest level since 1993. The 157 bank failures in 2010 represented the highest number since 1992. This significant increase in the number of troubled banking organizations has presented opportunities for us to grow both organically and through acquisitions. The pace of growth of the FDIC's problem list slowed in 2010, but we nevertheless expect the number of troubled banking organizations to remain at significantly elevated levels for the foreseeable future. We intend to continue seeking acquisition opportunities resulting from this environment.

Capital Raising Initiatives

        In late 2007, we adopted an initiative driven strategic plan, one component of which is to pursue an acquisition strategy to take advantage of our relative strength in a period of market disruption. We have been able to implement our acquisition strategy due to several significant capital raising transactions. These transactions are described above in this section under "—Primary Factors Affecting Comparability—Capital Raising Transactions." Our capital base has also grown due to the $33.7 million aggregate bargain purchase gains that we recognized in 2009 and 2010 in connection with our Strategic Capital, AMCORE and WestBridge acquisitions. These capital raising transactions have also supported our organic growth strategies.

        The capital generated by our capital raising transactions and bargain purchase gains allowed us to grow our balance sheet, both organically and through acquisitions, expand our marketing initiatives and increase our core deposit base. We intend to use the net proceeds from this offering to support our long-term growth by enhancing our capital ratios to permit future strategic acquisitions and growth initiatives. We believe our expected strong capital position following this offering, particularly relative to our competitors that are experiencing liquidity and capital constraints, will enable us to continue capitalizing on banking, lending and investment opportunities with attractive risk-adjusted returns.

Community Banking

        We believe the most important trends affecting community banks in the U.S. over the foreseeable future will be related to heightened regulatory capital requirements, increasing regulatory burdens generally, including the implementation of the Dodd-Frank Act and the regulations to be promulgated thereunder, and the possible protracted weakness in the commercial and residential real estate markets. We expect that community banks will face increased competition for lower cost capital as a result of regulatory policies that may offer larger financial institutions greater access to government assistance than is available for smaller institutions, including community banks. We expect that troubled community banks will continue to face significant challenges when attempting to raise capital. We also believe that heightened regulatory capital requirements will make it more difficult for even well-capitalized, healthy community banks to grow in their communities by taking advantage of opportunities in their markets that result as the economy improves. We believe these trends will favor community banks that have sufficient capital and a strong deposit franchise and we believe that, following this offering, we will possess these characteristics.

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        We also believe that increased regulatory burdens will have a significant adverse effect on smaller community banks, which often lack the personnel, experience and technology to efficiently comply with new regulations in a variety of areas in the banking industry, including in the areas of deposits, lending, compensation, information security and overdraft protection. We believe that a recovery in lending in the real estate sector may lag behind other areas of the economy in a broader recovery. We also believe the increased costs to smaller community banks from a more complex regulatory environment, especially those institutions with less than $500 million in total assets but also, to a lesser extent, institutions with between $500 million and $1 billion in total assets, coupled with challenges in the real estate lending area, present attractive acquisition opportunities for larger community banks that have already made significant investments in regulatory compliance and risk management and can acquire and quickly integrate these smaller institutions into their existing platform. Furthermore, we believe that, as a result of our recent significant operational investments and our experience acquiring other institutions and quickly integrating them into our organization, we are well positioned to capitalize on the challenges facing smaller community banks.

Wealth Management

        We believe the community bank-based trust and wealth management business is likely to experience several trends over the coming years. Among the trends that we expect to see are increasing demand by customers for more sophisticated and value-based services, more diverse product offerings and general consolidation in the industry. We expect that consolidation in the marketplace may occur as community banks with small trust and wealth management operations exiting the business due to the increasing difficulty to operate profitably in this scale-dependent business. We believe these trends present an important opportunity for us, and growing our wealth management group, including through acquisitions of the trust and wealth management operations of smaller banks in our markets, is one of our five strategic initiatives.

General and Administrative Expenses

        We expect to continue incurring increased noninterest expense attributable to general and administrative expenses as a result of transaction-related expenses from our recent acquisitions, including the costs of integrating acquired asset and operations into our organization, expenses related to building out and modernizing our operational infrastructure, including the costs of implementing our Future Bank project, expenses associated with operating as a public company, marketing and other administrative expenses to execute our strategic initiatives, costs associated with establishing de novo branch facilities, expenses to hire additional personnel and other costs required to continue our growth.

Credit Reserves and Discounts

        One of our key operating objectives has been, and continues to be, maintenance of an appropriate level of reserve protection against probable losses in our loan portfolio. Due to general declines in the real estate and housing markets, we have experienced increased levels of loan loss provisions.

        In addition to the allowance for loan losses, we have other credit-related reserves or discounts and purchase discounts related to certain acquired loans. As of December 31, 2010, we had an allowance for loan losses of $28.5 million and accretable discounts of $23.1 million.

Regulatory Environment

        As a result of regulatory changes, including the Dodd-Frank Act and Basel III, as well as regulatory changes resulting from becoming a publicly traded company, we expect to be subject to more restrictive capital requirements, more stringent asset concentration and growth limitations and new and potentially heightened examination and reporting requirements. We also expect to face a more challenging environment for customer loan demand due to the increased costs that could be ultimately borne by borrowers, and to incur higher costs to comply with these new regulations. This uncertain regulatory environment could have a detrimental impact on our ability to manage our business consistent with historical practices and cause difficulty in executing our growth plan. See "RISK FACTORS—Risks Related to our Business" and "REGULATION AND SUPERVISION."

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Average Balance Sheet, Interest and Yield/Rate Analysis

        The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2010, 2009 and 2008. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments.

			Year Ended December 31,
			2010								2009								2008
(tax-equivalent basis, dollars in thousands)			Average Balance		Interest & Fees			Yield / Rate			Average Balance		Interest & Fees			Yield / Rate			Average Balance		Interest & Fees			Yield / Rate
EARNING ASSETS:
	Federal funds sold & cash investments		$	79,433	$	206			0.26	%	$	57,936	$	156			0.27	%	$	7,435	$	118			1.56	%
Investment securities:
	Taxable investment securities			236,576		16,545			6.99	%		151,959		10,646			7.01	%		47,412		2,347			4.95	%
	Investment securities exempt from federal income tax(1)			120,371		8,318			6.91	%		80,858		6,210			7.57	%		26,450		1,583			5.91	%
		Total securities		356,947		24,863			6.97	%		232,817		16,856			7.24	%		73,862		3,930			5.31	%
Loans:
	Loans(2)			933,660		60,352			6.46	%		520,622		34,068			6.54	%		284,230		18,485			6.50	%
	Loans exempt from federal income tax(1)			17,110		1,246			7.28	%		8,774		764			8.71	%		8,295		704			8.49	%
		Total loans		950,770		61,598			6.47	%		529,396		34,832			6.58	%		292,525		19,189			6.56	%
		Total earning assets		1,387,150	$	86,667			6.25	%		820,149	$	51,844			6.32	%		373,822	$	23,237			6.21	%
Noninterest-earning assets				141,500								93,515								17,663
		Total assets	$	1,528,650							$	913,664							$	391,485
INTEREST-BEARING LIABILITIES
	NOW and money market deposits		$	465,611	$	4,940			1.06	%	$	161,880	$	2,798			1.73	%	$	85,485	$	1,237			1.45	%
	Savings deposits			61,856		231			0.37	%		24,860		77			0.31	%		13,980		45			0.32	%
	Time deposits			430,015		8,792			2.04	%		263,014		7,958			3.03	%		141,108		5,631			3.99	%
	Brokered deposits			182,293		5,868			3.22	%		243,111		6,559			2.70	%		31,651		1,411			4.46	%
	Short-term borrowings			38,580		439			1.14	%		18,197		266			1.46	%		24,350		447			1.84	%
	FHLB advances			74,784		1,990			2.66	%		49,157		1,293			2.63	%		11,737		478			4.07	%
	Other borrowings			25,315		2,864			11.31	%		17,105		1,628			9.52	%		9,999		639			6.39	%
		Total interest-bearing liabilities		1,278,454	$	25,124			1.97	%		777,324	$	20,579			2.65	%		318,310	$	9,888			3.11	%
NONINTEREST-BEARING LIABILITIES
	Noninterest-bearing deposits			135,323								58,951								37,710
	Other noninterest-bearing liabilities			12,435								12,786								3,348
		Total noninterest-bearing liabilities		147,758								71,737								41,058
Shareholders' equity				102,438								64,603								32,117
Total liabilities and shareholders' equity			$	1,528,650							$	913,664							$	391,485
Net interest income / interest rate spreads					$	61,543			4.28	%			$	31,265			3.67	%			$	13,349			3.10	%
Taxable equivalent adjustment						(3,348	)							(2,443	)							(800	)
Net interest income, as reported					$	58,195							$	28,822							$	12,549
Net interest margin									4.20	%							3.51	%							3.36	%
Tax equivalent effect									0.24	%							0.30	%							0.21	%
Net taxable equivalent interest margin(3)									4.44	%							3.81	%							3.57	%

(1)

Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.

(2)

Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which were not material.

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(3)

Net taxable equivalent interest margin during the periods presented represent: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.

Interest Rates and Operating Interest Differential

        Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period's average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous year's volume. Changes which are not due solely to volume or rate have been allocated to these categories based on the respective percent changes in average volume and average rate as they compare to each other.

			Year Ended December 31, 2010 Compared with Year Ended December 31, 2009									Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
			Change due to:									Change due to:
									Interest Variance									Interest Variance
(tax-equivalent basis, dollars in thousands)			Volume			Rate						Volume			Rate
EARNING ASSETS:
	Federal funds sold & cash investments		$	56		$	(6	)	$	50		$	460		$	(422	)	$	38
Investment securities:
	Taxable investment securities			5,943			(44	)		5,899			6,197			2,102			8,299
	Investment securities exempt from federal income tax			2,858			(750	)		2,108			3,699			928			4,627
		Total securities		8,801			(794	)		8,007			9,896			3,030			12,926
Loans:
	Loans			26,856			(572	)		26,284			15,423			160			15,583
	Loans exempt from federal income tax			675			(193	)		482			37			23			60
		Total loans		27,531			(765	)		26,766			15,460			183			15,643
		Total earning assets	$	36,388		$	(1,565	)	$	34,823		$	25,816		$	2,791		$	28,607
INTEREST-BEARING LIABILITIES
	NOW and money market deposits		$	4,237		$	(2,095	)	$	2,142		$	1,212		$	349		$	1,561
	Savings deposits			125			29			154			34			(2	)		32
	Time deposits			4,230			(3,396	)		834			4,280			(1,953	)		2,327
	Brokered deposits			(1,797	)		1,106			(691	)		7,563			(2,415	)		5,148
	Short-term borrowings			266			(93	)		173			(96	)		(85	)		(181	)
	FHLB advances			677			20			697			1,254			(439	)		815
	Other borrowings			852			384			1,236			454			535			989
		Total interest-bearing liabilities	$	8,590		$	(4,045	)	$	4,545		$	14,701		$	(4,010	)	$	10,691
Net interest income and margin			$	27,798		$	2,480		$	30,278		$	11,115		$	6,801		$	17,916

Results of Operations

        The following discussion of our results of operations compares the year ended December 31, 2010 to the year ended December 31, 2009, and a comparison of the year ended December 31, 2009 to the year ended December 31, 2008.

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Net Interest Income/Average Balance Sheet

        Our primary source of revenue is net interest income, which is the difference between interest income from earning assets (primarily loans and securities) and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Earning asset balances and related funding sources, as well as changes in the levels of interest rates, impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders' equity, also support earning assets. The impact of the noninterest-bearing sources of funds is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on a fully-taxable equivalent basis, which means that tax-free interest income has been adjusted to a pretax equivalent income, assuming a 35% tax rate.

        Net interest income on a tax equivalent basis was $61.5 million in 2010, an increase of $30.3 million, or 96.8%, from $31.3 million in 2009. The increase in net interest income was due to a higher level of interest earning assets and a significant improvement in our net interest margin. The average balance of interest earning assets in 2010 increased by $567.0 million, or 69.1%, from $820.1 million in 2009. Interest earning assets increased largely due to recent acquisitions completed within the last two years. Further, contributing to the increase in net interest income in 2010 was a 63 basis point increase in the taxable equivalent net interest margin to 4.44% from 3.81% in 2009.

        Interest Income.    Our total interest income increased $34.7 million, or 70.9%, to $86.7 million in 2010 from $51.8 million in 2009, primarily due to increases in interest income from our loan and investment securities portfolios.

        Interest income on our total loan portfolio increased $26.8 million, or 76.8%, to $61.6 million in 2010 from $34.8 million in 2009. This increase was primarily attributable to an increase of $421.4 million in the average balance of our loans for 2010 as compared to 2009, which primarily resulted from our acquisition in March 2010 of loans with a fair value of $407.2 million in the AMCORE transaction.

        Interest income earned on our investment securities portfolio increased $8.0 million, or 47.5%, to $24.9 million in 2010 from $16.9 million in 2009. This increase resulted primarily from a $124.1 million, or 53.3%, increase in the average balance of our investment securities portfolio to $356.9 million in 2010 from $232.8 million in 2009. Further, interest income from nonagency mortgage-backed securities and municipal securities increased $5.9 million and $2.1 million, respectively, in 2010 compared to 2009, primarily as a result of the $178.0 million of nonagency mortgage-backed securities and $85.1 million of municipal securities acquired in the May 2009 acquisition of Strategic Capital, which were included for the full year in 2010 as compared to seven months in 2009.

        In 2009, total interest income increased to $51.8 million compared to $23.2 million in 2008, an increase of $28.6 million, or 123.1%, primarily due to increases in interest income from our loan and investment securities portfolios.

        Interest income on our loan portfolio increased $15.6 million, or 67.3%, to $34.8 million in 2009 from $19.2 million in 2008. This increase was primarily attributable to an increase of $236.9 million in the average balance of our loans for 2009 as compared to 2008, which primarily resulted from our acquisition in February 2009 and May 2009 of loans with an aggregate fair market value of $214.6 million in the Waterloo Bancshares and Strategic Capital transactions, respectively.

        Interest income earned on our investment securities portfolio increased $12.9 million to $16.9 million in 2009 from $3.9 million in 2008. This increase resulted primarily from a $159.0 million increase in the average balance of our investment securities portfolio to $232.8 million in 2009 from $73.9 million in 2008, in addition to a 193 basis point increase in yield on the average balance of our

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investment securities portfolio to 7.24% in 2009 from 5.31% in 2008. Contributing to the increase in the size of the portfolio were $178.0 million in nonagency mortgage-backed securities and $85.1 million of state and political subdivision securities acquired in the acquisition of Strategic Capital. The increase in yield was due to the securities acquired in the Strategic Capital transaction.

        Interest Expense.    Interest expense on interest bearing liabilities increased $4.5 million, or 22.1%, to $25.1 million in 2010 from $20.6 million in 2009, primarily due to increases in our deposit interest expense and other borrowings interest expense.

        Deposit interest expense increased $2.4 million, or 14.0%, to $19.8 million in 2010 from $17.4 million in 2009. This increase resulted from an increase of $446.9 million, or 64.5%, in our average deposit balance to $1,139.8 million in 2010 from $692.9 million in 2009. The increase in our average deposit balance in 2010 was primarily attributable to our assumption of deposits with a fair value of $493.4 million in connection with the AMCORE transaction in March 2010. The average rate paid on our deposits was 1.74% in 2010 as compared to 2.51% in 2009. This decrease was primarily attributable to the fact that we assumed $413.7 million of higher cost brokered deposits as part of the acquisition of Strategic Capital acquisition in May 2009. In 2010, as these brokered deposits matured, we generally replaced them with core deposits, both through the AMCORE transaction and through organic growth. In this regard, as of December 31, 2009, we had $286.7 million in brokered deposits, which represented 31.2% of total deposits, with a cost of 2.55% and as of December 31, 2010 we had reduced our brokered deposits to $159.5 million, or 11.7% of total deposits, with a cost of 1.81%. From December 31, 2009 to December 31, 2010, we increased our core deposits from $523.3 million, or 57.0% of total deposits, to $1,058.4 million, or 77.6% of total deposits.

        Interest expense on borrowings increased $2.1 million, or 66.0%, to $5.3 million in 2010 from $3.2 million in 2009. Interest expense on subordinated debt increased $1.2 million in 2010 compared to 2009. In March 2010, we issued a $5.0 million 12.0% subordinated note. In addition, the $11.3 million 15.0% subordinated note issued in May 2009 was outstanding for 12 months in 2010 compared to only seven months in 2009. Interest expense on our FHLB advances increased $0.7 million in 2010 to $2.0 million from $1.3 million in 2009. The Strategic Capital acquisition in May 2009 resulted in our assumption of $50.0 million of additional advances, which was the primary factor in the increase in interest expense on FHLB advances.

        Total interest expense on interest bearing liabilities increased $10.7 million to $20.6 million in 2009 from $9.9 million in 2008, primarily due to increases in our deposit interest expense and other borrowings interest expense.

        Deposit interest expense increased $9.1 million to $17.4 million in 2009 from $8.3 million in 2008. This increase resulted from an increase of $420.6 million in our average deposit balance to $692.9 million in 2009 from $272.2 million in 2008, which was primarily attributable to our assumption of deposits with a fair value of $467.5 million in connection with the Strategic Capital transaction in May 2009 and $98.1 million from the Waterloo Bancshares transaction in February 2009. The average interest rate paid on our deposits was 2.51% in 2009 compared to 3.06% in 2008, largely due to lower market interest rates.

        Interest expense on average borrowings increased $1.6 million to $3.2 million in 2009 from $1.6 million in 2008. Interest expense on our subordinated notes was $1.1 million in 2009, which was attributable to the $11.3 million 15.0% subordinated note issued in May 2009. Interest expense on our FHLB advances increased $0.8 million in 2009 to $1.3 million from $0.5 million in 2008. The assumed $50.0 million of additional advances in connection with the Strategic Capital transaction represented the principal portion of the increase in interest expense on FHLB advances.

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Provision for Loan Losses

        Provision for loan losses decreased $7.1 million to $13.6 million in 2010 from $20.7 million in 2009. The decrease in provision was due to a $10.7 million decrease in provision related to PCI loans offset by a $4.0 million increase in provision for non-PCI loans. The decrease related to PCI loans was due to expected cash flows not decreasing as rapidly as they did in 2009. The increase in provision related to non-PCI loans was primarily due to the acquisition of $407.2 million of loans from AMCORE in March 2010, which required reserves subsequent to the acquisition.

        Provision for loan losses increased $19.6 million to $20.7 million in 2009 from $1.1 million in 2008, primarily due to $12.3 million of provision related to PCI loans acquired in the Strategic Capital and Waterloo Bancshares acquisitions. The provision was a result of a decrease in expected cash flows since the date of acquisition. A significant amount of the provision related to covered loans, which resulted in an increase in the indemnification asset and a gain in noninterest income of $10.5 million. The other $8.1 million of provision related to non-PCI loans, which was required due to increased charge offs in 2009 and an increase in non-PCI loans.

Noninterest Income

        Noninterest income decreased $24.2 million, or 56.2%, to $18.9 million in 2010 from $43.1 million in 2009. This decline was primarily the result of a substantially higher gain on bargain purchase recorded in 2009 (discussed below) than in 2010. Excluding the gain on bargain purchase of $8.7 million and $25.0 million recognized in 2010 and 2009, respectively, noninterest income decreased $7.9 million, or 43.8%, in 2010 compared to 2009. Noninterest income in 2009 was $39.6 million higher than in 2008, again primarily as a result of a gain on bargain purchase. Excluding the gain on bargain purchase of $25.0 million recognized in 2009, noninterest income increased $14.7 million, or 426.4%, in 2009 compared to 2008. The following table sets forth the major components of our noninterest income for the years ended December 31, 2010, 2009 and 2008:

									Variance			Variance
		Year Ended December 31,
									2010 v. 2009			2009 v. 2008
(dollars in thousands)		2010			2009		2008
Noninterest income:
	Service charges on deposits	$	3,083		$	1,386	$	1,046	$	1,697		$	340
	Wealth management revenue		2,479			1,212		595		1,267			617
	Mortgage banking revenue		2,224			1,634		431		590			1,203
	Gain on bargain purchase		8,704			25,031		—		(16,327	)		25,031
	FDIC loss-sharing income, net		1,043			10,496		—		(9,453	)		10,496
	(Amortization) accretion of indemnification asset due from FDIC		(1,232	)		1,912		—		(3,144	)		1,912
	Gains on sales of investment securities		2			399		751		(397	)		(352	)
	Other than temporary impairment on investment securities		(252	)		—		—		(252	)		—
	Other		2,826			1,055		614		1,771			441
Total noninterest income		$	18,877		$	43,125	$	3,437	$	(24,248	)	$	39,688

        In 2010, we recognized a $4.2 million gain on bargain purchase as a result of the AMCORE transaction in the first quarter and an additional $4.5 million as a result of the WestBridge acquisition in the fourth quarter. The gain on bargain purchase in 2009 of $25.0 million was attributable to the Strategic Capital acquisition in May 2009. We did not recognize any gain on bargain purchase in 2008. Significant components of the changes between 2010 compared to 2009 and 2009 compared to 2008 are discussed below.

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        Service charges on deposits.    Noninterest income from service charges on deposits increased $1.7 million, or 122.4%, to $3.1 million in 2010 from $1.4 million in 2009. As a result of the AMCORE transaction, our number of transaction accounts increased approximately 34,000, or 132%, in 2010 as compared to 2009. This increase in accounts resulted in additional transaction-based fee revenues and account-based service charge revenues.

        Service charges on deposit accounts increased $0.3 million in 2009 to $1.4 million compared to $1.1 million in 2008 primarily due to the additional transaction accounts that resulted from the acquisitions of Strategic Capital in May 2009 and Waterloo Bancshares in February 2009.

        Wealth management revenue.    Noninterest income from our wealth management business increased $1.3 million, or 104.5%, to $2.5 million in 2010 from $1.2 million in 2009. In connection with the AMCORE transaction in March 2010, we acquired approximately $400 million of assets under administration. In addition, we opened de novo offices in Joliet and Rockford, Illinois in 2010, which have attracted additional trust business for us. This increase in assets under administration was largely responsible for our increased wealth management revenue. As of December 31, 2010, we had $702.5 million of assets under administration compared to $265.7 million at December 31, 2009.

        Wealth management revenues totaled $1.2 million in 2009, an increase of $0.6 million, or 100%, compared to $0.6 million in 2008. In connection with the Strategic Capital acquisition in May 2009, we also acquired Strategic Capital's wholly owned trust subsidiary, from which we retained approximately $146.4 million of assets under administration. This increase in assets under administration was a substantial contributor to the increase in wealth management revenues recorded in 2009.

        Mortgage banking revenue.    Noninterest income from our mortgage banking activities increased $0.6 million, or 36.1%, in 2010 to $2.2 million from $1.6 million in 2009. Mortgage banking revenues are generated from gains on sales of loans into the secondary market and premiums for the servicing of loans sold to others. Servicing-related revenues totaled $0.3 million in 2010 compared to $0.2 million in 2009. Loans sold in the secondary market totaled $80.0 million generating net gains of $1.5 million in 2010 compared to sales of $78.0 million and related gains of $1.4 million in 2009.

        Mortgage banking revenue increased $1.2 million in 2009 to $1.6 million from $0.4 million in 2008. The acquisition of Waterloo Bancshares in February 2009 provided us with a mortgage servicing portfolio and related source of revenue that we did not previously have. Servicing-related revenues totaled $0.2 million in 2009. Loans sold in the secondary market totaled $78.0 million generating net gains of $1.4 million in 2009 compared to sales of $21.7 million and gains of $0.4 million in 2008.

        FDIC loss-sharing income.    FDIC loss-sharing income decreased $9.5 million, or 90.1%, to $1.0 million in 2010 from $10.5 million in 2009. The decrease in FDIC loss-sharing income is largely correlated to the provision made related to covered loans acquired in the Strategic Capital and WestBridge acquisitions. The FDIC loss-sharing income increases when a provision for loan losses is recorded for covered loans, which corresponds to increases in the indemnification asset.

        Amortization/accretion of indemnification asset due from FDIC.    Our FDIC-assisted acquisition of WestBridge in October 2010 resulted in the recording of an indemnification asset at the acquisition date of $13.9 million. The FDIC-assisted acquisition of Strategic Capital in May 2009 resulted in the recording of an indemnification asset at the acquisition date of $78.5 million. These assets were recorded based upon the discounted future cash expected to be recorded from the FDIC. The original discount is accreted into income over the life of indemnification asset, adjusted for changes in claims incurred and reimbursed. We recorded amortization expense of $1.2 million in 2010 compared to $1.9 million of accretion revenue in 2009. There was no accretion revenue in 2008.

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        Net securities gains and impairments.    In 2010, we recorded other than temporary impairment losses totaling $252,000 related to three securities. Included in this impairment was the gross write-down of two nonagency mortgage-backed securities of $946,000, which were covered by a loss-sharing agreement with the FDIC. Our portion of those losses was 20%, or $189,000, with the remainder reimbursed by the FDIC. The third impaired security was a municipal security that was written down by $63,000. Net securities gains totaled $2,000 in 2010, $399,000 in 2009 and $751,000 in 2008. No other than temporary impairment losses were recognized in 2009 or 2008.

        Other noninterest income.    Other noninterest income increased to $2.8 million in 2010 compared to $1.1 million in 2009. This increase related primarily to increased debit card income of $859,000 in 2010 compared to $296,000 in 2009. Other noninterest income was also positively impacted by increases in ATM interchange and surcharge fees, which increased by $354,000, or 172.8%, in 2010 to $559,000 from $205,000 in 2009.

Noninterest Expense

        Noninterest expense increased $23.2 million, or 98.4%, to $46.8 million in 2010 from $23.6 million in 2009. Noninterest expense in 2009 was $12.2 million, or 93.6%, higher than in 2008. The following table sets forth the major components of our noninterest expense for the years ended December 31, 2010, 2009 and 2008:

								Variance			Variance
		Year Ended December 31,
								2010 v. 2009			2009 v. 2008
(in thousands)		2010		2009		2008
Noninterest expense:
	Salaries and employee benefits	$	22,413	$	11,453	$	6,280	$	10,960		$	5,173
	Occupancy and equipment		4,612		2,457		1,418		2,155			1,039
	Data processing fees		3,020		1,451		964		1,569			487
	FDIC insurance		1,986		1,595		182		391			1,413
	Professional fees		3,492		1,298		596		2,194			702
	Other real estate owned expense		1,410		350		297		1,060			53
	Intangible assets amortization		2,082		279		120		1,803			159
	Impairment of customer relationship intangible		—		1,003		—		(1,003	)		1,003
	Loan expenses		1,524		734		215		790			519
	Communication		1,260		569		369		691			200
	Supplies		1,134		379		177		755			202
	Other		3,912		2,042		1,575		1,870			467
Total noninterest expense		$	46,845	$	23,610	$	12,193	$	23,235		$	11,417

        Significant components of the increase in our noninterest expense in 2010 and 2009 are discussed below.

        Salaries and employee benefits.    Noninterest expense from salaries and employee benefits, which is the largest component of noninterest expense, increased $11.0 million, or 95.7%, to $22.4 million in 2010 from $11.5 million in 2009. The increase was primarily attributable to an increase in the number of our full-time equivalent employees from 177 at December 31, 2009 to 396 at December 31, 2010. The increase in the number of employees was primarily due to the hiring of employees in connection with the AMCORE transaction, as discussed previously.

        Salaries and employee benefits expense increased $5.2 million, or 82.4%, to $11.5 million in 2009 from $6.3 million in 2008. There were 177 full-time equivalent employees at December 31, 2009

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compared to 123 at December 31, 2008. This increase resulted from the hiring of employees of Waterloo Bancshares and Strategic Capital in connection with these acquisitions in 2009.

        Occupancy and equipment.    Occupancy and equipment expense increased $2.2 million, or 87.7%, to $4.6 million in 2010 from $2.5 million in 2009. This increase was primarily attributable to the branch facilities that we acquired in connection with the AMCORE transaction in 2010. In addition, we opened de novo offices in Joliet, Illinois in May 2010 and Rockford, Illinois in June 2010. As of December 31, 2010, we were operating 29 branch facilities compared to 15 branch facilities at December 31, 2009.

        Occupancy and equipment expense increased $1.0 million, or 73.3%, to $2.5 million in 2009 from $1.4 million in 2008. This increase was primarily due to increases in the number of offices resulting from the Waterloo Bancshares and Strategic Capital acquisitions. As of December 31, 2009, we operated 15 branches compared to eight branches at December 31, 2008.

        Data processing fees.    Data processing fees increased $1.6 million, or 108.1%, to $3.1 million in 2010 from $1.5 million in 2009. This increase was primarily the result of costs associated with converting the acquired AMCORE and WestBridge operations to our data processing system and the overall larger size of our organization in 2010 as compared to 2009. We acquired approximately 6,500 loans and 42,500 deposit accounts from AMCORE, which represented approximately 132% and 124% of the loans and deposit accounts, respectively, processed by us prior to the acquisition.

        Data processing fees increased $0.5 million, or 50.5%, to $1.5 million in 2009 from $1.0 million in 2008. This increase was primarily the result of costs associated with converting the acquired Waterloo Bancshares and Strategic Capital operations to our data processing system and the overall larger size of our organization in 2009 as compared to 2008.

        FDIC insurance.    FDIC insurance expense increased $0.4 million, or 24.5%, to $2.0 million in 2010 from $1.6 million in 2009. This increase was primarily attributable to an increase of $446.9 million, or 64.5%, in our average deposit balance to $1,139.8 million in 2010 from $692.9 million in 2009.

        FDIC insurance expense increased $1.4 million to $1.6 million in 2009. This increase was due in part to a one-time assessment collected from all FDIC-insured banks to recapitalize the deposit insurance fund and increased insurance limits from $100,000 to $250,000 during this time of economic instability. Increased deposits resulting from our acquisitions also impacted this expense.

        Professional fees.    Professional fees totaled $3.5 million in 2010 compared to $1.3 million in 2009. We incurred increased legal, accounting and consulting expenses in 2010 related to the AMCORE and WestBridge transactions, including integration activities following such transactions, and the use of additional outsourced services for loan review, testing of internal controls for bank regulatory purposes and recruitment of additional support positions. In addition, we incurred $0.7 million in expenses attributable to our engagement of a financial services consulting organization in connection with our Future Bank project.

        Professional fees increased $0.7 million, or 117.8%, from $0.6 million in 2008 to $1.3 million in 2009 due primarily to legal and other professional fees incurred in connection with the Waterloo Bancshares and Strategic Capital acquisitions.

        Other real estate owned expense.    Other real estate owned expense was $1.4 million in 2010, an increase of $1.0 million, or 302.9%, from $350,000 in 2009. During 2010, other real estate owned expense increased compared to prior years due to the WestBridge acquisition. The loss-sharing agreements generally require the FDIC to reimburse us for 80% of these costs and thus only 20% of the cost is recorded as an expense. Also, as noted in the discussion of loan expense below, the AMCORE transaction increased our operating footprint, which increased our loan production volume

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and related costs. During 2009, other real estate owned expense increased to $350,000 from $297,000 during 2008.

        Intangible assets amortization.    Intangible assets amortization expense increased $1.8 million, or 646.2%, to $2.1 million in 2010 from $279,000 in 2009. This increase was primarily attributable to increased intangibles of $14.2 million due to core deposit and trust relationship intangibles recognized in connection with the AMCORE transaction in March 2010. During 2009, we recorded core deposit intangibles of $942,000 and $273,000, respectively, in connection with the Waterloo Bancshares and Strategic Capital transactions. Intangible assets amortization expense increased $159,000, or 132.5%, in 2009 from $120,000 in 2008.

        Loan expense.    Loan expense totaled $1.5 million in 2010 compared to $0.7 million in 2009, an increase of $0.8 million, or 107.6%. Loan expense includes appraisals, attorneys' fees, collateral protection and collection expenses. The AMCORE transaction in 2010 expanded our operating footprint, increasing loan production volume and related costs. Loan production increased 12.6% in 2010 compared to 2009. In addition, loan collection costs increased 83.2% in 2010 compared to the prior year, principally due to continuing efforts to maintain the Bank's interest in the collateral and collect on the loans acquired from Strategic Capital. These loan expenses associated with the loans acquired from Strategic Capital and WestBridge are shared with the FDIC under the applicable loss-sharing agreement which, generally require the FDIC to reimburse us for 80% of these costs and thus only 20% of the cost is recorded as a loan expense.

        Loan expense increased $0.5 million in 2009 compared to 2008. This increase in loan expense was primarily due to additional collection costs attributable to the acquisition of the Strategic Capital loan portfolio in May 2009 and were mitigated by the loss-sharing agreement with the FDIC.

Income Tax Expense

        Income tax expense was $4.6 million in 2010, a decrease of $4.7 million, or 50.6%, from $9.3 million in 2009. Income tax expense in 2008 was $0.6 million. The effective tax rates were 27.5%, 33.6% and 22.0% in 2010, 2009 and 2008, respectively. Pre-tax income in 2010 was $16.7 million, $10.9 million less than 2009 primarily due to the larger bargain purchase gain recorded in 2009 as a result of the Strategic Capital acquisition. During 2010, tax-exempt interest income increased compared to prior years due to the purchase of $5.0 million of bank-owned life insurance in 2010. During 2009, tax-exempt interest income increased by $3.0 million to $4.5 million from $1.5 million during 2008.

Net Income Available to Common Shareholders

        Net income available to common shareholders is computed by subtracting dividends paid to preferred shareholders from net income. Net income decreased $6.3 million and preferred dividends increased $1.4 million in 2010 compared to 2009, resulting in net income available to common shareholders decreasing $7.6 million in 2010. Net income available to common shareholders was $8.4 million in 2010 compared to $16.0 million in 2009 and $2.1 million in 2008.

        In 2008, we did not have any preferred stock outstanding. In January 2009, we issued $10.7 million of preferred stock to the U.S. Treasury pursuant to the TARP Capital Purchase Program. This preferred stock had a stated dividend rate of 5.0% per annum. We redeemed this preferred stock in December 2009. In May 2009, we issued $23.6 million of Series C Preferred Stock and, in March 2010, we issued $23.8 million of Series D Preferred Stock. Both the Series C Preferred Stock and Series D Preferred Stock have a stated dividend rate of 9.0% per annum. In total, we paid $3.7 million of preferred stock dividends in 2010 compared to $1.7 million in 2009 and none in 2008.

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Summary of Quarterly Results

        The following table presents unaudited quarterly results of operations for each of the quarters in the fiscal years ended December 31, 2010 and 2009.

		Year Ended December 31, 2010
(dollars in thousands, except per share data)		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
Interest income—loans		$	10,765	$	17,207	$	16,443	$	16,746	$	61,161
Interest income—investment securities			5,274		5,442		5,743		5,699		22,158
Interest expense			6,185		8,003		5,844		5,092		25,124
Net interest income			9,854		14,646		16,342		17,353		58,195
Provision for loan losses			3,205		2,201		3,120		5,054		13,580
Net interest income after provision for loan losses			6,649		12,445		13,222		12,299		44,615
Gain on bargain purchase			4,211		—		—		4,493		8,704
Noninterest income (excluding gain on bargain purchase)			950		2,429		3,453		3,341		10,173
Noninterest expense			8,555		11,016		11,579		15,695		46,845
Income before income taxes			3,255		3,858		5,096		4,438		16,647
Income tax expense			895		1,061		1,401		1,220		4,577
Net income			2,360		2,797		3,695		3,218		12,070
Preferred stock dividends			582		955		1,065		1,066		3,668
Net income available to common shareholders		$	1,778	$	1,842	$	2,630	$	2,152	$	8,402
Earnings per common share:
	Basic	$	0.42	$	0.44	$	0.62	$	0.51	$	1.99
	Diluted		0.36		0.37		0.49		0.41		1.63

		Year Ended December 31, 2009
(dollars in thousands, except per share data)		First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Full Year
Interest income—loans		$	5,977	$	8,734	$	10,300	$	9,551		$	34,562
Interest income—investment securities			827		3,389		5,079		5,544			14,839
Interest expense			2,760		4,620		6,945		6,254			20,579
Net interest income			4,044		7,503		8,434		8,841			28,822
Provision for loan losses			939		1,444		1,747		16,598			20,728
Net interest income after provision for loan losses			3,105		6,059		6,687		(7,757	)		8,094
Gain on bargain purchase			—		25,031		—		—			25,031
Noninterest income (excluding gain on bargain purchase)			1,304		1,872		2,616		12,302			18,094
Noninterest expense			3,833		7,741		6,016		6,020			23,610
Income before income taxes			576		25,221		3,287		(1,475	)		27,609
Income tax expense			193		8,470		1,104		(495	)		9,272
Net income			383		16,751		2,183		(980	)		18,337
Preferred stock dividends and discount accretion			113		297		680		1,201			2,291
Net income available to common shareholders		$	270	$	16,454	$	1,503	$	(2,181	)	$	16,046
Earnings per common share:
	Basic	$	0.06	$	3.94	$	0.36	$	(0.53	)	$	3.83
	Diluted		0.06		3.39		0.32		(0.52	)		3.11

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Financial Condition

Assets

        Total assets increased $520.6 million, or 46.7%, to $1,634.3 million at December 31, 2010 from $1,113.8 million at December 31, 2009, primarily due to the AMCORE transaction in March 2010. We acquired total assets with a fair market value of $499.5 million, including loans with a fair market value of $407.2 million, investment securities with a fair market value of $15.5 million, and premises and equipment with a fair market value of $12.6 million, and assumed deposits with a fair market value of $493.4 million. In connection with this acquisition, we recorded a core deposit intangible of $11.8 million and a gain on bargain purchase of $4.2 million.

        Total assets increased $672.8 million, or 152.5%, to $1,113.8 million at December 31, 2009 from $441.0 million at December 31, 2008, primarily due to the Waterloo Bancshares and Strategic Capital transactions in February and May 2009, respectively. Waterloo Bancshares and Strategic Capital had combined total assets with a fair market value of $662.3 million, including loans with a fair market value of $214.6 million, investment securities with a fair market value of $278.5 million and premises and equipment with a fair market value of $5.2 million, and combined deposits with a fair market value of $565.6 million. In connection with these acquisitions, we recorded goodwill of $3.8 million, all of which was attributable to the Waterloo transaction, and core deposit intangibles of $1.2 million.

Loans

        The loan portfolio is the largest category of our earning assets. At December 31, 2010, total loans, net of allowance for loan losses, totaled $1,018.7 million. Of this amount, $137.0 million was "covered" under loss-sharing agreements with the FDIC that we entered into in connection with our FDIC-assisted transactions and $83.1 million was classified as PCI loans. The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2010, 2009, 2008, 2007 and 2006:

			As of December 31,
(dollars in thousands)			2010			%		2009			%		2008			%		2007			%		2006			%
Loans:
	Commercial		$	199,186			19.0	$	123,537			19.8	$	85,022			25.2	$	73,650			25.9	$	79,153			27.4
	Commercial real estate			562,812			53.8		310,868			49.8		166,727			49.4		143,119			50.3		144,778			50.2
	Construction and land development			98,408			9.4		93,043			14.9		30,481			9.0		17,335			6.1		15,391			5.3
		Total commercial loans		860,406					527,448					282,230					234,104					239,322
	Residential real estate			139,886			13.4		89,899			14.4		49,324			14.6		44,034			15.5		42,445			14.7
	Consumer			46,852			4.5		7,109			1.1		5,666					6,095			2.1		6,858			2.4
		Total consumer loans		186,738					97,008					54,990			1.8		50,129					49,303
		Gross loans		1,047,144					624,456					337,220					284,233					288,625
	Allowance for loan losses			(28,488	)		2.7		(19,766	)		3.2		(3,718	)		1.1		(3,232	)		1.1		(3,766	)		1.3
	Net loans		$	1,018,656				$	604,690				$	333,502				$	281,001				$	284,859
	Covered loans		$	137,041			13.1	$	131,740			21.1	$	—			—	$	—			—	$	—			—
	PCI loans			83,138			8.0		81,470			13.1		—			—		—			—		—			—

        Loans increased $414.0 million, or 68.5%, to $1,018.7 million at December 31, 2010 from $604.7 million at December 31, 2009. The AMCORE transaction in March 2010 provided $407.2 million in loans and the acquisition of WestBridge in October 2010 provided $48.1 million in loans. Excluding the AMCORE and WestBridge transactions, loans decreased by $48.1 million, which was due to a $42.8 million decrease in covered loans.

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        The following table shows covered and noncovered loans by non-PCI and PCI loan category and the related allowance as of December 31, 2010 and 2009:

		As of December 31, 2010									As of December 31, 2009
(dollars in thousands)		Non- Purchased Credit- Impaired Loans			Purchased Credit- Impaired Loans			Total			Non- Purchased Credit- Impaired Loans			Purchased Credit- Impaired Loans			Total
Covered loans:
	Commercial	$	19,373		$	6,208		$	25,581		$	21,175		$	2,338		$	23,513
	Commercial real estate		32,161			33,485			65,646			32,549			25,237			57,786
	Construction and land development		4,448			30,747			35,195			5,714			39,603			45,317
	Residential		5,302			4,385			9,687			4,436			69			4,505
	Consumer		579			353			932			619			—			619
Total covered loans			61,863			75,178			137,041			64,493			67,247			131,740
Non-covered loans:
	Commercial		173,251			354			173,605			98,167			1,857			100,024
	Commercial real estate		495,560			1,606			497,166			250,572			2,510			253,082
	Construction and land development		61,992			1,221			63,213			45,502			2,224			47,726
	Residential		125,581			4,617			130,198			78,088			7,306			85,394
	Consumer		45,759			162			45,921			6,164			326			6,490
Total non-covered loans			902,143			7,960			910,103			478,493			14,223			492,716
Total loans (gross)			964,006			83,138			1,047,144			542,986			81,470			624,456
Allowance for loan losses			13,943			14,545			28,488			7,760			12,006			19,766
Total loans (net)		$	950,063		$	68,593		$	1,018,656		$	535,226		$	69,464		$	604,690
Nonperforming loans		$	26,270			—		$	26,270		$	11,539			—		$	11,539
Nonperforming loans to total loans			2.72	%		—			2.51	%		2.13	%		—			1.85	%
Allowance for loan losses to total loans			1.45	%		17.50	%		2.72	%		1.43	%		14.74	%		3.17	%

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        The following table shows the contractual maturities, including scheduled principal repayments, of our loan portfolio and the distribution between fixed and adjustable interest rate loans at December 31, 2010:

			Within One Year				One Year to Five Years				After Five Years
(dollars in thousands)			Fixed Rate		Adjustable Rate		Fixed Rate		Adjustable Rate		Fixed Rate		Adjustable Rate		Total
Commercial loans:
	Commercial		$	21,702	$	63,103	$	58,101	$	20,875	$	11,319	$	24,086	$	199,186
	Commercial real estate			127,690		18,622		273,062		49,532		59,675		34,231		562,812
	Construction and land development			42,812		23,713		21,194		3,092		2,069		5,528		98,408
		Total commercial loans		192,204		105,438		352,357		73,499		73,063		63,845		860,406
Consumer loans:
	Residential real estate			9,638		4,939		35,371		7,702		31,018		51,218		139,886
	Consumer			3,462		—		39,675		448		2,806		461		46,852
		Total consumer loans		13,100		4,939		75,046		8,150		33,824		51,679		186,738
Total loans			$	205,304	$	110,377	$	427,403	$	81,649	$	106,887	$	115,524	$	1,047,144

        The principal categories of our loan portfolio are discussed below:

        Commercial loans.    We provide a mix of variable and fixed rate commercial loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and farm operations. Commercial loans generally include lines of credit and loans with maturities of five years or less. The loans are generally made with business operations as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and/or personal guarantees.

        Commercial loans increased $75.7 million, or 61.2%, to $199.2 million at December 31, 2010 from $123.5 million at December 31, 2009. This increase was primarily attributable to the AMCORE transaction in March 2010 and, to a lesser extent, the WestBridge transaction in October 2010. Excluding increases attributable to the AMCORE and WestBridge transactions, commercial loans increased 1.2% as of December 31, 2010 as compared to December 31, 2009.

        As of December 31, 2010, $126.4 million, or 14.7%, of our commercial loans were covered by a loss-sharing agreement with the FDIC.

        Commercial real estate loans.    Commercial real estate loans increased $251.9 million, or 81.0%, to $562.8 million at December 31, 2010 from $310.9 million at December 31, 2009. This increase was primarily attributable to the AMCORE transaction in March 2010 and, to a lesser extent, the WestBridge transaction in October 2010. Excluding increases attributable to the AMCORE and WestBridge transactions, commercial real estate loans decreased 3.7% as of December 31, 2010 as compared to December 31, 2009. Approximately 23.9% and 39.8% of our commercial real estate loans as of December 31, 2010 and December 31, 2009, respectively, were owner-occupied, which generally involve less risk than loans on investment property.

        As of December 31, 2010, $65.6 million, or 11.7%, of our commercial real estate loans were covered by a loss-sharing agreement with the FDIC.

        Construction and land development loans.    Real estate construction and land development loans increased $5.4 million, or 5.8%, to $98.4 million at December 31, 2010 from $93.0 million at December 31, 2009. This increase was partly due to $12.6 million of these loans acquired in the WestBridge transaction, which was offset in part by a decrease in covered construction and land development loans of $10.1 million. As of December 31, 2010 and 2009, we had 35.8% and 48.7%, respectively, of our construction and land development loans covered by a loss-sharing agreement with the FDIC. Although we continue to make selective real estate construction loans, we do not expect our lending in this area to be significant.

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        Our real estate construction loans comprise residential construction, commercial construction and land acquisition and development construction. As of December 31, 2010, our real estate construction loan portfolio was divided among the foregoing categories as follows: approximately $19.6 million, or 20.0%, residential construction; approximately $44.5 million, or 45.2%, commercial construction; and approximately $34.3 million, or 34.8%, land acquisition and development.

        Residential real estate loans.    Residential real estate loans, which include home equity loans, increased $50.0 million, or 55.6%, to $139.9 million at December 31, 2010 from $89.9 million at December 31, 2009. This increase was primarily attributable to the residential real estate loans acquired in the AMCORE transaction in March 2010 and, to a lesser extent, the WestBridge transaction in October 2010. Excluding increases attributable to the AMCORE and WestBridge transactions, residential real estate loans decreased 1.1% as of December 31, 2010 as compared to December 31, 2009.

        Consumer loans.    Our consumer loans include direct personal loans, indirect automobile loans and lines of credit. Personal loans are generally secured by automobiles, boats and other types of personal property and are made on an installment basis.

        Consumer loans increased $39.7 million, or 559.1%, to $46.9 million at December 31, 2010 from $7.1 million at December 31, 2009. Consumer loans acquired in the AMCORE transaction were primarily indirect automobile loans, which represented $29.9 million of our total consumer loans as of December 31, 2010. Excluding increases attributable to the AMCORE and WestBridge transactions, consumer loans decreased $14.6 million as of December 31, 2010 as compared to December 31, 2009.

Loan Quality

        We use what we believe to be a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our loan portfolio. Our underwriting policies and practices govern the risk profile and credit and geographic concentration for our loan portfolio. We also have what we believe to be a comprehensive methodology to monitor these credit quality standards, including a risk classification system that identifies potential problem loans based on risk characteristics by loan type as well as the early identification of deterioration at the individual loan level. In addition to our allowance for loan losses, we have additional protections against credit losses, including loss-sharing agreements with the FDIC and purchase discounts on acquired loans.

Loans with Loss-Share Protection

        Loans with loss-share protection are the loans that we acquired in the Strategic Capital transaction in May 2009 and the WestBridge transaction in October 2010, which are covered by loss-sharing agreements that we entered into with the FDIC. Under the loss-sharing agreements, the FDIC has agreed, subject to reporting requirements, to reimburse us for up to a specified percentage of future losses incurred. Under the terms of the Strategic Capital loss-sharing agreement, the FDIC agreed to reimburse us for 80% of the first $167.0 million of net losses on covered assets, which include loans, other real estate owned and nonagency mortgage-backed securities, and 95% of all losses exceeding $167.0 million. As of December 31, 2010, we had submitted $100.5 million of losses to the FDIC under this loss-sharing agreement and we have collected or expect to collect our full portion of the submitted losses. Under the terms of the WestBridge loss-sharing agreement, the FDIC agreed to reimburse us for 80% of all net losses on covered assets, which include loans and other real estate owned. As of December 31, 2010, we had $137.0 million of covered loans, which represented 13.1% of our total loan portfolio.

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Discounts on PCI Loans

        We evaluate acquired loans for evidence of credit deterioration in order to determine proper accounting classification. Loans are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, or ASC 310-30, when there is evidence of credit deterioration since origination and for which it is probable, at acquisition, that we will be unable to collect all contractually required payments. At December 31, 2010, $83.1 million of acquired loans were within the scope of ASC 310-30.

        The following table presents information regarding the contractually required payments receivable, the cash flows expected to be collected and the estimated fair value of the loans acquired in the three acquisitions in which we acquired PCI loans, in each case as of the closing date of the transaction:

	WestBridge October 15, 2010						Strategic Capital May 22, 2009						Waterloo Bancshares February 12, 2009
(dollars in thousands)	Purchased Credit- Impaired Loans			Purchased Non-Credit- Impaired Loans			Purchased Credit- Impaired Loans			Purchased Non-Credit- Impaired Loans			Purchased Credit- Impaired Loans			Purchased Non-Credit- Impaired Loans
Contractually required payments (principal and interest)	$	55,717		$	17,151		$	128,191		$	87,276		$	39,023		$	73,462
Nonaccretable difference		(16,875	)		(1,490	)		(51,642	)		(6,962	)		(11,430	)		(1,827	)
Cash flows expected to be collected (principal and interest)		38,842			15,661			76,549			80,314			27,593			71,635
Accretable difference		(4,538	)		(1,893	)		(5,637	)		(8,114	)		(6,697	)		(21,036	)
Estimated fair value	$	34,304		$	13,768		$	70,912		$	72,200		$	20,896		$	50,599
Discount to contractually required payments	$	21,413		$	3,383		$	57,279		$	15,076		$	18,127		$	22,863
Discount %		38.4	%		19.7	%		44.7	%		17.3	%		46.5	%		31.1	%

        ASC 310-30 allows us to aggregate PCI loans into one or more pools according to common risk characteristics. The recorded balance of these pools is reduced by the portion expected to be uncollectible, referred to as the nonaccretable discount. A pool is then accounted for as a single asset with a composite interest rate and an aggregate expectation of cash flows net of expected credit losses. Cash flows are determined based on the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. Expected cash flows are discounted by an interest rate approximating the market rate of return for the pool of loans to determine fair value. The excess of contractual required payments, net of the nonaccretable discount, over fair value is referred to as the accretable discount. The accretable discount is recognized as interest income over the estimated remaining life of the portfolio.

        We review our portfolio quarterly and may make adjustments related to nonaccretable and accretable discounts as a result of actual cash flows received and for actual loss experience as compared

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to loss experience estimates used to calculate the existing discount balances. The following table shows changes in the accretable yield for PCI loans:

		As of December 31,
(dollars in thousands)		2010			2009
Balance at beginning of period		$	21,100		$	—
Additions due to acquisitions:
	Waterloo Bancshares		—			6,697
	Strategic Capital		—			5,637
	WestBridge		4,538			—
Accretion			(5,878	)		(2,941	)
Cash flow net additions			727			8,154
Reclassification from nonaccretable to accretable			2,658			3,553
Balance at end of period		$	23,145		$	21,100

        As of December 31, 2010, the balance of accretable discounts on our PCI loan portfolio, which was recorded in connection with the Strategic Capital, Waterloo Bancshares and WestBridge transactions, was $23.1 million. We may not accrete the full amount of these discounts into interest income in future periods if the assets to which these discounts are applied do not perform according to our expectations at the time of acquisition.

        We have also recorded accretable discounts in purchase accounting for loans that are accounted for under ASC 310-20, Non-Refundable Fees and Other Costs. Similar to the way in which we employ the fair value methodology described above, we consider expected prepayments and estimate the amount and timing of undiscounted cash flows in order to determine the accretable discount.

Analysis of the Allowance for Loan Losses

        The following table allocates the allowance for loan losses, or the allowance, by category:

			As of December 31,
(dollars in thousands)			2010		%(1)		2009		%(1)		2008		%(1)		2007		%(1)		2006		%(1)
Commercial loans:
	Commercial		$	2,847		0.27	$	2,481		0.40	$	1,226		0.36	$	1,399		0.49	$	1,126		0.39
	Commercial real estate			12,426		1.19		4,675		0.75		1,637		0.48		1,377		0.49		2,250		0.78
	Construction and land development			11,079		1.06		11,580		1.85		232		0.07		137		0.05		51		0.02
		Total commercial loans		26,352				18,736				3,095				2,913				3,427
Consumer loans:
	Residential real estate			1,074		0.10		970		0.16		528		0.16		268		0.09		285		0.09
	Consumer			1,062		0.10		60		0.01		95		0.03		51		0.02		54		0.02
		Total consumer loans		2,136				1,030				623				319				339
Total allowance for loan losses				28,488		2.72		19,766		3.17		3,718		1.10		3,232		1.14		3,766		1.30

(1)

Represents the percentage of the allowance to total loans in the respective category.

        The allowance and the balance of nonaccretable discounts represent our estimate of probable and reasonably estimable credit losses inherent in loans held for investment as of the respective balance sheet date. We assess the adequacy of our allowance for non-PCI loans separately from the allowance for our PCI loans.

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        Allowance for non-PCI loans.    Our methodology for assessing the adequacy of the allowance for non-PCI loans includes a general allowance for performing loans, which are grouped based on similar characteristics, and a specific allowance for individual impaired loans or loans considered by management to be in a high risk category. General allowances are established based on a number of factors, including historical loss rates, an assessment of portfolio trends and conditions, accrual status and economic conditions.

        For commercial and commercial real estate loans, a specific allowance may be assigned to individual loans based on an impairment analysis. Loans are considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of impairment is based on an analysis of the most probable source of repayment, including the present value of the loan's expected future cash flows, the estimated market value or the fair value of the underlying collateral. Interest income on impaired loans is accrued as earned, unless the loan is placed on nonaccrual status.

        Allowance for PCI loans.    PCI loans are recorded at their estimated fair value at the date of acquisition, with the estimated fair value including a component for estimated credit losses. An allowance related to PCI loans may be recorded in the future if a PCI loan pool experiences a decrease in expected cash flows as compared to the expected cash flows projected in the previous quarter. The following table shows our allowance by loan portfolio and by non-PCI and PCI loans as of December 31, 2010:

(dollars in thousands)	Non-Purchased Credit- Impaired Loans		Purchased Credit- Impaired Loans		Total
Commercial	$	2,327	$	520	$	2,847
Commercial real estate		8,965		3,461		12,426
Construction and land development		752		10,327		11,079
Residential		854		220		1,074
Consumer		1,045		17		1,062
Total allowance (net)	$	13,943	$	14,545	$	28,488

        Individual loans considered to be uncollectible are charged off against the allowance. Factors used in determining the amount and timing of charge-offs on loans include consideration of the loan type, length of delinquency, sufficiency of collateral value, lien priority and the overall financial condition of the borrower. Collateral value is determined using updated appraisals and/or other market comparable information. Charge-offs are generally taken on loans once the impairment is determined to be other than temporary. Recoveries on loans previously charged off are added to the allowance. Net charge-offs to average loans for the periods ended December 31, 2010 and December 31, 2009, were 0.51% and 0.88%, respectively.

        The allowance totaled $28.5 million at December 31, 2010, an increase of $8.7 million from December 31, 2009, primarily due to reserves required on the loan portfolio acquired in the AMCORE transaction subsequent to the acquisition and additional reserves required for PCI loans. Prior to late 2007, when the challenging economic conditions began, fluctuations in the allowance totals were primarily impacted by the growth and concentration levels in the loan portfolio.

        We analyze the loan portfolio, including delinquencies, concentrations, and risk characteristics, at least quarterly in order to assess the overall level of the allowance and nonaccretable discounts. We also rely on internal and external loan review procedures to further assess individual loans and loan pools, and economic data for overall industry and geographic trends.

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Provision for Loan Losses

        Provisions for loan and lease losses are charged to operations to record changes to the total allowance to a level deemed appropriate by us. The provision for loan losses totaled $13.6 million for the year ended December 31, 2010, compared to $20.7 million for the same period of 2009 and $1.1 million for 2008. The $7.1 million decrease in 2010 from 2009 was due to a decrease in 2010 in provision related to PCI loans offset by an increase in 2010 in provision for non-PCI loans. The $19.6 million increase in 2009 was primarily due to $12.6 million of provision related to PCI loans acquired in the Strategic Capital and Waterloo Bancshares transactions, which was a result of a decrease in expected cash flows since the date of the acquisition. A significant amount of the provision in 2009 was related to covered PCI loans, which resulted in an increase in the indemnification asset and a gain in noninterest income of $10.5 million. The other $6.1 million of provision related to non-PCI loans resulted from increased charge-offs in 2009 and an increase in non-PCI loans.

        The following table provides an analysis of the allowance, provision for loan losses and net charge-offs for each year in the five-year period ended December 31, 2010:

		As of December 31,
(dollars in thousands)		2010			2009			2008			2007			2006
Balance at the beginning of period		$	19,766		$	3,718		$	3,232		$	3,766		$	3,592
Charge-offs:
	Commercial		474			1,421			375			598			813
	Commercial real estate		2,535			2,508			184			92			159
	Construction and land development		1,619			704			188			62			—
	Residential real estate		280			345			147			235			166
	Consumer		432			61			61			122			136
Total charge-offs			5,340			5,039			955			1,109			1,274
Recoveries:
	Commercial		402			210			73			40			14
	Commercial real estate		16			15			4			21			7
	Construction and land development		—			62			26			—			—
	Residential real estate		15			37			7			2			12
	Consumer		49			35			25			15			54
Total recoveries			482			359			135			78			87
Net charge-offs			4,858			4,680			820			1,031			1,187
Branch acquisitions			—			—			255			—			—
Provision for loan losses			13,580			20,728			1,051			497			1,361
Balance at end of period		$	28,488		$	19,766		$	3,718		$	3,232		$	3,766
Period end gross loans		$	1,047,144		$	624,456		$	337,220		$	284,233		$	288,625
Average loans			951,502			530,411			292,525			281,029			280,602
Net charge-offs to average loans			0.51	%		0.88	%		0.28	%		0.37	%		0.42	%
Allowance to total loans			2.72	%		3.17	%		1.10	%		1.14	%		1.30	%

Problem Loans

        Loans are placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual, which is generally when the loan becomes 90 days past due, with the exception of some acquired loans. When a loan is placed

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on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and interest income is recorded as collected.

        We exclude PCI loans from nonperforming status because we expect to fully collect their new carrying value, which reflects significant purchase discounts, and, in the case of the loans acquired in the Strategic Capital and WestBridge acquisitions, because they are covered by loss-sharing agreements with the FDIC. If our expectation of reasonably estimable future cash flows deteriorates, the loans may be classified as nonaccrual loans and interest income will not be recognized until the timing and amount of future cash flows can be reasonably estimated.

        Real estate we acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until sold, and is carried at the balance of the loan at the time of foreclosure or at estimated fair value less estimated costs to sell, whichever is less.

        In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring, or TDR. Loans restructured at a rate equal to or greater than that of a new loan with comparable risk at the time the contract is modified are not considered to be impaired loans in calendar years subsequent to the restructuring.

        The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings. As noted above, nonperforming loans exclude PCI loans. The balances of nonperforming loans reflect the net investment in these assets, including deductions for purchase discounts.

		As of December 31,
(dollars in thousands)		2010			2009			2008			2007			2006
Nonperforming loans:
	Commercial	$	4,597		$	2,419		$	738		$	626		$	921
	Commercial real estate		18,046			6,451			2,304			3,049			1,797
	Construction and land development		741			881			27			216			257
	Residential real estate		1,835			1,690			1,042			530			1,221
	Consumer		1,051			98			50			31			48
Total nonperforming loans			26,270			11,539			4,161			4,452			4,244
Other real estate owned, non-covered			3,002			1,394			1,302			130			115
Nonperforming assets		$	29,272		$	12,933		$	5,463		$	4,582		$	4,359
Nonperforming loans to total loans			2.51	%		1.85	%		1.23	%		1.57	%		1.47	%
Nonperforming assets to total assets			1.79	%		1.16	%		1.24	%		1.20	%		1.06	%

        The increase in nonperforming loans in 2010 was due to an increase in nonaccrual commercial real estate. The increase was primarily due to three commercial real estate loans totaling $9.8 million that moved to nonaccrual status in 2010.

        We did not recognize any interest income on nonaccrual loans during 2010 while the loans were in nonaccrual status. We recognized interest income of $1.7 million in 2010 on these loans while they were in accrual status. Additional interest income that we would have recognized on these loans had they been current in accordance with their original terms was $1.3 million in 2010. We recognized interest income on TDRs of $121,006 in 2010.

        We utilize an asset risk classification system in compliance with guidelines established by the Federal Reserve as part of our efforts to improve asset quality. In connection with examinations of

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insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful," and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset is not warranted. Commercial loans that are classified are reviewed by our credit review committee monthly.

        We use a risk grading system to categorize and determine the credit risk of our loans. Potential problem loans include loans with a risk grade of 5, which are "watch credits," and loans with a risk grade of 6, which are "substandard" loans that are not considered to be impaired. These loans generally require more frequent loan officer contact and receipt of financial data to closely monitor borrower performance. Potential problem loans are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive officers and other members of the Bank's senior management team. The following table presents the recorded investment of potential problem commercial loans (excluding PCI loans) by risk category as of December 31, 2010:

	Risk Category
(dollars in thousands)	5		6(1)		Total
Commercial	$	12,463	$	7,802	$	20,265
Commercial real estate		32,948		11,482		44,430
Construction and land development		5,457		4,599		10,056
Total potential problem loans	$	50,868	$	23,883	$	74,751

(1)

Includes only those 6-rated loans that are not included in nonperforming loans.

Investment Securities

        Our investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk. The types and maturities of securities purchased are primarily based on our current and projected liquidity and interest rate sensitivity positions.

        The following table sets forth the book value, which is equal to fair market value because all investment securities were classified as available for sale as of the applicable date, and percentage of total investment securities of each category of investment security at December 31, 2010, 2009 and 2008:

		December 31,
		2010					2009					2008
(dollars in thousands)		Book Value		% of Total			Book Value		% of Total			Book Value		% of Total
Investment securities
	U.S. government	$	78,388		20.0	%	$	6,545		2.2	%	$	6,796		9.4	%
	Agency mortgage-backed		62,749		16.0	%		25,975		8.7	%		38,462		53.0	%
	Covered nonagency mortgage-backed(1)		134,029		34.2	%		151,619		50.8	%		—		—
	Tax-exempt		116,576		29.8	%		114,523		38.3	%		27,278		37.6	%
Total investment securities		$	391,742		100.0	%	$	298,662		100.0	%	$	72,536		100.00	%

(1)

All nonagency mortgage-backed securities are covered under the loss-sharing agreement we entered into with the FDIC in connection with the Strategic Capital acquisition. None of our other investment securities are covered under a loss-sharing agreement with the FDIC.

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        The following table sets forth the book value, scheduled maturities and weighted average yields for our investment portfolio at December 31, 2010:

(dollars in thousands)		Book Value		% of Total Investment Securities			Weighted Average Yield
U.S. government securities:
	Maturing within one year	$	21,997		5.6	%		0.13	%
	Maturing in one to five years		55,404		14.1	%		0.75	%
	Maturing in five to ten years		987		0.3	%		0.57	%
	Maturing after ten years		—		—			—
Total U.S. government securities		$	78,388		20.0	%		0.57	%
Agency mortgage-backed securities:
	Maturing within one year	$	335		0.1	%		4.55	%
	Maturing in one to five years		931		0.2	%		4.09	%
	Maturing in five to ten years		36,752		9.4	%		2.19	%
	Maturing after ten years		24,731		6.3	%		3.58	%
Total agency mortgage-backed securities		$	62,749		16.0	%		2.78	%
Covered nonagency mortgage-backed securities(1):
	Maturing within one year	$	—		—			—
	Maturing in one to five years		—		—			—
	Maturing in five to ten years		—		—			—
	Maturing after ten years		134,029		34.2	%		11.93	%
Total covered nonagency mortgage-backed securities		$	134,029		34.2	%		11.93	%
Tax-exempt securities(2):
	Maturing within one year	$	3,536		0.9	%		4.81	%
	Maturing in one to five years		12,942		3.3	%		5.75	%
	Maturing in five to ten years		17,065		4.4	%		5.97	%
	Maturing after ten years		83,033		21.2	%		6.70	%
Total tax-exempt securities		$	116,576		29.8	%		6.43	%
Total investment securities		$	391,742		100.00	%		6.55	%

(1)

All nonagency mortgage-backed securities are covered under the loss-sharing agreement we entered into with the FDIC in connection with the Strategic Capital acquisition. None of our other investment securities are covered under a loss-sharing agreement with the FDIC.

(2)

Weighted average yield for tax-exempt securities are presented on a tax-equivalent basis assuming a federal income tax rate of 35%.

        The increase in our investment portfolio since December 31, 2008 primarily reflects an increase in covered nonagency mortgage-backed securities and obligations of states and political subdivisions securities. This change in portfolio mix was primarily attributable to the Strategic Capital acquisition in May 2009 pursuant to which we acquired $178.0 million in private label collateralized mortgage obligations, or CMOs, and $85.1 million of state and political subdivision securities. All of our CMOs are covered under a loss-sharing agreement with the FDIC pursuant to which the FDIC has agreed to reimburse us for 80% of the first $167.0 million of net losses (when aggregated with losses on the other covered assets) and 95% of net losses exceeding $167.0 million. The loss-sharing agreement for the CMOs has a seven-year term. In addition, at the time of the Strategic Capital acquisition, we recorded a $35.2 million write-down on the acquired CMO portfolio to reflect its fair value. The predominant form of collateral underlying the CMOs is fixed-rate, first lien residential mortgages of both conforming

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and jumbo mortgage size with both traditional and nontraditional underwriting qualities (e.g., jumbo, conforming Alt-A and jumbo Alt-A, which includes reduced documentation types). All of our CMOs are senior securities that rank ahead of subordinated tranches intended to be in a first-loss position with respect to the collateral pool. The majority of these securities were originated from 2003 through 2007. At December 31, 2010, our CMO portfolio had an amortized cost of $133.0 million with a fair value of $134.0 million and an unrealized gain of $1.0 million. We do not expect to sell any of our CMOs before recovery of their amortized cost bases, which may be at maturity.

        The mix of our investment portfolio has shifted as investments in U.S. government and agency mortgage-backed securities increased $108.6 million in 2010. At December 31, 2009, these investments represented 10.9% of our investment portfolio compared to 36.0% of our portfolio by December 31, 2010. U.S. government and agency mortgage-backed securities were purchased to provide improved liquidity, as these are readily pledged for deposit and borrowing collateral requirements. Our investment in covered nonagency mortgage-backed securities decreased $17.6 million in 2010 due to $25.0 million in paydowns received on the securities, offset in part by an increase in unrealized gains of $7.4 million. In the current interest rate environment, we expect similar decreases in future periods.

        Declines in the fair value of available-for-sale investment securities are recorded as either temporary impairment or other-than-temporary impairment, or OTTI. Temporary adjustments are recorded when the fair value of a security fluctuates from its historical cost. Temporary adjustments are recorded in accumulated other comprehensive income and impact our equity position. Temporary adjustments do not impact our net income. A recovery of available-for-sale security prices also is recorded as an adjustment to other comprehensive income for securities that are temporarily impaired, and results in a positive impact to our equity position. OTTI is recorded when the fair value of an available-for-sale security is less than historical cost, and it is probable that all contractual cash flows will not be collected. OTTI is recorded to noninterest income and, therefore, results in a negative impact to our net income. Because the available-for-sale securities portfolio is recorded at fair value, the conclusion as to whether an investment decline is other-than-temporarily impaired does not significantly impact our equity position, as the amount of the temporary adjustment has already been reflected in accumulated other comprehensive income or loss. A recovery in the value of an other-than-temporarily impaired security is recorded as additional interest income over the remaining life of the security.

        The table below presents the credit ratings at December 31, 2010 for our investment securities measured at fair value:

	As of December 31, 2010
					Average Credit Rating
(dollars in thousands)	Amortized Cost		Est. Fair Value		AAA		AA+/-		A+/-		BBB+/-		< BBB-		Not Rated
U.S. government	$	78,995	$	78,388	$	78,388	$	—	$	—	$	—	$	—	$	—
Agency mortgage-backed		62,090		62,749		62,749		—		—		—		—		—
Covered nonagency mortgage-backed(1)		133,058		134,029		6,567		—		—		—		95,398		32,064
Tax-exempt		117,925		116,576		377		27,466		14,519		6,065		—		68,149
Total investments	$	392,068	$	391,742	$	148,081	$	27,466	$	14,519	$	6,065	$	95,398	$	100,213

(1)

All nonagency mortgage-backed securities are covered under the loss-sharing agreement we entered into with the FDIC in connection with the Strategic Capital acquisition. None of our other investment securities are covered under a loss-sharing agreement with the FDIC.

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Cash and Cash Equivalents

        Cash and cash equivalents decreased $26.8 million, or 31.9%, to $57.1 million as of December 31, 2010 from $83.9 million at December 31, 2009. We experienced strong core deposit growth during the year ended December 31, 2010, which, combined with other improved liquidity metrics, allowed us to reduce our excess cash position and allocate resources to higher return assets.

Indemnification Asset (FDIC Loss-Sharing Agreements)

        At December 31, 2010, our indemnification asset totaled $67.5 million, or 4.1% of total assets, as compared to $72.7 million, or 6.5% of total assets, at December 31, 2009. This amount represents the present value of estimated future payments to be reimbursed to us by the FDIC pursuant to the loss-sharing agreements that we entered into in connection with the Strategic Capital and WestBridge transactions in May 2009 and October 2010, respectively. See "BUSINESS—Our Recent Growth—Acquisition Strategy and Recent Acquisitions: FDIC-Assisted Acquisition of Strategic Capital Bank." The loss-sharing agreements significantly mitigate the risk of future loss on the loans and investment securities acquired. The loss-sharing agreements provide for a reimbursement period of five years for commercial loans and other real estate owned, seven years for nonagency mortgage-backed securities and ten years for single family residential mortgages, in each case measured from the date of the applicable loss-sharing agreement. Under the terms of the Strategic Capital loss-sharing agreement, the FDIC has agreed to reimburse 80% of the first $167.0 million of net losses on the loans, other real estate owned and nonagency mortgage-backed investment securities acquired and 95% of net losses exceeding $167.0 million. As of December 31, 2010, we had submitted $100.5 million of losses to the FDIC under this loss-sharing agreement and we have collected or expect to collect our full portion (80%) of the submitted losses. Under the terms of the WestBridge loss-sharing agreement, the FDIC has agreed to reimburse 80% of the net losses on the loans and other real estate owned acquired. As a result, we recognized an indemnification asset representing the fair value of the future reimbursement payments expected to be paid by the FDIC pursuant to the loss-sharing agreement. Any changes resulting from either increases or decreases in expected payments pursuant to the loss-sharing agreements will impact the carrying value of our related indemnification asset and have a related effect on our earnings.

Goodwill and Other Intangible Assets

        Our total goodwill was $7.6 million at both December 31, 2010 and December 31, 2009. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired. Our other intangible assets, which consist of core deposit and trust relationship intangibles, were $13.2 million at December 31, 2010 and $1.1 million at December 31, 2009. These assets are amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of three to 10 years. The increase in core deposit intangibles from December 31, 2009 to December 31, 2010 was primarily the result of $11.8 million of core deposit intangibles recorded in connection with the AMCORE transaction.

Liabilities

        Total liabilities increased $487.3 million to $1,527.8 million at December 31, 2010 from $1,040.5 million at December 31, 2009, primarily due to growth in deposits, both organic and through our assumption of deposit liabilities in connection with the AMCORE and WestBridge transactions in March 2010 and October 2010, respectively. In the AMCORE transaction, we assumed deposits with a fair market value of $493.4 million. In the WestBridge transaction, we assumed deposits with a fair market value of $61.1 million.

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Deposits

        We emphasize developing total client relationships with our customers in order to increase our retail core deposit base, which is our primary funding source. Our deposits consist of non-interest-bearing and interest-bearing demand, savings and time deposit accounts.

        The following table summarizes our average deposit balances and weighted average rates at December 31, 2010, 2009 and 2008:

			December 31,
			2010					2009					2008
(dollars in thousands)			Average Balance		Weighted Average Rate			Average Balance		Weighted Average Rate			Average Balance		Weighted Average Rate
Deposits
	Noninterest-bearing demand		$	135,323		—		$	58,951		—		$	37,710		—
	Interest-bearing:
		NOW		159,919		0.58	%		51,565		0.58	%		36,994		0.78	%
		Money market		305,692		1.31	%		110,315		2.27	%		48,491		1.96	%
		Savings		61,856		0.37	%		24,860		0.31	%		13,980		0.32	%
		Time, less than $100,000		269,716		2.32	%		169,284		2.76	%		91,998		4.07	%
		Time, $100,000 and over		160,299		2.62	%		93,827		3.36	%		49,110		4.09	%
		Time, brokered		182,293		3.22	%		243,014		2.70	%		31,651		4.46	%
	Total interest-bearing			1,139,775		1.74	%		692,865		2.51	%		272,224		3.06	%
Total deposits			$	1,275,098		1.69	%	$	751,816		2.30	%	$	309,934		2.68	%

        The following table sets forth the maturity of time deposits of $100,000 or more and brokered deposits as of December 31, 2010:

	Maturity Within:
(dollars in thousands)	Three Months		Three to Six Months		Six to 12 Months		After 12 Months		Total
Time, $100,000 and over	$	44,825	$	17,770	$	44,738	$	39,265	$	146,598
Brokered deposits		56,623		—		24,697		78,229		159,549
Total	$	101,448	$	17,770	$	69,435	$	117,494	$	306,147

        Total deposits increased $446.4 million, or 48.6%, to $1,364.5 million at December 31, 2010 from $918.1 million at December 31, 2009. The AMCORE transaction in March 2010 added $493.4 million to our deposits. These deposits consisted of: $100.1 million, or 20.3%, of non-interest-bearing demand accounts; $173.0 million, or 35.1%, of interest-bearing transaction accounts; and $220.1 million, or 44.6%, of time deposits. The AMCORE transaction impacted our deposit mix as the availability of non-interest-bearing demand accounts as a funding source increased significantly at the same time as the reliance on time deposits decreased significantly. At December 31, 2010, total deposits were comprised of 12.7% non-interest-bearing demand accounts, 43.9% interest-bearing transaction accounts and 43.4% of time deposits. At December 31, 2009, total deposits were comprised of 7.0% of non-interest-bearing demand accounts, 32.9% interest-bearing transaction accounts and 60.1% time deposits.

        At December 31, 2009, brokered deposit balances were $286.7 million, and represented 31.2% of total deposits. A substantial majority of the brokered deposits we held were acquired in the FDIC-assisted acquisition of Strategic Capital in May 2009. Our post-acquisition strategy has been to systematically reduce the level of brokered deposits through our organic deposit growth and with cash generated from the acquisition and, since the Strategic Capital transaction, our brokered deposits have

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declined steadily as a result of maturities and the fact that we called $98.0 million of these deposits in June 2010. Of these deposits, $35.0 million were refinanced at lower rates and the remaining $63.0 million were paid off. At December 31, 2010, brokered deposits totaled $159.5 million, representing 11.7% of total deposits. During 2010, we grew transactional accounts organically by $123.6 million and we continue to focus on growing core transactional deposits through our performance banking initiative.

Short-Term Borrowings

        In addition to deposits, we use short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase and Federal Reserve Discount Window advances, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. Our short-term borrowings increased to $56.7 million at December 31, 2010 from $13.2 million at December 31, 2009, but the weighted average interest rate of our short-term borrowings at December 31, 2010 declined to 0.88% from 1.54% at December 31, 2009. We increased our use of repurchase agreements in 2010 primarily in furtherance of our strategy to reduce the level of brokered deposits that we acquired in the Strategic Capital transaction in May 2009. As noted above, in June 2010, we called $98.0 million of brokered deposits we had acquired in the Strategic Capital transaction, $63.0 million of which were paid off and not refinanced into new brokered deposits. Our repurchase agreements have significantly lower interest rates than the brokered deposits we acquired in the Strategic Capital transaction.

        The following table sets forth the amount of short-term borrowings outstanding, as well as the weighted average interest rate thereon, as of the dates indicated. In addition, it sets forth the maximum amount of short-term borrowings outstanding at any month-end during each period, the average amounts outstanding during each period and the weighted average interest rate thereon. The balances set forth below are comprised primarily of repurchase agreements.

		As of and for the year ended December 31,
(dollars in thousands)		2010			2009			2008
Outstanding at year-end		$	56,718		$	13,191		$	27,551
Maximum amount outstanding at any month-end			65,221			21,586			46,464
Average amount outstanding			38,580			18,197			24,350
Weighted average interest rate:
	During year		1.14	%		1.46	%		1.84	%
	End of year		0.88	%		1.54	%		1.32	%

FHLB Borrowings

        In addition to deposits and short-term borrowings, we use borrowings from the FHLB as an additional source of liquidity. Our FHLB borrowings decreased $5.7 million, or 7.4%, to $71.3 million at December 31, 2010 from $77.0 million at December 31, 2009 due to scheduled maturities.

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        The following table provides a summary of our FHLB advances at the dates indicated:

	December 31,
(in thousands)	2010		2009		2008
Fixed-rate, fixed term, at rates from 2.07% to 3.92%, averaging 2.66% (maturing July 2011 through July 2014)	$	55,000	$	—	$	—
Fixed-rate, fixed term, at rates from 2.07% to 3.92%, averaging 2.73% (maturing March 2010 through July 2014)		—		60,450		—
Fixed-rate, fixed term, at rates from 3.19% to 3.92%, averaging 3.52% (maturing March 2010 through December 2011)		—		—		10,450
Putable fixed-rate, at rates from 4.02% to 4.09%, averaging 4.07% (maturing January 2016 through November 2016)		16,193		16,405		—
Structured repayment, fixed-rate, at 4.68% (maturing January 2013)		86		115		143
Total FHLB advances	$	71,279	$	76,970	$	10,593

Long-Term Subordinated Notes

        In May 2009, we issued an $11.3 million subordinated note bearing a fixed interest rate of 15.0% until maturity on April 1, 2020. We may redeem this note on or after July 1, 2013. In connection with the issuance of the subordinated note, we issued to this investor a warrant to acquire 630 shares of our Series C Preferred Stock at a price of $10,000 per share, and this warrant was exchanged in April 2011 for a warrant to acquire 630 shares of our Series E Preferred Stock. The Series E Preferred Stock has substantially the same terms as the Series C Preferred Stock, including the dividend rate and conversion terms. This warrant expires April 1, 2016. Prior to July 1, 2013, the exercise price of the warrant may be paid solely by the exchange of an amount of the principal then outstanding equal to the total exercise amount.

        In March 2010, we issued an additional $5.0 million subordinated note bearing a fixed interest rate of 12.0% until maturity on April 1, 2020. We may redeem this note on or after July 1, 2016. As of December 31, 2010, both subordinated notes remained outstanding. In connection with the issuance of the subordinated note, we issued to this investor a warrant to acquire 500 shares of our Series D Preferred Stock at a price of $10,000 per share, and this warrant was exchanged in April 2011 for a warrant to acquire 500 shares of our Series F Preferred Stock. The Series F Preferred Stock has substantially the same terms as the Series D Preferred Stock, including the dividend rate and conversion terms. This warrant expires April 1, 2016. The exercise price of the warrant may be paid solely by the exchange of an amount of the principal then outstanding equal to the total exercise amount.

Junior Subordinated Debentures Related to Trust Preferred Securities

        As of December 31, 2010 and 2009, $10.0 million aggregate principal amount of junior subordinated debentures issued to our subsidiary trust remained outstanding. All of the junior subordinated debentures are unsecured with interest payable quarterly at an interest rate of the three-month LIBOR plus 2.75%. As of December 31, 2010 and 2009, the interest rate on the debentures was 3.01% and 6.58%, respectively. The debentures may be redeemed, subject to approval of the Federal Reserve, at our option. The debentures mature on April 23, 2034.

Capital Resources and Liquidity Management

Capital Resources

        Shareholders' equity is influenced primarily by earnings, dividends, sales and redemptions of common stock and preferred stock and, to a lesser extent, changes in unrealized holding gains or

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losses, net of taxes, on available-for-sale investment securities. Shareholders' equity increased $33.2 million, or 45.4%, to $106.5 million at December 31, 2010 from $73.3 million at December 31, 2009, due to the retention of earnings and the issuance of preferred stock. During the year ended December 31, 2010, we generated net income of $12.1 million and paid cash dividends of $1.7 million to common shareholders and $3.7 million to preferred shareholders. In 2010, we raised additional capital of $23.8 million through the sale of shares of our Series D Preferred Stock. For more information regarding our Series D Preferred Stock, see "DESCRIPTION OF OUR CAPITAL STOCK."

        Shareholders' equity increased $36.0 million, or 96.5%, to $73.3 million at December 31, 2009 from $37.3 million at December 31, 2008 due to retention of earnings and the issuance of preferred stock. In 2009, we generated net income of $18.3 million and paid aggregate cash dividends of $1.8 million to common shareholders and $1.7 million to preferred shareholders. In May 2009, we raised $23.6 million of capital through the sale of shares of our Series C Preferred Stock. In addition, in January 2009, we raised $10.2 million of capital through the sale of shares of our Series A Preferred Stock and Series B Preferred Stock to the U.S. Treasury pursuant to the TARP Capital Purchase Program; however, we redeemed all of this preferred stock in December 2009 and, thus, this amount was not included in shareholders' equity at December 31, 2009. For more information regarding our Series C Preferred Stock, see "DESCRIPTION OF OUR CAPITAL STOCK."

Liquidity Management

        Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

        Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-bearing deposits in banks, federal funds sold, available-for-sale investment securities and maturing or prepaying balances in our investment and loan portfolios. Liquid liabilities include core deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional national market noncore deposits, the issuance of additional collateralized borrowings such as FHLB advances, the issuance of debt securities, additional borrowings through the Federal Reserve's discount window and the issuance of preferred or common securities. Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. For additional information regarding our operating, investing and financing cash flows, see the Consolidated Statements of Cash Flows provided in our consolidated financial statements.

        Integral to our liquidity management is the administration of short-term borrowings. To the extent we are unable to obtain sufficient liquidity through core deposits, we seek to meet our liquidity needs through wholesale funding on either a short- or long-term basis.

        Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. As of December 31, 2010, $56.7 million of securities sold under agreements to repurchase were

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outstanding, which was an increase of $43.5 million, or 330%, from $13.2 million as of December 31, 2009.

        We did not have any unsecured federal funds lines of credit as of December 31, 2010. We established an additional line of credit of $22.3 million and $17.9 million, respectively, from the Federal Reserve Discount Window in 2010 and 2009. Federal Reserve Discount Window advances were collateralized by a pool of commercial real estate loans totaling $41.4 million and $38.0 million, respectively, as of December 31, 2010 and 2009.

        At December 31, 2010, we had $71.3 million of outstanding advances from the FHLB. Based on the values of stock, securities, and loans pledged as collateral, we have $12.6 million of additional borrowing capacity with the FHLB. We did not have any borrowings outstanding with the Federal Reserve at December 31, 2010, and our borrowing capacity is limited only by eligible collateral. At December 31, 2010, we had eligible security and loan collateral available to be pledged to one or more facilities that could have provided additional borrowing capacity of $22.3 million. We also maintain relationships in the capital markets with brokers and dealers to issue certificates of deposit.

        The Company is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. The Company's main source of funding is dividends declared and paid to us by the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For additional information regarding dividend restrictions, see "RISK FACTORS—Risks Related to Our Business," "DIVIDEND POLICY" and "REGULATION AND SUPERVISION."

Regulatory Capital Requirements

        We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

        We expect that, as a result of recent developments such as the Dodd-Frank Act and Basel III, we will be subject to increasingly stringent regulatory capital requirements. For further discussion of the changing regulatory framework in which we operate, see "REGULATION AND SUPERVISION."

        At December 31, 2010, the Bank exceeded all regulatory capital requirements and was considered to be "well-capitalized" with a Tier 1 leverage ratio of 6.93%, a Tier 1 capital to risk-weighted assets ratio of 9.98% and a total capital to risk-weighted assets ratio of 11.24%.

        At December 31, 2009, the Bank also exceeded all regulatory capital requirements and was considered to be "well-capitalized" with a Tier 1 leverage ratio of 7.67%, a Tier 1 capital to risk-weighted assets ratio of 12.56% and a total capital to risk-weighted assets ratio of 13.83%.

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Contractual Obligations

        The following table contains supplemental information regarding our total contractual obligations at December 31, 2010:

	Payments Due
(dollars in thousands)	Within One Year		One to Three Years		Three to Five Years		After Five Years		Total
Deposits without a stated maturity	$	773,358	$	—	$	—	$	—	$	773,358
Time deposits		397,573		140,761		26,762		26,063		591,159
Federal funds purchased and securities sold under repurchase agreements		56,718		—		—		—		56,718
Other borrowed funds		5,000		25,086		25,000		32,493		87,579
Construction of new corporate headquarters		16,000		—		—		—		16,000
Operating lease obligations		759		670		355		137		1,921
Junior subordinated debt related to trust preferred securities		—		—		—		10,000		10,000
Total contractual obligations	$	1,249,408	$	166,517	$	52,117	$	68,693	$	1,536,735

        We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

Off-Balance Sheet Arrangements

        We have limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

        In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets. Most of these commitments mature within two years and are expected to expire without being drawn upon. Standby letters of credit are included in the determination of the amount of risk-based capital that the Company and the Bank are required to hold.

        We enter into contractual loan commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon customers maintaining specific credit standards until the time of loan funding. We decrease our exposure to losses under these commitments by subjecting them to credit approval and monitoring procedures. We assess the credit risk associated with certain commitments to extend credit and establish a liability for probable credit losses.

        Standby letters of credit are written conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event that the customer does not perform in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer. Our policies generally require that standby letter of credit

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arrangements contain security and debt covenants similar to those contained in loan agreements. See Note 19 to our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 for additional information regarding our contractual obligations.

        We guarantee the distributions and payments for redemption or liquidation of the trust preferred securities issued by our wholly owned subsidiary business trust to the extent of funds held by the trusts. Although this guarantee is not separately recorded, the obligation underlying the guarantee is fully reflected on our consolidated balance sheets as junior subordinated debentures held by subsidiary trusts. The junior subordinated debentures currently qualify as Tier 1 capital under the Federal Reserve capital adequacy guidelines. For additional information regarding the subordinated debentures, see Note 10 to our consolidated financial statements as of and for the years ended December 31, 2010 and 2009.

Quantitative and Qualitative Disclosures About Market Risk

Market Risk

        Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified two primary sources of market risk: interest rate risk and price risk.

Interest Rate Risk

Overview

        Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers' ability to prepay residential mortgage loans at any time and depositors' ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).

        Our board of directors Asset-Liability Committee, or ALCO, establishes broad policy limits with respect to interest rate risk. ALCO establishes specific operating guidelines within the parameters of the board of directors' policies. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO regularly monitors the level of interest rate risk sensitivity to ensure compliance with the board of directors' approved risk limits.

        Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

        An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

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Income Simulation and Economic Value Analysis

        Interest rate risk measurement is performed quarterly. Two broad approaches to modeling interest rate risk are employed: income simulation and economic value of equity, or EVE, analysis. An income simulation analysis is used to measure the sensitivity of net interest income to changes in market rates over a one- and two-year time periods. EVE analysis is used to measure the sensitivity of the values of period-end assets and liabilities to changes in market interest rates. EVE analysis serves as a complement to income simulation modeling as it provides risk exposure estimates for time periods beyond the one- and two-year simulation periods.

        The models used for these measurements take into account prepayment speeds on mortgage loans, mortgage-backed securities, and consumer installment loans, as well as cash flows of other assets and liabilities. Balance sheet assumptions are also considered in the income simulation model.

        The baseline scenario for income simulation analysis, with which all other scenarios are compared, is based on market interest rates implied by the prevailing yield curve as of the period-end. Alternative interest rate scenarios are then compared with the baseline scenario. These alternative interest rate scenarios include movements in interest rates that alter the shape of the yield curve with a positive or negative slope.

        The simulations for evaluating short-term interest rate risk exposure are scenarios that model immediate +/-100 and +/-200 basis points parallel shifts in market interest rates over the next one- and two-year periods beyond the interest rate change implied by the current yield curve. We assumed market interest rates would not fall below 0% over the next one- and two-year periods for the scenarios that used the -100 and -200 basis points parallel shift in market interest rates. Current policy limits these exposures to minus 10% and 20%, for the immediate +/-100 and +/-200 basis point increase and decrease, of the anticipated level of net interest income over the corresponding 12-month period assuming no change in interest rate. The table below shows the results of the scenarios as of December 31, 2010, and December 31, 2009. All of the positions were within the board of directors' policy limits.

		Net Interest Income Sensitivity
		Immediate Change in Rates
(dollars in thousands)		-200			-100			+100			+200
December 31, 2010:
	Dollar change	$	(5,036	)	$	(1,200	)	$	(1,632	)	$	(3,131	)
	Percent change		(8.2	)%		(1.9	)%		(2.6	)%		(5.1	)%
December 31, 2009:
	Dollar change	$	567		$	406		$	290		$	291
	Percent change		1.5	%		1.1	%		0.8	%		0.8	%

        The net interest income at risk reported as of December 31, 2010 for the +200 basis points scenario shows a change to a liability-sensitive near-term interest rate risk position compared with December 31, 2009. The primary factors contributing to this change are the decline in market interest rates over the course of 2010 along with growth in deposits and net free funds, offset by the AMCORE and WestBridge transactions during 2010.

        The following table shows the income sensitivity as of December 31, 2010 of select portfolios to changes in market interest rates. A portfolio with 100% sensitivity would indicate that interest income and expense will change with the same magnitude and direction as interest rates. A portfolio with 0% sensitivity would indicate that interest income and expense will not change as a result of a change in interest rates. For the +200 basis point scenario, total interest sensitive income is 10.9% sensitive to

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changes in market interest rates, while total interest sensitive expense is 75.6% sensitive to changes in market interest rates.

					Percentage Change in Interest Income / Expense for a Given Change in Interest Rates Over (Under) Base Case Parallel Shock
		Percent of Total Earning Assets
					-200			-100			+100			+200
Total gross loans			72	%		(10.6	)%		(5.2	)%		5.8	%		12.3	%
Total investment and other earning assets			28	%		(6.7	)%		(3.1	)%		4.1	%		6.9	%
	Total interest sensitive income					(9.6	)%		(4.7	)%		5.4	%		10.9	%
Total interest-bearing deposits			82	%		(16.5	)%		(16.8	)%		44.6	%		89.2	%
Total borrowings			11	%		(11.9	)%		(11.8	)%		22.9	%		46.1	%
	Total interest sensitive expense					(15.1	)%		(15.2	)%		37.8	%		75.6	%

        The primary simulations for EVE at risk assume immediate +/-100 and +/-200 basis point parallel shifts in market interest rates beyond the interest rate change implied by the current yield curve. The table below outlines the December 31, 2010, results compared with December 31, 2009. Current policy limits these exposures to minus 15% and 25%, for the immediate +/-100 and +/-200 basis point increase and decrease, of the anticipated level of economic value of equity over the corresponding 12-month period assuming no change in interest rate. All of the positions were within the board of directors' policy limits.

		Economic Value of Equity Sensitivity
		Immediate Change in Rates
(dollars in thousands)		-200			-100			+100			+200
December 31, 2010:
	Dollar change	$	(9,349	)	$	1,603		$	(15,650	)	$	(27,265	)
	Percent change		(4.9	)%		0.8	%		(8.1	)%		(14.2	)%
December 31, 2009:
	Dollar change	$	(7,982	)	$	(2,072	)	$	(3,663	)	$	(10,236	)
	Percent change		(5.9	)%		(1.5	)%		(2.7	)%		(7.6	)%

        The EVE at risk reported as of December 31, 2010 for the +200 basis points scenario shows a change to a lower long-term liability sensitive position compared with December 31, 2009. The primary factors contributing to this change are the decline in market interest rates over the course of 2010 along with growth in deposits and net free funds, offset by the assets and liabilities acquired in the AMCORE and WestBridge transactions during 2010.

        The following table shows the economic value sensitivity as of December 31, 2010 of select portfolios to changes in market interest rates. The change in economic value for each portfolio is measured as the percent change from the base economic value for the portfolio. For the +200 basis point scenario, total net tangible assets decreased in value 5.0% to changes in market interest rates,

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while total net tangible liabilities increase in value 3.5% to changes in market interest rates. The EVE at risk for the +200 basis point scenario is liability sensitive.

					Percentage Change in Interest Net Tangible Assets / Liabilities for a Given Change in Interest Rates Over (Under) Base Case Parallel Shock
		Percent of Total Net Tangible Assets
					-200			-100			+100			+200
Total gross loans			65	%		1.8	%		1.3	%		(1.2	)%		(2.5	)%
Total investment and other earning assets			25	%		6.1	%		3.8	%		(5.8	)%		(10.6	)%
	Total net tangible assets					3.1	%		2.1	%		(2.6	)%		(5.0	)%
Total interest-bearing deposits			74	%		(3.9	)%		(2.0	)%		1.8	%		3.5	%
Total borrowings			9	%		(3.4	)%		(1.9	)%		1.7	%		3.5	%
	Total net tangible liabilities					(3.8	)%		(2.0	)%		1.8	%		3.5	%

Price Risk

        Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting. We have price risk from equity investments, and investments in mortgage-backed securities.

Critical Accounting Policies and Estimates

        The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

        Accounting policies, as described in detail in the notes to our consolidated financial statements are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. We believe that the critical accounting policies and estimates discussed below require us to make difficult, subjective or complex judgments about matters that are inherently uncertain. Changes in these estimates that are likely to occur from period to period, or the use of different estimates that we could have reasonably used in the current period, would have a material impact on our financial position, results of operations or liquidity.

Loans Held for Investment

        Loans held for investment includes loans we originate and retain on the balance sheet and other loans acquired through acquisition. Our accounting policies require that we evaluate all acquired loans for evidence of deterioration in credit quality since origination and to evaluate whether it is probable that we will collect all contractually required payments from the borrower. Loans acquired with evidence of deterioration in credit quality are accounted for as PCI loans. For PCI loans, the amount of contractually required payments receivable in excess of the amount of future cash flows we estimate at acquisition is considered a nonaccretable difference. The PCI loans are reflected on the balance sheet based on the amount expected to be collected. In addition, the amount of future cash flows expected to be collected in excess of the fair value of the PCI loans is considered accretable yield and is recognized in interest income on a level-yield basis over the estimated life of the acquired loans.

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        We reevaluate our original estimates of cash flows expected to be collected over the life of the PCI loans on a quarterly basis. If it is probable, based on current information and events, that there is a significant increase in cash flows previously expected to be collected, or if actual cash flows are significantly greater than cash flows previously expected, we adjust the amount of accretable yield by reclassification from nonaccretable difference. Conversely, if we believe we will be unable to collect all cash flows expected at acquisition, we establish a valuation allowance through the allowance for loan losses with a change to the provision for loan losses.

        Determining the accretable and nonaccretable amounts at acquisition and the ongoing reevaluation of expected cash flows are considered critical accounting estimates, as these require significant judgment and the use of subjective measurements, including our assessment of historical loss rates, changes in the nature of the portfolio and delinquency trends.

Investment Securities

        Investment securities generally must be classified as held to maturity, available for sale or trading. Held-to-maturity securities are principally debt securities that we have both the positive intent and ability to hold to maturity. Trading securities are held primarily for sale in the near term to generate income. Securities that do not meet the definition of trading or held to maturity are classified as available for sale.

        The classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on these securities. Unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise. Trading and available-for-sale securities are measured at fair value each reporting period. Unrealized gains and losses on available-for-sale securities are recorded as a separate component of shareholders' equity (accumulated other comprehensive income or loss) and do not affect earnings until realized or deemed to be OTTI. Investment securities that are classified as held to maturity are recorded at amortized cost, unless deemed to be OTTI.

        The fair values of investment securities are generally determined by various pricing models. We evaluate the methodologies used to develop the resulting fair values. We perform a quarterly analysis on the pricing of investment securities to ensure that the prices represent a reasonable estimate of the fair value. Our procedures include initial and ongoing review of pricing methodologies and trends. We seek to ensure prices represent a reasonable estimate of fair value through the use of broker quotes, current sales transactions from our portfolio and pricing techniques, which are based on the net present value of future expected cash flows discounted at a rate of return market participants would require. Significant inputs used in internal pricing techniques are estimated by type of underlying collateral, estimated prepayment speeds where applicable and appropriate discount rates. As a result of this analysis, if we determine there is a more appropriate fair value, the price is adjusted accordingly.

        When the level and volume of trading activity for certain securities has significantly declined or when we believe that pricing is based in part on forced liquidation or distressed sales, we estimate fair value based on a combination of pricing information and an internal model using a discounted cash flow approach. We make certain significant assumptions in addition to those discussed above related to the liquidity risk premium, specific nonperformance and default experience in the collateral underlying the security. The values resulting from each approach are weighted to derive the final fair value for each security trading in an inactive market.

        The fair value of investment securities is a critical accounting estimate. Changes in the fair value estimates that are likely to occur from period to period, or the use of different estimates that we could have reasonably used in the current period, could have a material impact on our financial position, results of operations or liquidity.

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Allowance for Loan Losses

        The allowance for loan losses represents management's estimate of probable and reasonably estimable credit losses inherent in the held for investment loan portfolio. In determining the allowance, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably estimated. On a quarterly basis, we assess the risk inherent in our loan portfolio based on qualitative and quantitative trends in the portfolio, including the internal risk classification of loans, historical loss rates, changes in the nature of the portfolio, industry concentrations, delinquency trends, detailed reviews of significant loans with identified weaknesses and the impacts of local, regional and national economic factors on the quality of the loan portfolio. Based on this analysis, we record a provision for loan losses in order to maintain the allowance at appropriate levels.

        For PCI loans, an allowance may be required subsequent to their acquisition. The PCI loans are recorded at their estimated fair value at the date of acquisition, with the estimated fair value including a component for estimated credit losses. A portion of the allowance, however, may be set aside in the future if a PCI loan pool experiences a decrease in expected cash flows as compared to those projected at the acquisition date.

        Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management's assessment of overall portfolio quality. The allowance is maintained at an amount we believe is sufficient to provide for estimated losses inherent in our loan portfolio at each balance sheet date, and fluctuations in the provision for loan losses may result from management's assessment of the adequacy of the allowance. Changes in these estimates and assumptions are possible and may have a material impact on our allowance, and therefore our financial position, liquidity or results of operations.

Goodwill

        The excess purchase price over the fair value of net assets from acquisitions, or goodwill, is evaluated for impairment at least annually and on an interim basis if an event or circumstance indicates that it is likely an impairment has occurred. In testing for impairment in the past, the fair value of net assets was estimated based on an analysis of market-based trading and transaction multiples of selected profitable banks in the Midwestern region of the United States and, if required, the estimated fair value would have been allocated to our assets and liabilities. In future testing for impairment, the fair value of net assets will be estimated based on an analysis of our market value.

        Determining the fair value of goodwill is considered a critical accounting estimate because of its sensitivity to market-based trading and transaction multiples in prior periods and to market-based trading of our common stock in future periods. In addition, any allocation of the fair value of goodwill to assets and liabilities requires significant management judgment and the use of subjective measurements. Variability in the market and changes in assumptions or subjective measurements used to allocated fair value are reasonably possible and may have a material impact on our financial position, liquidity or results of operations.

Recently Issued Accounting Pronouncements

        We have evaluated new accounting pronouncements that have recently been issued and have determined that there are no new accounting pronouncements that should be described in this section that will impact our operations, financial condition or liquidity in future periods. Refer to Note 1 of our audited consolidated financial statements for the years ended December 31, 2010 for a discussion of recently issued accounting pronouncements that have been adopted by us during the year ended December 31, 2010 or that will require enhanced disclosures in our financial statements in future periods.

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BUSINESS

Overview

        We are a 130-year-old financial institution and the fourth largest bank holding company in Illinois headquartered outside of the Chicago metropolitan area (based on deposits, as reported to the FDIC as of June 30, 2010). We are headquartered in Effingham, Illinois, as we have been for our entire 130-year history, and are a bank holding company registered under the Bank Holding Company Act that has elected to be a financial holding company. Through the Bank, we deliver a comprehensive range of banking products and services to individuals, businesses, not-for-profit organizations, municipalities and other entities through 29 banking offices in 23 communities within three market areas—central Illinois, northern Illinois and the St. Louis metropolitan area. The Bank also delivers, under the Midland Financial Strategies name, a comprehensive offering of trust and wealth management services, including financial and estate planning, trustee and custodial services, investment management, tax and insurance planning, business planning, corporate retirement plan consulting and administration and retail brokerage services. As of December 31, 2010, we had total consolidated assets of $1.6 billion, total deposits of $1.4 billion and total common shareholders' equity of $59.2 million.

        We have been consistently profitable despite the sustained adverse economic conditions that have affected the U.S. economy since 2007, and have taken advantage of the turmoil in the banking industry to grow, both in size and scope, over the past several years. For example, between December 31, 2007 and December 31, 2010, we grew our total assets from $382.1 million to $1.6 billion, a CAGR of 62.3%, our total loans from $284.2 million to $1.0 billion, a CAGR of 54.4%, and our total deposits from $301.4 million to $1.4 billion, a CAGR of 65.4% and expanded our operations from six branch offices located in five communities in five counties to 29 branch offices located in 23 communities in 15 counties. In addition, our net income increased from $2.1 million in 2007 to $12.1 million in 2010, contributing to an increase in return on average assets from 0.55% to 0.79% and an increase in return on average common equity from 5.97% to 13.63% over the same period, and our core pre-tax, pre-provision earnings increased from $3.4 million in 2007 to $3.8 million, $11.8 million and $24.7 million in 2008, 2009 and 2010, respectively.

Our History

The Company

        We were originally organized as a Delaware corporation in 1990 to serve as the holding company for the Bank and, on December 31, 2010, we reincorporated as an Illinois corporation.

        In late 2007, our board of directors and management team—led by our Chief Executive Officer and President, Leon J. Holschbach, whom we hired in August 2007, and Executive Vice President and Chief Financial Officer, Jeffrey G. Ludwig, whom we hired in November 2006—adopted an initiative driven strategic plan that envisioned organic growth and acquisitions, as well as the development of a more robust banking platform and performance oriented culture. Our acquisition strategy was formulated partly in response to the fact that Illinois has the second highest total number of banks and the second highest number of banks with less than $1.0 billion of total assets in the United States, and that many of these banks are facing management succession challenges, increasingly complex regulatory and competitive environments and deteriorating financial conditions. Our other strategic initiatives were formulated to help us become a leading performer in the banking industry.

        Since the development of our strategic plan, we have completed five acquisitions and have implemented various internal growth initiatives. These acquisitions and growth initiatives are discussed below under "—Our Recent Growth." We believe we have significant opportunities for further growth through additional conventional and FDIC-assisted acquisitions of banks, branches, wealth management firms and trust departments of community banks, selective de novo opportunities, continued expansion

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of our wealth management operations, the hiring of commercial banking and wealth management professionals from other organizations and organic growth within our existing branch network. We also believe we have the necessary experience, management and infrastructure to take advantage of these growth opportunities.

The Bank

        The Bank was established in Effingham, Illinois, in 1881 and became an Illinois-chartered bank in 1903. It has been headquartered in the same location in Effingham for 130 years.

        As a community banking institution, the Bank prides itself on establishing and maintaining relationships with its customers and is committed to serving the financial needs of individuals, businesses, not-for-profit organizations and municipalities in the market areas it serves. Through community-focused, local leadership, the Bank has established a legacy of helping customers with many of their financial needs. The Bank has also generally experienced consistent profitability, steadily increasing annual dividends and capital in excess of regulatory requirements.

Our Recent Growth

        Pursuant to our initiative driven strategic plan adopted in late 2007, we have grown significantly over the past several years, in terms of both the number of communities we serve and the size and scope of our operations, as well as in terms of balance sheet and earnings growth. We have demonstrated our ability to grow through various expansion efforts. Specifically, since 2007, we have completed a traditional bank holding company acquisition, two FDIC-assisted acquisitions, one in-market branch acquisition and one large branch acquisition from a troubled depository institution. We have also generated organic growth and have opened two de novo branch offices.

Geographic Expansion

        We have expanded the geographic scope of our operations by significantly increasing the number of communities we serve. Prior to 2008, our operations were limited to our central Illinois market and to a single branch office on the Missouri side of the St. Louis metropolitan area. Over the past three years, we have expanded into the Illinois side of the St. Louis metropolitan area through the conventional acquisition of Waterloo Bancshares, entered the northern Illinois market through our acquisition of 12 branch facilities of AMCORE, expanded into the Champaign-Urbana metropolitan area in central Illinois through the FDIC-assisted acquisition of Strategic Capital and increased the size of our operations in the Missouri side of the St. Louis metropolitan area through the FDIC-assisted acquisition of WestBridge.

        At December 31, 2007, we had offices in five communities and five counties. Currently, we have offices in 23 communities and 15 counties. Because of our geographic expansion, our central Illinois market represented only approximately 39% of our total loans and 37% of our total deposits as of December 31, 2010, as compared to December 31, 2007 when central Illinois comprised substantially all of our balance sheet.

Size and Scope of Operations

        Since 2007, we have expanded our operations from six branch offices to 29 branch offices today. Our number of employees has also grown rapidly, from 96 at December 31, 2007 to 397 at December 31, 2010. Approximately 200 of these new employees were employed at the locations we have acquired, while the remainder represent newly created positions. To accommodate the significant increase in the size and scope of our operations, we are currently in the process of building a new 79,500 square foot corporate facility in Effingham to serve as our new headquarters office and

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operations center. This compares to our current 17,600, 123-year-old corporate headquarters facility. We anticipate that the new facility will be completed by September 2011.

        We have also transformed our trust department into a full-service wealth management group operating under the Midland Financial Strategies name and are aggressively pursuing further expansion of this business by providing a comprehensive suite of trust and wealth management products and services, including financial and estate planning, trustee and custodial services, investment management, tax and insurance planning, business planning and corporate retirement plan consulting and administration. Midland Financial Strategies also offers retail brokerage services through a nationally recognized third party broker-dealer. Our trust and wealth management assets under administration have increased from $99.6 million at December 31, 2007 to $702.5 million at December 31, 2010.

Balance Sheet and Earnings Growth

        Our balance sheet and earnings have grown significantly over the past three years as we have expanded geographically and grown the size and scope of our operations. Our consolidated assets have grown from $382.1 million as of December 31, 2007 to $1.6 billion as of December 31, 2010, a CAGR of 62.3% over the period. Our deposits have grown from $301.4 million as of December 31, 2007 to $1.4 billion as of December 31, 2010, a CAGR of 65.4%. Our net income also has increased significantly—in 2007 we generated net income available to common shareholders of $2.1 million, compared to net income available to common shareholders of $16.0 million in 2009 and $8.4 million in 2010. As a result, we have increased our total common shareholders' equity from $35.9 million as of December 31, 2007 to $59.2 million as of December 31, 2010, a CAGR of 18.1%. The following table illustrates our balance sheet and earnings growth since December 31, 2007:

									Compounded annual growth rate through December 31, 2010(4)
	As of and for the Year Ended December 31,
(dollars in thousands, except per share data)	2007		2008		2009		2010
Core pre-tax, pre-provision earnings(1)(2)	$	3,377	$	3,793	$	11,791	$	24,676		94.1	%
Net income		2,105		2,139		18,337		12,070		79.0
Diluted earnings per common share		0.50		0.52		3.11		1.62		48.3
Total assets		382,053		441,027		1,113,752		1,634,322		62.3
Total loans (gross)		284,233		337,220		624,456		1,047,144		54.4
Total deposits		301,389		351,865		918,092		1,364,517		65.4
Core deposits(1)		229,601		246,407		523,278		1,058,370		66.4
Total shareholders' equity		35,935		37,301		73,292		106,535		43.7
Total common shareholders' equity		35,935		37,301		49,692		59,165		18.1
Book value per share(1)		8.90		9.25		11.99		14.21		16.9
Book value per share—as converted(1)		8.90		9.25		11.90		14.80		18.5
Tangible book value per share(1)(3)		8.45		8.28		9.90		9.21		2.9
Tangible book value per share—as converted(1)(3)		8.45		8.28		10.99		12.19		13.0
Trust and wealth management assets under administration		99,605		94,828		265,707		702,516		91.8

(1)

This measure is set forth in the table under "SUMMARY CONSOLIDATED FINANCIAL DATA" beginning on page 16 of this prospectus and in the table under "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" beginning on page 47 of this prospectus. See the notes to those tables for a description of how we calculate this measure.

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(2)

Core pre-tax, pre-provision earnings is a financial measure that is not recognized under U.S. generally accepted accounting principles, or GAAP. Financial measures that are not recognized under GAAP, such as core pre-tax, pre-provision earnings, are referred to as non-GAAP financial measures. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(3)

Tangible book value is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA—Non-GAAP Financial Measures."

(4)

CAGR represents the annualized percentage increase over the three-year period from December 31, 2007 to December 31, 2010.

Organic Growth

        In the past three years, and excluding our acquisition-related growth, we have succeeded in growing our core banking business at a time when many other banking institutions have struggled to survive. We believe this growth is principally attributable to the commitment of our team, the strength of our relationships in the markets we serve and the operational improvements we have made as part of our strategic initiatives. Since December 31, 2007, our deposits, excluding deposits assumed in acquisitions and brokered deposits, have grown by $222.6 million. We have also dramatically expanded our wealth management operations, with trust and wealth management assets under administration growing from $99.6 million as of December 31, 2007 to $702.5 million as of December 31, 2010. We estimate that approximately $77 million of this $602.9 million of growth represents organic growth.

        Core Deposits.    At December 31, 2010, core deposits represented 77.6% of our total deposits and our net non-core funding ratio was 24.6%, which represented improvements from 57.0% and 44.9%, respectively, at December 31, 2009 and 70.0% and 35.1%, respectively, at December 31, 2008. Our improvement in core deposit funding has, in part, resulted from successes with our performance banking initiative, a primary objective of which is to generate core deposits from both existing and new customers. In this regard, we believe our growth in core deposits over the past three years is principally attributable to our efforts in building a stronger sales culture, improving customer service, modifying our banking operations to become more user friendly and increasing the cross-selling of deposit products. We have also increased our efforts to reach deeper into the communities we serve and leverage existing relationships to forge new deposit customers. Although we continue to make improvements in all areas of our operations, we believe that we have developed a strong sales and customer service based culture that will serve as an effective platform for future organic growth. The AMCORE transaction also improved our mix of core deposits during 2010, as the majority of deposits assumed were core deposits.

        Loans.    After adjusting for acquisition-related growth in our loan portfolio, the size of our loan portfolio remained relatively stable between December 31, 2007 and December 31, 2010. However, this muted growth was primarily attributable to the uncertain economic environment and its effect on loan demand (particularly for commercial real estate loans) and the number of qualified borrowers generally and our tightening of lending standards to take account of the economic environment and depressed real estate values. We believe our loan operations showed substantial strength over the past several years despite the economic environment. We focused on serving the credit needs of qualified borrowers in the communities we serve and taking advantage of opportunities in the marketplace due to financial challenges faced by many of our competitors over the past several years. For example, we originated approximately $103.2 million of residential loans in 2010 and $108.6 million in 2009, which represented a significant increase from $21.1 million in 2008. Most of the residential loans that we originate are sold in the secondary market and thus have a nominal impact on our loan portfolio.

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        Wealth Management.    Our wealth management initiative has resulted in marked improvements in the amount of our trust and wealth management assets under administration and in the number of our wealth management clients. Between December 31, 2007 and December 31, 2010, our wealth management group grew its assets under administration from $99.6 million to $702.5 million and increased its number of accounts from 1,173 to 3,046. Most of this growth was attributable to our acquisition of Strategic Capital and our acquisition of a significant number of trust and wealth management accounts from AMCORE. However, this growth through acquisition has provided us with the scale that we believe is necessary to profitably grow this business and the products and services needed to enhance the cross-selling of wealth management products and services to our loan and deposit customers. Because we have built scale in this business and significantly enhanced our suite of trust and wealth management products and services, we have been able to hire a highly experienced chief investment officer and several financial advisors and believe we are well positioned to further add to our roster of wealth management professionals.

        Capital.    A significant contributing factor to our ability to grow significantly over the past several years was our success in raising substantial amounts of new capital, primarily from our directors, executive officers and existing shareholders. Specifically, in 2009 and 2010, we consummated two private placements of our non-cumulative perpetual convertible preferred stock in which we raised an aggregate of $47.4 million of Tier 1 capital. We also raised $16.3 million of Tier 2 capital through the private placement of subordinated notes, together with warrants to acquire shares of our non-cumulative perpetual convertible preferred stock, to a substantial shareholder of the Company. In each case, we completed our capital raising transactions in a short time period to provide us with the necessary capital to take advantage of attractive acquisition opportunities (the Strategic Capital acquisition in May 2009 and the AMCORE transaction in March 2010). Although we have been able to fund our growth through private offerings in the past, we believe the proceeds from this offering and the improved access to the capital markets resulting from us being a publicly traded company will enhance our ability to pursue further growth opportunities as they arise.

Acquisition Strategy and Recent Acquisitions

        We have completed five acquisitions since we implemented our strategic plan in 2007, and we expect growth through acquisitions to remain an integral part of our strategy going forward. Our acquisition strategy focuses on acquiring organizations that enhance our strategic growth plans, both in terms of markets served and products and services offered. We expect our acquisitions to provide significant long-term operating synergies and attractive economic returns to our shareholders. Each of the five acquisitions we have completed since 2007 has been accretive to our earnings in the year of acquisition and has enhanced the long-term growth prospects of our franchise.

        Key considerations in analyzing acquisition opportunities include a careful assessment of the risks involved in completing the transaction, effective integration of the acquired entity's operations and culture and the likelihood of realizing the perceived benefits and value of the acquired assets, particularly with respect to the acquired loan portfolio. Furthermore, in analyzing acquisition opportunities, we evaluate whether the specific acquisition opportunity fits within our overall initiative driven strategic plan. Our risk management process for acquisitions focuses on three elements: pre-transaction due diligence; prudent negotiation of price and other terms and conditions of the acquisition; and post-closing integration. We believe we have built a strong acquisition and integration team and have developed a set of acquisition and integration processes that can serve as the foundation for further significant growth through acquisitions in the future.

        We have grown our business during a time of significant turmoil in the banking sector. The unprecedented levels of disruption in the banking sector provided strong banks with an opportunity to grow, including through the acquisition of assets and liabilities of failed banking organizations from the FDIC. In this regard, two of our acquisitions, Strategic Capital and WestBridge, were acquired from the

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FDIC out of receivership and substantially all of the assets acquired in these transactions are covered by FDIC loss-sharing agreements. In general, under these FDIC loss-sharing agreements, the FDIC agrees to reimburse, up to a certain amount, losses the acquirer may incur with respect to the acquired assets. Additionally, the failed institution's assets are typically purchased from the FDIC at a discount to their book value. These loss-sharing agreements and asset pricing discounts are designed to mitigate the potential risks faced by the purchaser. Both of our FDIC-assisted acquisitions were accretive to our total shareholders' equity because we recognized bargain purchase gains in connection with these acquisitions due to the purchase prices being less than the fair value of the net assets acquired.

        We believe we may have further opportunities to make FDIC-assisted acquisitions in the markets in which we seek to grow. We also believe that our experience in consummating two FDIC-assisted acquisitions gives us a competitive advantage over other institutions bidding on an institution held in receivership by the FDIC, in part because of our established due diligence process and in part because of our proven ability to successfully transition these institutions to our organization with little or no interruption in service.

FDIC-Assisted Acquisition of WestBridge Bank & Trust Company

        On October 15, 2010, we acquired WestBridge in Chesterfield, Missouri from the FDIC out of receivership. We acquired assets totaling $84.7 million, including $48.1 million of loans, and assumed liabilities of $80.2 million, including $61.1 million of deposits. We did not pay the FDIC a premium for the deposits.

        This acquisition increased our deposits in St. Louis County, Missouri by approximately 66% and expanded the presence we originally established in the Chesterfield market in 2003. Because WestBridge's sole office was located within a few blocks of our existing Chesterfield office, we were able to realize cost efficiencies by consolidating WestBridge's operations into our existing office and terminating the WestBridge lease. We consider Chesterfield to be a strategic hub for future growth. Chesterfield is an affluent suburb in the St. Louis metropolitan area, as evidenced by its median household income of approximately $98,000.

        The purchase and assumption agreement includes loss-sharing between the FDIC and the Bank, which, after purchase accounting fair value adjustments, significantly mitigates the risk of future loss on the loan portfolio acquired. The term for loss-sharing on residential real estate loans is ten years, and the term for loss-sharing on nonresidential real estate loans is five years with respect to losses and eight years with respect to recoveries. Under the terms of our loss-sharing agreement with the FDIC, the FDIC generally will absorb 80% of net losses on the loans and other real estate acquired. As noted above, the gross book value of the loans acquired from WestBridge was $48.1 million, and the loss-sharing agreement with the FDIC covers substantially all of the gross book value of the loans acquired. We recorded a write-down of $16.9 million on the acquired loans and other real estate acquired. Upon consummation of the acquisition, we recognized a bargain purchase gain of $4.5 million.

AMCORE Bank Branch Acquisition

        On March 26, 2010, we purchased a portfolio of loans, investment securities, trust and wealth management account relationships and certain other assets and assumed certain deposit liabilities from AMCORE. We also purchased 12 branch facilities and two stand-alone drive-up facilities from AMCORE, and hired approximately 120 employees that were employed at the acquired branches.

        We pursued the AMCORE transaction principally because the 12 branch offices available for acquisition are community-oriented branches located primarily in rural communities similar to those in which we are operating. Furthermore, the acquired branches had a strong core deposit base and wealth management business. We believe this acquisition was particularly attractive because, prior to joining the Company in 2007, Leon J. Holschbach, our Chief Executive Officer and President, was employed

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by AMCORE for ten years, the last seven of which he served as Region Market President for the locations that we acquired. Thus, Mr. Holschbach has extensive knowledge of and business relationships in the northern Illinois market. We hired substantially all of the employees associated with the acquired branches, including the Bank's current Region Market President for our northern Illinois market. Part of our strategic rationale for this transaction was to leverage the knowledge and relationships of Mr. Holschbach and our current Region Market President for northern Illinois in this new market area to grow our business.

        In the transaction, we acquired assets totaling $499.5 million, including $407.2 million of loans, and assumed $493.4 million of deposits. We did not assume any liabilities other than deposit liabilities. The acquired loans consisted of $184.5 million of loans to in-market borrowers and $222.7 million of out-of-market loans, including $44.3 million of indirect automobile loans. All of the acquired loans were performing, pass-graded credits and were selected following a rigorous due diligence process, including a third-party loan review. We also acquired approximately $400 million in trust and wealth management account relationships that were attributable to the acquired branches. We paid a 1.5% premium for the deposits and a $1.5 million trust and wealth management account premium. Upon consummation of the transaction, we recognized a bargain purchase gain of $4.2 million

        As a result of this transaction, we established a presence in the northern Illinois market in what we believe to be a significant and high profile manner due to the number of locations acquired and the amount of loans, deposits and trust and wealth management accounts acquired. We have thus far experienced a high retention rate with respect to the trust and wealth management accounts acquired from AMCORE, as we estimate that approximately 95% of these accounts remained with Midland Financial Strategies as of December 31, 2010.

        The acquired branches are located in Dixon, Freeport, Mendota, Oregon, Peru, Princeton, Rock Falls and Sterling, Illinois, all of which are within an approximate 30-mile radius of each other and an approximate 80-mile radius of Rockford. Rockford is the third largest city in Illinois. The Rockford metropolitan area has a population of approximately 359,000 and is a major commercial center in the northwest Illinois-south-central Wisconsin corridor.

        The transaction was completed prior to AMCORE being placed in receivership in April 2010 by the Office of the Comptroller of the Currency, so the acquisition did not include any loss-sharing with the FDIC. However, as noted above, we acquired only performing, pass graded loans in the transaction that were selected following a rigorous due diligence process, including a third-party loan review.

FDIC-Assisted Acquisition of Strategic Capital Bank

        On May 22, 2009, we acquired Strategic Capital in Champaign, Illinois, from the FDIC out of receivership. We acquired assets totaling $546.2 million, including $143.1 million of loans and $263.1 million of investment securities, and assumed liabilities of $521.2 million, including $413.7 million of brokered deposits and $53.8 million of non-brokered deposits. We paid the FDIC a 1.0% deposit premium for the non-brokered deposits of Strategic Capital.

        Strategic Capital operated one banking office in Champaign, which is approximately 75 miles north of our Effingham headquarters. The acquisition of Strategic Capital marked our initial entry into this community. Champaign-Urbana is the home of the University of Illinois and its approximately 41,000 students, and the Champaign-Urbana metropolitan area has a population of approximately 226,000. Our management team considers the Champaign-Urbana community to be a desirable banking market because the presence of the university provides a relatively stable employment and population base and the community has a higher median household income than most other communities in central Illinois. Our management team also considered Strategic Capital to be an attractive acquisition opportunity because of its established wealth management business. This transaction contributed $146.4 million of trust and wealth management assets to our wealth management group.

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        The purchase and assumption agreement includes loss-sharing between the FDIC and the Bank, which, after purchase accounting fair value adjustments, significantly mitigates the risk of future loss on the covered assets. The term for loss-sharing on residential real estate loans is ten years, the term for loss-sharing on nonresidential real estate loans is five years with respect to losses and seven years with respect to recoveries and the term for loss-sharing on investment securities is seven years with respect to losses and 10 years with respect to recoveries. Under the terms of our loss-sharing agreement with the FDIC, the FDIC agreed to reimburse us for 80% of net losses on the covered assets up to $167.0 million and 95% of net losses exceeding $167.0 million. We recorded a write-down of approximately $105.4 million on the acquired loans, other real estate and investment securities portfolio. Upon consummation of the acquisition, we recognized a bargain purchase gain of $25.0 million

Acquisition of Waterloo Bancshares, Inc.

        On February 12, 2009, we acquired Waterloo Bancshares, the holding company for Commercial State Bank of Waterloo. Commercial State Bank of Waterloo was headquartered in Waterloo, Illinois, which is located on the Illinois side of the St. Louis metropolitan area approximately 25 miles southeast of St. Louis. It operated six offices in Monroe and St. Clair counties. Monroe County has a median household income of approximately $71,000 and, between 2000 and 2010, experienced the eighth highest population growth in Illinois (among 102 counties) at 20.1%. In this transaction, we acquired assets totaling $116.1 million, including $71.5 million of loans, and assumed liabilities of $108.1 million, including $98.1 million of deposits.

        In connection with the merger of Waterloo Bancshares with and into the Company, Commercial State Bank of Waterloo was merged into the Bank. The acquired operations of Waterloo Bancshares comprise an important component of our St. Louis-area operations, particularly because they provide a relatively stable base of core deposits, and operate under the management of our leadership team in our Chesterfield office.

People's National Bank Branch Acquisition

        On November 14, 2008, we purchased two branch facilities of People's National Bank, N.A., located in the central Illinois market. In this transaction, we acquired assets totaling $29.6 million, including $27.9 million of loans, along with $23.6 million of deposits. This acquisition extended our presence in the central Illinois market by establishing a third branch office in Effingham and our first branch office in the community of Vandalia, Illinois, which is approximately 30 miles southwest of Effingham.

Our Strategy

        The initiative driven strategic plan that our board of directors and management team developed in late 2007 includes the five strategic initiatives discussed below.

Performance Banking

        Our performance banking initiative is focused on accelerating organic growth through our existing branch network and business lines, building a sales and service minded staff, and developing a constructive, accountable and performance driven culture. We seek to develop bankers who create dynamic relationships through innovative solutions, and to provide a superior customer experience and industry leading customer service. Toward these ends, we have developed a comprehensive training program for our employees. This program includes personal development training through the Investment in Excellence® program developed by The Pacific Institute, and performance training that focuses on exceeding client expectations. We have also streamlined our teller and back office

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operations, allowing our banking professionals more time to focus on serving our customers. We believe continual investment in our people is a key driver to superior financial performance, with respect to both our intended organic growth and integrating and growing acquired operations. A primary objective of our performance banking initiative is to generate core deposits from both existing and new customers, thereby lowering our cost of funding and enhancing the stability of our primary funding source. Since December 31, 2007, our deposits, excluding deposits assumed in acquisitions and brokered deposits, have grown by $222.6 million, and we believe this performance banking initiative has been a significant contributing factor to this deposit growth.

Accretive Acquisitions

        Our accretive acquisition initiative is based upon our determination that we can strengthen our long term franchise value by capitalizing on opportunities to increase our earnings through acquisitions in our existing market areas and in the broader Midwestern region. We believe there continues to be numerous small to midsized publicly traded and privately held banking organizations that will become available for acquisition, either because of financial weakness, scale and operational challenges, regulatory pressure, management succession issues or because their principal shareholders will seek liquidity. We are confident that we can play an important role in serving as a platform for these organizations, some of which may also be finding it difficult to compete with more efficient competitors. Two of our five acquisitions have resulted from FDIC receivership proceedings (Strategic Capital and WestBridge), one has resulted from the need of the selling institution to enter into the transaction because of material financial weakness (AMCORE) and one from the desire of the former principal shareholders to sell the institution (Waterloo Bancshares). In the aggregate, these acquisitions have increased our branch offices by 19 and have added approximately $600 million of core deposits and $670 million in loans to our balance sheet. To date, all five of our acquisitions since 2008 have been accretive to our earnings per share in the year of acquisition, and we believe we will have opportunities in the future to make acquisitions that are also accretive to our earnings per share in the year of acquisition, enhance shareholder returns and strengthen our business and franchise value over the long term. We also believe that, as a result of our recent acquisitions, we have developed an experienced acquisition and integration team capable of identifying acquisition candidates, conducting due diligence, determining if a business case exists for the acquisition and achieving a smooth post-closing transition. We have been successful to date in integrating acquired banking operations into our organization and applying our performance banking initiative to organically grow these operations following the acquisition, and we believe that our acquisition experience positions us to generate incremental growth following future acquisitions.

        As part of this initiative, our board of directors and management team recognizes that comprehensive due diligence prior to an acquisition, and efficient operational and cultural integration upon completion, are key factors in realizing the intended benefits of any acquisition. As such, we aim to develop integration processes that can be standardized and replicated to help achieve immediate benefits from each acquisition. Although the challenges of each acquisition vary, we believe the five acquisitions we have completed since 2008, and the success we have had in managing each phase of this growth, demonstrate our competency in this critical area of growth capacity. We also believe that we have an experienced acquisition and integration team capable of rapidly identifying strong acquisition candidates, working with the target to conduct due diligence with minimal interruption to their business, developing an appropriate financial and pricing model and business case for determining whether to pursue the acquisition, and achieving a smooth post-closing transition. This capacity also includes the ability to work with the FDIC in connection with the acquisition of depository institutions going into, or already in, receivership, as we did with our acquisitions of Strategic Capital and WestBridge, and our acquisition of 12 branch offices and other assets and liabilities from AMCORE immediately prior to AMCORE being placed into FDIC receivership.

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Wealth Management

        Our wealth management initiative is based upon our determination that trust and wealth management services can generate stable and recurring revenue and enhance banking customer loyalty, which can result in increased core deposits and greater cross-selling opportunities. Since 2007, we have added a president and a chief investment officer for this group, added to our staff of financial advisors, expanded our wealth management product offerings and increased the offering of wealth management services from two to seven locations. Our trust and wealth management assets under administration grew from $99.6 million to $702.5 million between December 31, 2007 and December 31, 2010, a CAGR of 91.8%, and we have been successful in our efforts to retain a large percentage of the trust and wealth management accounts that we have acquired in recent years. We expect growth in our wealth management operations to continue over the next several years, including through the possible acquisition of trust and other wealth management accounts from community banks seeking to exit this specialized, scale-dependent business, the opening of new wealth management offices and the hiring of wealth management professionals with established client rosters.

De Novo Growth

        Our de novo growth initiative is focused on growing our market presence through de novo branch offices in new communities within our existing market areas and potential new market areas. As part of our strategic plan, we determined that we would have opportunities to grow though additional de novo locations in select markets by building upon our experience with establishing a de novo branch office in Chesterfield, Missouri in the St. Louis metropolitan area in 2003. We have been successful in developing our Chesterfield branch office into a full-service office and establishing deposit-based relationships with our customers of that office. We have also established de novo operations in Joliet, Illinois with the opening of a branch office in May 2010, and in Rockford, Illinois with the opening of a wealth management office and the hiring of a team of wealth management professionals in June 2010. We intend to continue seeking de novo opportunities for both our community banking business and wealth management group. However, we expect to limit our de novo strategy to those communities and market areas where our management team has business relationships and knowledge of the market's customer base and competition. We believe that our experience in establishing de novo operations will serve us particularly well in the future as we seek to complement our acquisition and organic growth strategy.

Enterprise-Wide Risk Management

        Our enterprise-wide risk management initiative is designed to ensure that we are using best practices in enterprise-wide risk management. It is also designed to ensure that all of our employees are fully engaged in these efforts, and that we have in place a solid foundation for organic growth and for integrating future acquisitions. One significant tool we have implemented is a risk management dashboard that monitors key risk factors within eight broad risk categories across our entire business. This dashboard, which summarizes the current risk level, risk limit, risk trend and the action steps to improve or maintain our risk position for the identified risks, is reviewed monthly by our risk management team and senior management risk committee, and quarterly by our board of directors. To ensure that our risk management initiative is ingrained throughout our organization, the compensation committee of our board of directors has based annual performance bonuses for our executive officers and other employees on the achievement of certain risk-based metrics, including exceeding "well capitalized" regulatory standards and maintaining specified asset quality ratios. We believe we have been successful in this area to date and intend to continue investing in this initiative.

        These strategic initiatives, coupled with our long standing focus on forming strong relationships in the communities that we serve, form our current business strategy.

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Our Competitive Strengths

Experienced Senior Management Team

        Our core senior management team has extensive and varied experience in managing community banking organizations or advising community banks at a professional services firm. Our Chief Executive Officer and President has 31 years of experience in the industry, including 18 years as president of a Wisconsin-based community bank and ten years as Region Market President in northern Illinois for a multi-billion dollar publicly traded regional banking organization. Our Executive Vice President and Chief Financial Officer has 9 years of public accounting experience at a Big Four firm, including significant experience working with financial institutions, and has substantial financial reporting and accounting experience with two publicly traded companies. Our Senior Vice President—Corporate Counsel served as our lead outside counsel for each of our acquisitions and capital raising transactions from 2008 through 2010 and has almost 15 years experience advising banking organizations, including a number of publicly traded companies. Each of our Senior Vice President—Community Banking, Senior Vice President—Chief Credit Officer and Senior Vice President—Corporate Services has extensive community banking experience. As we have grown over the past several years, we have been successful in attracting management talent to central Illinois from areas outside of our primary market areas, including from areas outside of the Midwest. In addition to the important additions we have made to our senior level management team, we also have built a deep, but streamlined, bench of talent below the senior level in areas such as finance, treasury, loan and deposit operations, risk management, information technology, human resources, marketing and special assets. Our senior management team has a demonstrated track record of managing profitable growth, successfully executing acquisitions, implementing a rigorous enterprise-wide risk management system and instilling a company-wide entrepreneurial culture. We continue to recruit and develop talented individuals to add value for the long-term and expand our management team.

Proven Ability and Demonstrated Success in Acquisition Execution and Integration

        As a result of the five acquisitions that we have completed since we implemented our initiative driven strategic plan, we believe we have developed an experienced acquisition and integration team capable of identifying acquisition candidates, conducting thorough due diligence, determining if an acquisition opportunity fits within our overall strategic plan and will enhance shareholder returns, integrating the acquired operations into our existing operational platform and retaining a high percentage of the acquired entity's customer base. To date, all five of our acquisitions have been accretive to earnings per share, three have been accretive to capital and each has been effectively integrated into our core banking operations. We believe this acquisition experience positions us to continue to capitalize on additional acquisition opportunities.

Robust, Stable Core Funding Base

        We focus on relationship banking with our customers and on generating core deposits. Because a majority of our operations are outside of major metropolitan areas such as Chicago, we believe we generally experience less competition from large national and super-regional banks than do community banks located in more urban areas. This enables us to better compete for core deposits primarily through service as opposed to pricing and we have been successful in generating core deposits to fund our liquidity needs, thus avoiding excessive reliance on brokered deposits and other sources of non-core funding. We also consider core deposits to be an important driver of value in any acquisition we consider. At December 31, 2010, core deposits represented 77.6% of our total deposits and our net non-core funding ratio was 24.6%. If calculated based on the new regulatory classification for non-brokered certificates of deposit of up to $250,000 being includible in core deposits, core deposits would have represented 87.0% of our total deposits at December 31, 2010. We also benefit from an improving concentration of non-interest bearing deposits, which represented 12.7% of our total deposits

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at December 31, 2010. This stable core funding base provides us with a less expensive funding source than if we had to rely more heavily on brokered deposits or other forms of higher cost deposits, and provides us with a more stable funding base to support our growth initiatives. Our five recent acquisitions have contributed significantly to our stable core funding base since December 31, 2007. Of the $828.8 million in core deposit growth we have experienced since 2007, we estimate that $606.2 million has come through acquisitions while $222.6 million has been generated organically.

Diversified Loan Portfolio

        We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic location and industries in which our business customers are engaged. No loan product represented more than one-third of our total loan portfolio at December 31, 2010. Non-owner-occupied commercial real estate loans, our largest category, represented approximately 31% of our total loan portfolio at December 31, 2010. Our next largest categories were commercial loans at approximately 17% and owner-occupied commercial real estate loans at approximately 13%. Construction and land development loans comprised less than 10% of our total loan portfolio. Because of the importance agriculture and agricultural-related businesses to our primary market areas, we also have a meaningful amount of loans made to finance farmland purchases and agricultural equipment and production, with these loans representing nearly 5% of our total loan portfolio at December 31, 2010. At December 31, 2010, our total loan portfolio was spread across our primary market areas as follows: central Illinois—39%; northern Illinois—30%; St. Louis metropolitan area—23%; and other areas—8%.

        We have established industry concentration limits to ensure that our loan portfolio is not overexposed to a particular industry. Our largest industry concentration at December 31, 2010 was assisted living facilities, at 35% of the Bank's total risk-based capital (after adjusting for FDIC loss-sharing protection).

        Furthermore, we focus on maintaining our loan-to-deposit ratio lower than the average of our peer group. At December 31, 2010, our loan-to-deposit ratio was 76.7%, which, based on information compiled by SNL Financial, compared favorably to our Midwest-focused peer group's median loan-to-deposit ratio of 80.9% and was an improvement from our loan-to-deposit ratio of 94.3% at December 31, 2007. We also manage risk by limiting exposures to individual borrowers. As of December 31, 2010, we had only five borrower relationships with outstanding balances of $8 million or greater, all of which represented performing pass-rated credits. Furthermore, the risk exposure of our loan portfolio is mitigated by the fact that, at December 31, 2010, 13.1% of our loan portfolio was covered by our loss-sharing agreements with the FDIC. This loss-share coverage provides us with certain protection from further downturns in the financial markets and economy in general.

Growing and Profitable Wealth Management Group

        We have grown our wealth management group significantly since 2007, increasing our assets under administration from $99.6 million at December 31, 2007 to $702.5 million at December 31, 2010, a CAGR of 91.8%. We currently have 26 wealth management professionals compared to only five at December 31, 2007. Wealth management is a scale-dependent business, and our recent growth has given us the scale to operate this business profitably. Our wealth management operations provide us with stable, recurring fee revenue that we expect to continue growing as we expand the size and scope of our operations and enhance our ability to cultivate banking customer loyalty by developing deeper financial relationships with our customers. Because we now have the scale to operate this business profitably, we believe we will have significant opportunities to acquire trust and wealth management accounts from smaller community banking organizations that lack the necessary scale to operate profitably in this area. Furthermore, as we have expanded our brand, size and scope, we have enhanced

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our ability to recruit talented and experienced wealth management professionals in existing and new markets.

History of Sustained Profitability and Steadily Increasing Dividends

        We focus on long-term financial performance and have a long history of profitability despite the turmoil in the banking industry. Since 2007, our net income available to common shareholders has increased four-fold from $2.1 million to $8.4 million in 2010 and our core pre-tax, pre-provision earnings have increased more than seven-fold from $3.3 million to $24.7 million in 2010. Furthermore, between 2007 and 2010, our return on average assets increased from 0.55% to 0.79% and our return on average common equity improved from 5.97% to 13.63% despite significant investments in our franchise. Our profitability has enabled us to consistently increase dividends to our common shareholders over the past several years.

Well Positioned to Capitalize on Market Opportunities

        We continually evaluate potential acquisitions of loan and securities portfolios, banks or bank branches in unassisted and FDIC-assisted transactions, wealth management firms, trust departments of community banks and other financial services-related businesses. Many financial institutions in our primary market, Illinois, are significantly distressed, as evidenced by Illinois experiencing the third highest number of bank failures in the United States since 2007. Furthermore, we believe there are numerous small to midsized family-owned community banking organizations in our existing markets and surrounding areas that will become available for acquisition due to succession issues or because of their inability to compete with more efficient competitors in an increasingly competitive and heavily regulated environment. We believe that this is also true of a significant number of publicly traded and privately held subscale community banking organizations operating in our market areas. Our ability to raise capital from our existing shareholder base and strong liquidity position, coupled with our risk management procedures, have allowed us to grow our business profitably at a time when the broader banking sector has experienced significant losses and balance sheet contraction. As of December 31, 2010, our total equity capital was approximately $106.5 million, the Bank's Tier 1 leverage and total capital to risk-weighted assets ratios were 6.93% and 11.24%, respectively, and our total core deposits represented approximately 77.6% of total funding. As adjusted for this offering, we estimate our tangible common equity ratio to be         % and the Bank's Tier 1 leverage and total risk-based capital ratios to be        % and        %, respectively (assuming we were to downstream                         of the net proceeds of this offering to the Bank). We believe our scalable operational platform and demonstrated success in acquisition execution and integration, coupled with the capital to be raised in this offering, will allow us to take advantage of any additional acquisition opportunities.

High-Capacity, Efficient Operating Platform

        To support our rapid growth, we have made significant investments in our operational infrastructure, including hiring additional personnel in key operational areas. One major component of our performance banking initiative is our "Future Bank" project, which is discussed in more detail below. As part of our Future Bank project, we are preparing to transition in the second half of 2011 to a new core processing system provided by one of the largest information technology and data processing providers to the financial institutions industry. We also are in the process of constructing a new 79,500 square foot corporate headquarters facility, with occupancy expected in September 2011. We believe that these investments in our infrastructure and operational personnel will create the capacity to grow our asset base significantly in the near term, and that this growth capacity is a significant competitive advantage over many of our competitors. We believe these investments provide us with the scale to grow in the near term without incurring significant incremental noninterest expenses, thereby enhancing our return on assets and equity.

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Board of Directors Comprised of Successful Entrepreneurs

        Our six non-executive directors are all successful entrepreneurs and business owners with long-standing ties to the communities in which we operate, particularly in our primary central Illinois market. Mr. John M. Schultz and Mr. Robert F. Schultz are members of the founding family of J.M. Schultz Seed Company, a seed and chemical business. John Schultz currently is the chief executive officer of an industrial developer of manufacturing and high tech facilities and is the author of BoomtownUSA: The 7¹/2 Keys to Big Success in Small Towns, a book analyzing how small and mid-sized rural U.S. communities can create and retain economic vitality. Robert Schultz is the chairman of a national construction, design-build and project management firm. Mr. Kenneth Maschhoff is the president and chief executive officer of a family-owned pork production company operating through a network of approximately 350 farmers, which is one of the largest pork producers in the United States. Mr. Q. Anthony Siemer is a founding partner of a business law firm in central Illinois, and Mr. Jeffrey Smith is the founding principal and managing partner of a golf club management company that operates 14 golf properties in the St. Louis metropolitan area. Finally, Ms. Karen Wolters is the founder of four companies, including Ignite USA, LLC, a successful marketing, product strategy, research, industrial design, engineering, manufacturing and production management company. The collective professional background of our directors contributes to our organization-wide entrepreneurial culture and provides us with valuable insight to the business and banking needs of our customer base. Furthermore, our six non-executive directors and their affiliated entities, collectively, have a substantial ownership interest in the Company of 19.3% (on an as-converted basis and excluding any shares to be issued in this offering) and invested approximately 10% of the aggregate $63.7 million of new capital we raised in 2009 and 2010 to support our growth objectives.

Our "Future Bank" Project: Building Our Banking Platform for the Future

        As part of our growth strategy, our management team developed a strategic plan for our "Future Bank." Future Bank is our project to build an efficient, technology-driven banking operation with significant capacity for growth, and encompasses all aspects of our strategic plan.

        Our Future Bank project began with an intensive assessment of all phases of the Bank's operations, which was performed by a prominent financial services consulting organization. This assessment was designed to accomplish a variety of goals, including, among others:

•

identifying opportunities to improve our customers' banking experience;

•

developing improved data reporting systems to facilitate cross-selling opportunities;

•

updating our policies and procedures in light of changes to the regulatory, industry and business landscape;

•

minimizing the actions and forms required to be completed by our tellers and personal bankers to permit more "face time" with customers;

•

reducing operating expenses, including by creating a more efficient, technology-driven operational platform;

•

improving security and risk management; and

•

adopting "best practices" throughout our organization.

        This assessment, which began in August 2010, was performed over an approximately nine month period by our consulting firm and a designated internal team consisting of members of the Bank's management as well as operational and customer service personnel. The recommendations from this assessment led us to make significant operational modifications, ranging from, among other things, expedited teller operations and document imaging to a streamlined small business lending approval

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process. In many cases, these operational changes were also designed to coordinate with our enterprise wide risk assessment and management programs and to facilitate improved information management and reporting systems.

        Modifications to our human resource allocation, line reporting and compensation programs have also been implemented, and further changes in these and other aspects of our operations will continue as a result of the recommendations developed by our consultants and the internal Future Bank team.

        As noted above, as part of our Future Bank project, we are preparing to transition in the second half of 2011 to a new core processing system provided by one of the largest information technology and data processing providers to the financial institutions industry. We currently utilize a core processing system from a vendor that specializes in community banking organizations with less than $1.0 billion in assets. By upgrading to a more robust and sophisticated core processing system, we believe we will be better positioned to streamline our operations, grow our asset and deposit base in a cost-efficient manner and seamlessly integrate acquired operations into our existing organization.

        We believe our Future Bank project will contribute to the processes by which we ensure our banking platform has the size, breadth, scope, scale and agility to meet future demands as we continue to grow well into the future.

Community Banking

Lending Activities

Products

        Through the Bank, we offer a broad range of commercial and retail lending products to businesses, not-for-profit organizations and individuals. Commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment financing and lines of credit) to small and midsized businesses, real estate construction loans, multifamily loans and loans to purchase farmland and finance agricultural production. Retail lending products include residential first and second mortgage loans, home equity lines of credit and consumer installment loans such as loans to purchase cars, boats and other recreational vehicles.

        Our strategy is to maintain a broadly diversified loan portfolio in type of customer (i.e., businesses and not-for-profit organizations vs. individuals), type of loan product (e.g., owner-occupied commercial real estate, commercial loans, agricultural loans, etc.), geographic location and industries in which our business customers are engaged (e.g., manufacturing, retail, hospitality, etc.). We focus our lending activities on loans that we originate from borrowers located in our market areas. We seek to be the premier provider of lending products and services in our market areas and serve the credit needs of high quality business, not-for-profit and individual borrowers in the communities that we serve.

        We market our lending products and services to qualified lending customers through our prominent marketing initiatives, conveniently located branch offices and high touch personal service. We target our business development and marketing strategy primarily on businesses with between $500,000 and $50 million in annual revenue. Our lending officers actively solicit the business of companies entering our market areas as well as long-standing businesses operating in the communities we serve. We seek to attract new lending customers through professional service, competitive pricing and innovative structure. We also actively pursue consumer lending opportunities. As part of our performance banking initiative, we have increased our emphasis on cross-selling lending products to our deposit customers.

        We acquired a significant amount of purchased loan participations in connection with our Strategic Capital and AMCORE acquisitions, but historically have not been an active purchaser of loan

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participations. Recently, however, our management team made the strategic decision to become more active in the loan participation market. Because we currently operate primarily in mid- and smaller-sized communities in Illinois, many of the competitors in our market areas are small community banks (less than $500 million of assets) that have limited capacity to make larger commercial loans to businesses in their markets, even if those businesses are important deposit customers. We believe that we can capitalize on these circumstances to grow and diversify our loan portfolio by purchasing participation interests in high-quality commercial loans originated by smaller banks in our existing market areas. For example, given the importance of agriculture in Illinois, particularly in our central and northern Illinois markets, we believe we may be able to grow our agribusiness loan portfolio through loan participations. We also believe this will provide us potential strategic dialogue with new commercial customers in our market areas. In recognition of the risks inherent in loan participation, we intend to purchase loan participations only from within our market areas, subject participations to the same underwriting process as is applied to internally originated commercial loans, purchase only from other community banks and only participate in transactions in which we are in the lead or co-lead position. We generally do not purchase loan participations through broker networks, but from time to time we evaluate proposals received from these sources and we may, in the future, purchase loan participations from these sources. We expect, however, that these loan participations will not comprise a material component of our loan participation portfolio.

        The following table summarizes our loan portfolio by product type and geographic location as of December 31, 2010:

(dollars in thousands)			Central Illinois			Northern Illinois			St. Louis Metro			Other(1)			Total
Commercial loans:
	Commercial		$	117,103		$	48,166		$	30,510		$	3,407		$	199,186
	Commercial real estate			175,457			206,851			155,620			24,884			562,812
	Construction and land development			58,449			6,766			12,286			20,907			98,408
		Total commercial loans		351,009			261,783			198,416			49,198			860,406
Consumer loans:
	Residential real estate			55,397			43,807			38,092			2,590			139,886
	Consumer			4,292			10,286			2,048			30,226			46,852
		Total consumer loans		59,689			54,093			40,140			32,816			186,738
Total loans			$	410,698		$	315,876		$	238,556		$	82,014		$	1,047,144
% of total loans by location				39.2	%		30.2	%		22.8	%		7.8	%		100.0	%
Non-covered loans			$	340,840		$	315,876		$	212,210		$	41,177		$	910,103
Covered loans(2)				69,858			—			26,346			40,837			137,041

(1)

"Other" consists of indirect automobile loans and certain other loans managed by our special assets group.

(2)

Covered loans are loans that are covered by a loss-sharing agreement with the FDIC.

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        Commercial Loans.    We have a strong commercial loan base. As of December 31, 2010, we had outstanding commercial loans, which include business term loans, equipment financing and lines of credit to small and midsized businesses, of $175.2 million, or 16.7% of our total loan portfolio. There were additional undisbursed commitments of $82.1 million related to these loans. The commercial loan portfolio is comprised primarily of term loans to purchase capital equipment and lines of credit for working capital and operational purposes to small and midsized businesses. Because we are a traditional community bank with long-standing close ties to the businesses operating in our market areas, we are able to tailor our commercial loan program to meet the needs of our customers. Although most loans are made on a secured basis, loans may be made on an unsecured basis where warranted by the overall financial condition of the borrower.

        As of December 31, 2010, the outstanding balance of loans extended to finance agricultural equipment and production totaled $24.0 million, or 2.3% of our total loan portfolio. These loans are typically short-term loans extended to farmers and other agricultural producers to purchase seed, fertilizer and equipment.

        Commercial Real Estate Loans.    We offer real estate loans for commercial property that is owner-occupied as well as commercial property owned by real estate investors. The total amount of owner-occupied commercial real estate loans outstanding at December 31, 2010 was $183.0 million, or 17.5% of our loan portfolio. The total amount of commercial real estate investment loans outstanding at December 31, 2010, including owner-occupied properties but excluding loans secured by farmland, was $537.7 million, or 51.4% of our loan portfolio. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/commercial, retail centers, multifamily properties and assisted living facilities.

        As of December 31, 2010, the outstanding balance of loans secured by farmland totaled $25.1 million, or 2.4% of our total loan portfolio. Farmland loans are generally made to the person actively involved in farming rather than to passive investors.

        Construction and Land Development Loans.    Our construction portfolio includes loans to small and midsized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single family homes in our market areas. These loans are typically disbursed as construction progresses and carry interest rates that vary with the prime rate. As of December 31, 2010, the outstanding balance of our construction loans was $98.4 million, or 9.4% of our total loan portfolio. We had undisbursed commitments of $18.0 million related to our construction loan portfolio.

        Residential Real Estate Loans.    We offer first and second mortgage loans to our individual customers primarily for the purchase of primary residences. As of December 31, 2010, the outstanding balance of one-to-four family real estate secured loans, including home equity loans, represented $139.9 million, or 13.4%, of our total loan portfolio.

        We also offer home equity lines of credit, or HELOCs, consisting of loans secured by first or second mortgages on primarily owner-occupied primary residences. As of December 31, 2010, the outstanding balance due under HELOCs was $27.3 million, or 2.6% of our total loan portfolio, and the unused remaining balance was $11.5 million.

        Consumer Loans.    We offer a variety of consumer loans, such as installment loans to purchase cars, boats and other recreational vehicles. As of December 31, 2010, we had outstanding $46.9 million of consumer loans, or 4.5% of our total loan portfolio. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than residential real estate mortgage loans. Consumer loan collections are dependent on the borrower's continuing financial stability and are therefore more likely to be affected by adverse personal circumstances.

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Underwriting

        We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic area and industries in which our business customers are engaged. We adhere to disciplined underwriting standards, but also remain cognizant of the need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive and timely manner. Key components of our underwriting standards include the following:

        Limit on Aggregate Credit Exposure to a Single Borrower.    We generally limit the Bank's aggregate credit exposure, including both funded and unfunded amounts, to any one borrower to $10.0 million, which is significantly lower than the Bank's legal lending limit of 25% of total risk-based capital (approximately $31.8 million as of December 31, 2010). Any exceptions to this limit must be expressly approved by the Bank's directors' loan committee, which is comprised of our Chief Executive Officer and President, Chief Credit Officer and three non-executive directors of the Bank. As of December 31, 2010, we had a limited number of loans outstanding for which exceptions to the general $10.0 million aggregate credit exposure had been approved, and these loans did not exceed the general threshold by a significant amount. In addition, when applying the dollar thresholds for purposes of the loan approval process (discussed below), we look at our aggregate credit exposure to the borrower (both existing and the potential new exposure) rather than only looking at the new loan under consideration. As of December 31, 2010, we had we had only five borrower relationships with outstanding balances of $8 million or greater, all of which represented performing pass-rated credits.

        Concentration Limits.    We have established concentration limits with respect to loan product type and specific industries. Our current loan policy limits commercial real estate loans for which cash flow from real estate is the primary source of repayment (i.e., real estate construction, land development and other land loans, multifamily loans and nonfarm nonresidential property where the primary source of repayment is derived from rental income associated with the property) to 300% of the Bank's total risk-based capital, residential loans to 300%, real estate construction loans to 75%, land development loans to 50%, raw land loans to 25%, farmland loans to 100% and agricultural production loans to 100%. As of December 31, 2010, we were within policy limits on all of these categories except for commercial real estate loans for which cash flow from real estate is the primary source of repayment, which equaled 342% of the Bank's total risk-based capital (after adjusting for the guaranteed portion of such loans that are covered by a loss-sharing agreement with the FDIC). We exceeded our policy limit on commercial real estate loans for which cash flow from real estate was the primary source of repayment primarily due to the significant amount of such loans that we have acquired in our five recent acquisitions.

        The following tables show the specific industries for which we have established concentration limits and, for each industry, the amount of the limit, the total outstanding commitment amount, the total outstanding commitment amount after adjusting for the guaranteed portion of loans that are covered by a loss-sharing agreement with the FDIC and the percentage of the Bank's total risk-based capital

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represented by the industry, and, in the case of bought participation loans, the percentage of the Bank's total loans, in each case as of December 31, 2010:

(dollars in thousands)	Policy Limit			Total Commitment Amount		Total Commitment Amount (adjusted for loss-sharing)		% of Total Risk- Based Capital(1)
Residential real estate		300	%	$	90,541	$	87,107		69	%
Retail strip centers		25	%		16,519		16,519		13	%
Hotel / motel		50	%		24,504		13,885		11	%
Assisted living facilities		75	%		45,951		44,546		35	%
Leisure and entertainment (e.g., golf courses, movie theatres)		25	%		23,613		22,063		17	%
Multifamily		100	%		49,787		45,190		36	%
Construction		75	%		93,962		85,201		67	%
Raw land		25	%		5,423		4,128		3	%
Land development		50	%		31,640		16,419		13	%
Income producing agricultural real estate		100	%		25,527		24,348		19	%
Operating agricultural loans		100	%		36,992		30,752		24	%
Bank holding companies		30	%		25,948		25,948		20	%
Printing industry		25	%		8,441		8,441		7	%
Medical (e.g., medical-related real estate and physician loans)		50	%		21,988		21,823		17	%
Trucking and transportation		25	%		14,967		14,967		12	%
Gas stations, convenience stores, petroleum dealers		25	%		32,175		31,621		25	%
To any one borrower		25	%		10,958		10,958		9	%
Bought participation loans—per lead bank		50	%		51,766		51,766		41	%

(1)

This percentage equals the "Total Commitment Amount (adjusted for loss-sharing)" divided by the Bank's total risk-based capital as of December 31, 2010 of approximately $127.2 million.

	Policy Limit as % of Total Loans			Total Commitment Amount		Total Commitment Amount (adjusted for loss-sharing)		% of Total Loans
Bought participation loans—aggregate		40	%		141,353		128,918		12	%

        As of December 31, 2010, we had total purchased loan participations from a single lead bank of $51.8 million, which represented 41% of the Bank's total risk-based capital. These loan participations were acquired in connection with the AMCORE transaction (and the referenced lead bank is the bank that ultimately acquired AMCORE out of FDIC receivership). We expect the total amount of purchased loan participations that we have from this lead bank to gradually decline as the underlying loans pay down and mature, as we generally do not have an ongoing relationship with this single lead bank to purchase loan participations.

        In general, our loan product concentration levels are monitored on a quarterly basis, and our commercial real estate concentrations are monitored at least monthly, by our Chief Credit Officer and the Bank's directors' loan committee, and industry concentration levels are monitored on a quarterly basis. The Bank's board of directors recently reduced the concentration policy limits for several industry categories to the amounts in the above table to better reflect our overall objective of maintaining a broadly diversified loan portfolio.

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        Loan Approval Process—Commercial Loans.    In operating our loan approval process, we seek to achieve an appropriate balance between prudent, disciplined underwriting and being flexible in our decision making and responding to our customers and their loan applications in a timely manner. Accordingly, we have established dollar thresholds that determine the level of approval that is required to originate or renew a loan. As discussed above, when applying these dollar thresholds, we look at the Bank's aggregate credit exposure to the borrower (both existing and potential new exposure) rather than only looking at the particular loan under consideration. Our relationship managers in the field collect the necessary paperwork from prospective borrowers and complete a loan summary. This paperwork is then provided to our centralized loan underwriting group, which analyzes the overall application and makes a recommendation as to whether the loan should be approved. If so, the underwriting group prepares the required credit package and provides it to the appropriate party for approval.

        Some relationship managers in the field have loan approval authority up to $500,000, and members of our Small Business Banking Underwriting Group have loan approval authority up to $300,000. The manager of our Small Business Banking Underwriting Group has loan approval authority up to $1.0 million, and our Senior Credit Officer, who reports to our Chief Credit Officer, has loan approval authority up to $2.0 million. Our Chief Credit Officer has loan approval authority up to $3.0 million for renewals, but only $2.0 million for new loans and new relationships. Any new loan or new relationship in excess of $2.0 million, or any loan renewal in excess of $3.0 million, must be approved by the Bank's directors' loan committee, which meets weekly.

        We have established LTV and term policies for our commercial loans as follows:

		LTV Limit	Term
Land loans:
	Raw	50%	12 months
	Entitled	60%	12 months
	Farmland actively used in farming	75%	5-year term, 20-year amortization
Acquisition and development		75%	Less than 24 months
Commercial real estate and construction:
	Pre-sold detached residential	80%
	Speculative detached residential	75%
	Condo and townhouse	70%
	Multifamily	70%	Construction: Less than 24 months
	Office	70%
	Retail w/ credit anchor	70%	CRE: 5-year term, 20-year amortization
	Retail w/o credit anchor	60%
	Industrial	70%
	Warehouse	70%
Accounts receivable		80%	Less than 12 months
Inventory		50%	Less than 12 months
Grain inventory		80%	Less than 12 months
Livestock		75%	Less than 12 months (market livestock); 3-5 years (breeding stock)
Equipment		70 - 80%	5 years

        We have a small correspondent banking division that purchases loan participations from other banks. All purchased loan participations are subject to the same loan approval process as is required for loans that we originate. We focus on purchasing in-market loan participations and do not actively pursue out-of-market participations.

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        Loan Approval Process—Residential Real Estate Loans.    We have a specialized residential loan underwriting group. Most of our residential loan origination involves conforming loans to be sold in the secondary market. However, we do originate some residential loans to be held in our portfolio. For these loans, the director of our residential loan underwriting group has approval authority up to approximately $800,000. Loans above this amount require further approvals.

        We do not originate loans with "teaser" rates. We do not originate residential loans with the characteristics typically described as "subprime" or "high cost," such as loans made to borrowers with little or no cash reserves and poor or limited credit using limited income documentation. All of our home loans were underwritten using full documentation. Our sales of whole loan pools have always been executed in the Prime market. For residential loans, our general policy is not to exceed an LTV of 80% unless the borrower obtains mortgage insurance or there are strong compensating factors.

        In-Market vs. Out-of-Market Lending.    We are a relationship-oriented, rather than transaction-oriented, lender. Accordingly, substantially all of our loans and purchased loan participations (excluding certain loans and loan participations acquired in our two FDIC-assisted transactions, which are covered by loss-sharing agreements, and approximately $29.0 million of indirect interests in automobile financing receivables not attributable to our banking offices that we purchased as part of the AMCORE transaction) are made to borrowers located or operating in our primary market areas. The limited number of loans secured by properties located in out-of-market areas that we have are made to borrowers who are well-known to the Bank because they headquartered within one of our primary market areas. For example, our largest aggregate credit exposure as of December 31, 2010, was to a developer located in one of our primary market areas for the development of a student apartment complex at a large state university in the southern United States.

Credit Risk Management/Special Assets Group

        Credit risk management involves a partnership between our relationship and portfolio managers and our credit administration and special assets group. We believe that we distinguish ourselves from many community banking organizations of comparable size in the area of credit risk management because of our dedicated special assets group. Our special assets group is comprised of 12 full-time employees, several of whom have significant prior experience working in special assets/loan workout groups at large national or super-regional banks. The members of our special assets group focus their efforts exclusively on monitoring and working out problem loans, managing the collection and foreclosure process and operating and disposing of other real estate owned. The manager of the special assets group also has overall responsibility for ensuring compliance with the two loss-sharing agreements that we have entered into with the FDIC, except that any action that would cause the FDIC's loss-share coverage to be voided with respect to a particular asset requires the prior approval of our Chief Executive Officer and President, Chief Financial Officer or Chief Credit Officer.

        Ongoing monitoring of our outstanding performing loans is generally handled by the relationship managers in the field. In some of our markets, we have portfolio managers (who generally do not have loan origination goals) that oversee the loan monitoring process. All aggregate credit exposures in excess of $1.0 million are subject to annual review by our centralized loan underwriting group.

        In general, whenever a particular loan or overall borrower relationship is downgraded to special mention or substandard based on one or more standard loan grading factors, the relationship or portfolio manager, as applicable, contacts a member of our special assets group to discuss the loan or relationship. The manager of the special assets group will make a determination as to whether responsibility for the ongoing monitoring of the loan or relationship should be retained by the relationship or portfolio manager, or whether this responsibility should be transferred to the special assets group. The manager of our special assets group reports to our Chief Credit Officer on a regular basis regarding the status of the special assets group's overall portfolio as well as the larger credits in

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the portfolio. As of December 31, 2010, the special assets group had primary responsibility for a portfolio of $141.3 million of loans and $17.0 million of foreclosed property.

Credit Quality Trends

        The following table summarizes our credit quality trends, on a quarterly basis, since the beginning of 2008:

(dollars in thousands)	Total Loans (Gross)		Provisions for Loan Losses		Net (Charge- Offs) / Recoveries			Allowance for Loan Losses		Loans 30 - 89 Days Past Due		Non- Performing Loans(1)		Non- Performing Assets(2)
Q1 2008	$	275,703	$	142	$	21		$	3,395	$	3,241	$	6,145	$	6,274
Q2 2008		283,775		140		(268	)		3,267		3,252		5,616		6,705
Q3 2008		304,876		254		12			3,533		1,340		4,551		5,381
Q4 2008(3)		337,220		515		(585	)		3,718		3,227		4,161		5,463
Q1 2009		431,374		939		(276	)		4,381		9,430		6,680		7,808
Q2 2009		581,958		1,444		(202	)		5,623		6,202		6,530		7,658
Q3 2009		608,860		1,747		(820	)		6,550		10,127		11,297		12,600
Q4 2009		624,456		16,598		(3,382	)		19,766		11,177		11,539		12,933
Q1 2010		1,022,492		3,205		(320	)		22,651		12,377		11,979		13,073
Q2 2010		1,046,339		2,201		(654	)		24,198		21,387		12,288		14,318
Q3 2010		1,029,738		3,120		(673	)		26,645		13,788		24,834		27,723
Q4 2010		1,047,144		5,054		(3,211	)		28,488		9,926		26,270		29,273

(1)

Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings. Nonperforming loans exclude PCI loans that were acquired in the Waterloo Bancshares, Strategic Capital and WestBridge transactions.

(2)

Nonperforming assets include nonperforming loans, other real estate owned and other repossessed assets. Nonperforming assets exclude other covered real estate owned that is related to the Strategic Capital and WestBridge FDIC-assisted transactions.

(3)

In connection with our acquisition of the People's National Bank branches, $255,000 was added to our allowance in the fourth quarter of 2008.

        As previously discussed, in connection with our acquisitions of Strategic Capital and WestBridge, we entered loss-sharing agreements with the FDIC pursuant to which the FDIC has agreed to reimburse us for 80% of losses we incur on covered assets. In addition, the loss-sharing agreement related to the Strategic Capital acquisition provides that the FDIC will reimburse us for 95% of losses in excess of $167.0 million that we incur on covered assets from such transaction. The figures included in the table above include loans that are covered by our loss-sharing agreements. The following table

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shows the amount of our non-performing loans in each quarter since the beginning of 2008 that were covered by a loss-sharing agreement:

	Non-Performing Loans
(dollars in thousands)	Total		Covered by Loss-Sharing Agreement		% Covered
Q1 2008	$	6,145	$	—		—
Q2 2008		5,616		—		—
Q3 2008		4,551		—		—
Q4 2008		4,161		—		—
Q1 2009		6,680		—		—
Q2 2009		6,530		—		—
Q3 2009		11,297		—		—
Q4 2009		11,539		340		2.95	%
Q1 2010		11,979		3,767		31.45	%
Q2 2010		12,288		4,205		34.22	%
Q3 2010		24,834		5,830		23.48	%
Q4 2010		26,270		5,459		20.78	%

Covered Loans

        The following table summarizes by category our loans that are covered by a loss-sharing agreement with FDIC as of December 31, 2010, and also sets forth the aggregate unpaid principal balance for each category:

(dollars in thousands)			Book Value		Unpaid Principal Balance (UPB)		Book Value as % of UPB			% of Loan Category That is Covered
Commercial loans:
	Commercial		$	25,581	$	29,666		86.23	%		12.84	%
	Commercial real estate			65,646		74,909		87.63	%		11.66	%
	Construction and land development			35,195		39,290		89.58	%		35.76	%
		Total commercial loans		126,422		143,865		87.88	%		14.69	%
Consumer loans:
	Residential real estate		$	9,687	$	11,886		81.50	%		6.92	%
	Consumer			932		1,063		87.68	%		1.99	%
		Total consumer loans		10,619		12,949		82.01	%		5.69	%
Total covered loans			$	137,041	$	156,814		87.39	%		13.09	%

Mortgage Banking Activities

Residential Real Estate Loan Originations and Secondary Market Sales

        Through the Bank, we also engage in the origination and purchase of residential loans for sale into the secondary market. We have historically sold whole loans to the Federal National Mortgage Association, or Fannie Mae, the Federal Home Loan Mortgage Corporation, or Freddie Mac, and various institutional purchasers, such as investment banks and other financial institutions. For the loans sold to Fannie Mae and Freddie Mac, the Bank retains the servicing rights on these loans, which generates servicing income. Intermediate-term adjustable rate loans and longer-term fixed rate loans are sold into the secondary market, while the Bank typically retains for its own portfolio short-term (no more than five years) adjustable rate loans.

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        In 2010, we sold $80.0 million of residential loans into the secondary market, or approximately 77% of the residential loans we originated during the year. In 2009 and 2008, we sold $78.0 million and $21.7 million, respectively, of residential loans into the secondary market, or approximately 72% and 52%, respectively, of the residential loans we originated during that period.

Loan Servicing

        We have retained servicing on substantially all loans sold to Fannie Mae, thereby generating ongoing servicing revenues and maintaining client relationships. Loan servicing activities include collecting and remitting loan payments, accounting for principal and interest, responding to client inquiries, holding escrow (impound) funds for payment of taxes, collecting amounts due from delinquent mortgagors, supervising foreclosures in the event of unremedied defaults and generally administering the loans for the investors to whom the loans have been sold.

        Our loan servicing portfolio was $103.1 million as of December 31, 2010, all of which were fixed rate loans with a weighted average contractual rate of 4.75%. When we collect monthly mortgage payments, we retain the servicing fees, ranging generally from 0.25% to 0.375% per annum on the principal balances of the loans. The weighted average servicing fee collected was 0.28% for the year ended December 31, 2010. Our servicing portfolio is reduced by normal amortization and prepayment or liquidation of outstanding loans.

        In 2010, our mortgage banking revenue, which includes gains on sales of loans into the secondary market and loan servicing income, increased to $2.2 million from $1.6 million in 2009 and $0.4 million in 2008. This represented a 36.1% increase from 2009 and an aggregate 416% increase from 2008.

Deposits

        We offer traditional depository products, including checking, savings, money market and certificates of deposits, to individuals, businesses, not-for-profit organizations, municipalities and other entities throughout our market areas. We also offer sweep accounts to our business customers. Deposits at the Bank are insured by the FDIC up to statutory limits. We also offer sweep accounts that are guaranteed through repurchase agreements to our business and municipal customers.

        Our ability to gather deposits, particularly core deposits, is an important aspect of our business franchise and we believe core deposits is a significant driver of franchise value. As of December 31, 2010, we held $1.4 billion of total deposits, 77.6% of which we considered to be core deposits. Effective in the first quarter of 2011, the federal banking agencies changed the classification for certificates of deposit greater than $100,000 but less than or equal to $250,000 from non-core to core deposits in response to the Dodd-Frank Act permanently increasing the deposit insurance limit to $250,000. Based on this new classification, our core deposits as of December 31, 2010 would have represented 87.0% of total deposits. We have grown deposits at a CAGR of 65.4% since December 31, 2007. Based on information reported to the FDIC as of June 30, 2010, we are the fourth largest bank holding company in Illinois headquartered outside of the Chicago metropolitan area measured by total deposits.

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        The following table presents the composition of our deposit base as of December 31, 2010:

(dollars in thousands)			Balance		Average Rate			% of Total Deposits
Deposits
	Interest bearing deposits:
		NOW accounts	$	210,937		0.49	%		15.5	%
		Money market deposit accounts		313,741		0.79	%		23.0	%
		Other savings deposits		74,805		0.41	%		5.5	%
		Certificates of deposit < $100,000		285,012		2.38	%		20.9	%
		Certificates of deposit > $100,000		146,598		2.14	%		10.8	%
		Brokered deposits		159,549		1.81	%		11.7	%
	Total interest bearing			1,190,642		1.37	%		87.3	%
	Noninterest bearing			173,875					12.7	%
Total deposits			$	1,364,517					100.0	%
Core deposits			$	1,058,370		1.00	%		77.6	%

        Due in large part to our performance banking initiative, we have been successful in recent years improving the composition of our deposit base by increasing the percentage of our noninterest bearing deposits to total deposits and reducing the percentage of our brokered deposits to total deposits. In the Strategic Capital transaction, we assumed all of the institution's deposits, including its significant levels of brokered deposits, as we needed a temporary funding source to support the nearly 100% increase in our total assets due to this transaction. Since that acquisition, we have focused on letting the acquired brokered deposits run off and replacing them with core deposits. The following table summarizes the quality of our deposit base, on a quarterly basis, since the beginning of 2008:

	Noninterest Bearing Deposits					Core Deposits					Certificates of Deposit > $100,000					Brokered Deposits
(dollars in thousands)	Amount		% of Total Deposits			Amount		% of Total Deposits			Amount		% of Total Deposits			Amount		% of Total Deposits
Q1 2008	$	39,825		13.6	%	$	229,195		78.2	%	$	42,843		14.6	%	$	21,083		7.2	%
Q2 2008		44,660		15.3	%		228,259		78.2	%		47,425		16.3	%		16,083		5.5	%
Q3 2008		38,965		11.8	%		231,094		69.9	%		52,680		15.9	%		46,774		14.2	%
Q4 2008		38,363		10.9	%		246,407		70.0	%		63,838		18.1	%		41,620		11.8	%
Q1 2009		58,172		12.0	%		362,747		74.6	%		92,238		19.0	%		31,050		6.4	%
Q2 2009		63,292		6.6	%		431,325		45.3	%		104,071		11.0	%		416,719		43.7	%
Q3 2009		63,621		7.0	%		470,170		51.6	%		100,984		11.1	%		340,246		37.3	%
Q4 2009		64,356		7.0	%		523,278		57.0	%		108,084		11.8	%		286,730		31.2	%
Q1 2010		166,316		11.6	%		1,010,676		70.5	%		155,638		10.9	%		267,383		18.7	%
Q2 2010		135,660		9.8	%		1,036,890		75.0	%		157,374		11.4	%		187,421		13.6	%
Q3 2010		150,402		11.1	%		1,075,587		79.4	%		124,635		9.2	%		154,213		11.4	%
Q4 2010		173,875		12.7	%		1,058,370		77.6	%		146,598		10.7	%		159,549		11.7	%

        We have been headquartered in Effingham, Illinois, in our central Illinois market area for our entire 130-year history and our central Illinois market area remains our largest geographic region measured by total deposits. However, we have become more geographically diversified over the past several years due our success in developing our Chesterfield branch office in the St. Louis metropolitan area into a full-service office catering to small and medium sized commercial customers, the consummation of the Waterloo Bancshares acquisition in February 2009, which gave us a traditional community banking business on the Illinois side of the St. Louis metropolitan area, and the consummation of the AMCORE transaction in March 2010, which established our presence in northern Illinois. As of December 31, 2007, approximately 92% of our total deposits came from central Illinois and approximately 8% from the St. Louis metropolitan area, with the remaining being out-of-market

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certificates of deposits, including brokered deposits, and we did not have operations in northern Illinois at such time. As of December 31, 2010, our deposit base was better diversified geographically, with approximately 37% of our total deposits coming from central Illinois, approximately 36% from northern Illinois and approximately 13% from the St. Louis metropolitan area, with the remaining 14% being out-of-market certificates of deposits, including brokered deposits. We anticipate that the trend toward a larger percentage of our total deposits coming from the St. Louis metropolitan area will continue in future periods.

        The following table summarizes our deposit portfolio by geographic region as of December 31, 2010:

(dollars in thousands)			Central Illinois			Northern Illinois			St. Louis Metro			Other(1)			Total
Deposits
	Interest bearing deposits:
		NOW accounts	$	100,617		$	94,734		$	15,586		$	—		$	210,937
		Money market deposit accounts		197,500			46,896			69,345			—			313,741
		Other savings deposits		15,199			49,814			9,792			—			74,805
		Certificates of deposit < $100,000		93,614			149,451			39,037			2,910			285,012
		Certificates of deposit > $100,000		40,411			55,626			23,982			26,579			146,598
		Brokered deposits		—			—			—			159,549			159,549
	Total interest bearing			447,341			396,521			157,742			189,038			1,190,642
	Noninterest bearing			53,495			103,075			16,776			529			173,875
Total deposits			$	500,836		$	499,596		$	174,518		$	189,567		$	1,364,517
% of total deposits in region				36.7	%		36.6	%		12.8	%		13.9	%

(1)

"Other" consists of deposits that are not managed on a regional basis.

Trust and Wealth Management

        As previously discussed, enhancing and expanding our wealth management group is an important component of our initiative driven strategic plan because trust and wealth management services can generate stable and recurring revenue and enhance banking customer loyalty, which can result in increased core deposits and greater cross-selling opportunities. In recent years, we have greatly expanded the breadth and scope of our wealth management services and have focused on generating more recurring fee based revenue as opposed to principally offering one-time transactional based services. We believe that our full-service, holistic approach to wealth management differentiates us from other community banks, where the principal focus of this area is on trust administration and/or brokerage services.

        We deliver our comprehensive suite of trust and wealth management services through the Bank under the Midland Financial Strategies name. Such services include the following:

        Financial and estate planning.    We assist individuals in organizing, analyzing and understanding their financial information and setting financial goals. We then work with them to develop a comprehensive investment and asset allocations strategy to assist them in achieving their financial goals. We also work with small and midsized business owners, professionals and other individuals to develop estate plans that minimize or eliminate estate tax liability and achieve their goals for passing their accumulated wealth to heirs and charitable organizations.

        Trustee and custodial services.    We serve as a corporate trustee for a wide array of trusts, such as living trusts, testamentary trusts, irrevocable life insurance trusts, and generation skipping trusts, and as

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a corporate fiduciary of estates and guardianships. We also provide traditional custodial services, including serving as custodian for self-directed individual retirement accounts and other retirement accounts.

        Investment management and retail brokerage.    We offer clients comprehensive investment management solutions whereby we manage all or a portion of a client's investment portfolio on a discretionary basis. We also offer clients retail brokerage capabilities through a nationally recognized third party broker-dealer.

        Tax and insurance planning.    We assist our clients in understanding the tax impact of certain financial decisions and investment strategies and products and developing tax-efficient financial and investment plans. We also help ensure that our clients have appropriate insurance coverage to protect against adverse events. We assist our clients in identifying potential risks and understanding their options when purchasing life, long-term care, disability and other types of insurance.

        Business planning.    We provide small and midsized business owners with strategic oversight to assist them in navigating the unique challenges that come with business ownership. Our services include assistance with succession planning, valuation and buy/sell arrangements, key person planning, deferred compensation, group benefit planning and tax planning.

        Corporate retirement plan consulting and administration.    We provide comprehensive consultation on corporate pension, profit sharing, 401(k) and other retirement plans. Our bundled services include plan design, investment advice, plan administration, employee education and regulatory compliance testing.

        As of December 31, 2010, we had $702.5 million of trust and wealth management assets under administration and 3,046 trust and wealth management accounts. Such amounts represented CAGRs of 91.8% and 37.4%, respectively, from the $99.6 million of trust and wealth management assets under administration and 1,173 trust and wealth management accounts that we had as of December 31, 2007. We expect growth in our wealth management group to continue over the next several years, including through the possible acquisition of trust and other wealth management accounts from community banks seeking to exit this specialized, scale-dependent business, the opening of new wealth management offices and the hiring of wealth management professionals with established client rosters.

Our Market Areas

        We operate primarily in three market areas—central Illinois, northern Illinois and the St. Louis metropolitan area. Many of our branch offices are located in communities where agriculture and agricultural-related businesses are particularly important to the local economy. The communities that we serve tend to be smaller and generally are not serviced by large national and super-regional banks. For example, based on information reported to the FDIC as of June 30, 2010, in Effingham County, where we are headquartered, no large national or super-regional bank (which we define as having more than $10.0 billion in total assets) had a deposit market share ranking in the top five in the county. In addition, only two of the counties that we serve in our northern Illinois market area have a large national or super-regional bank among the top five in deposit market share, and in each such case the large competitor had a deposit market share of less than 10%.

        As of December 31, 2010, we were diversified among our market areas, with approximately 37% of our deposits in the central Illinois area, approximately 36% in the northern Illinois area, approximately 13% in the St. Louis metropolitan area and the remaining 14% in out-of-market certificates of deposit, including brokered deposits. We also believe that our operations are not dependent on the strength of any particular industry. In addition to agriculture, other industries of importance to our market areas include transportation and logistics, higher education (particularly in Champaign-Urbana in our central Illinois market), healthcare services, hospitality and tourism and technology.

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        The HHI is a method used by banking regulators of measuring the concentration in a particular banking market. The HHI for a banking market can range from zero to 10,000, with larger numbers signifying more concentrated markets. If the HHI for a banking market is less than 1,000, the market is considered to be unconcentrated; if between 1,000 and 1,800, the market is considered to be moderately concentrated; and if in excess of 1,800, the market is considered to be highly concentrated. We generally operate in banking markets that are considered to be only moderately concentrated. Accordingly, we believe that we have opportunities to gain market share, either through organic growth or through acquisitions, in the market areas in which we operate. The following table shows the HHI for each of the banking markets in which we operate:

HHI Banking Market (Counties in Which the Company Operates)	HHI Unweighted Deposits		HHI Weighted Deposits(1)
Effingham, Illinois (Effingham)		1,602		1,675
Champaign/Urbana, Illinois (Champaign)		1,427		1,467
St. Louis, Missouri (Bond, Monroe, St. Clair, St. Louis)		615		634
Vandalia, Illinois (Fayette)		2,628		2,628
Kewanee, Illinois (Bureau)		968		1,034
La Salle County, Illinois (La Salle)		759		802
Lee County, Illinois (Lee)		1,419		1,491
Ogle, Illinois (Lee, Ogle)		1,502		1,553
Freeport, Illinois (Stephenson)		1,736		1,736
Whiteside, Illinois (Whiteside)		1,172		1,148
Joliet, Illinois (Will)		866		882

Source: Federal Reserve Bank of St. Louis, CASSIDI®. Based on deposit information as of June 30, 2010, the most recent date available.

(1)

Bank deposits weighted at 100% with thrift deposits weighted at 50%.

        We recently have sought to expand our presence in several larger communities to complement our existing strength in predominantly rural communities. With our FDIC-assisted acquisition of Strategic Capital in May 2009, we expanded into the Champaign-Urbana metropolitan area, home of the University of Illinois and approximately 226,000 residents. We have recently opened a wealth management office in Rockford, Illinois, which is located 90 miles northwest of Chicago, has a population of approximately 150,000 (the third largest city in Illinois by population). The Rockford metropolitan area has a population of approximately 359,000 and is a major commercial center in the northwest Illinois-south-central Wisconsin corridor. We also opened a branch office in Joliet, Illinois, which is located 40 miles southwest of Chicago and has a population of approximately 148,000 (the fourth largest city in Illinois by population). In the St. Louis metropolitan area, we have expanded our operations in Chesterfield, Missouri, which is a relatively affluent western suburb of St. Louis with a population of approximately 47,000.

        Additional information about our three primary market areas is set forth below:

•

Central Illinois—We have been headquartered in Effingham, Illinois for 130 years and central Illinois continues to represent approximately 39% of our loans and 37% of our deposits. Effingham is located at the intersection of Interstates 57 and 70 in south-central Illinois. Interstate 57 runs from the Chicago metropolitan area to southeastern Missouri, serving as a primary route for travelers headed from the southern United States, such as Memphis and New Orleans, to Chicago and enabling them to bypass the St. Louis metropolitan area. Interstate 70 is a major east-west transportation route, running from Baltimore to Utah, and connects Indianapolis with St. Louis in the Midwest. Effingham, which has a population of approximately 13,000, is centrally located between Chicago (approximately 210 miles to the north), Indianapolis

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(approximately 140 miles to the east) and St. Louis (approximately 100 miles to the west) and, because of its location at the intersection of Interstates 57 and 70, serves as a major transportation route. After Effingham, our Champaign office is our second largest office in terms of deposits in central Illinois. As previously noted, the Champaign-Urbana metropolitan area is the home of the University of Illinois, which has in excess of 41,000 students. The Champaign-Urbana metropolitan area also serves as a major healthcare center for much of central Illinois and western Indiana, and has a population in excess of 226,000.

Other offices in our central Illinois market area are in Centralia, Greenville, Vandalia and Farina, the largest of which is Centralia with a population of approximately 13,500. As of June 30, 2010, the most recent date for which FDIC data is available, we ranked in the top four in deposit market share in four of the five central Illinois counties that we serve—first in Effingham County with a 30.8% market share; second in Fayette County with a 19.3% market share; second in Bond County with a 17.7% market share; and fourth in Marion County with a 10.3% market share. We ranked first in market share in the community of Effingham with a 40.8% market share.

•

Northern Illinois—We entered the northern Illinois market area in March 2010 with the AMCORE transaction. All of the branch offices that we acquired are within an approximate 80-mile radius of Rockford, which is the third largest metropolitan area in Illinois with a population of approximately 359,000. The size, demographics and economies of the communities served by these branch offices are similar to those of the predominantly rural communities served in our central Illinois market area. Furthermore, most of the communities served in our northern Illinois market area are located along Interstates 80 or 88, both of which serve as major transportation routes between Chicago and the Quad Cities metropolitan area in western Illinois and eastern Iowa. We also recently opened a wealth management office in Rockford and a branch office in Joliet, which is located at the intersection of Interstates 55 and 80 approximately 40 miles southwest of Chicago. After Joliet and Rockford, the largest community served in this region is Freeport, which has a population of approximately 25,000 and is approximately 30 miles west of Rockford. Other offices in our northern Illinois market area acquired from AMCORE are in Dixon, Mendota, Oregon, Peru, Princeton, Rock Falls and Sterling. As of June 30, 2010, we ranked in the top five in deposit market share in three northern Illinois counties that we serve—first in Lee County with a 22.8% market share; fourth in Bureau County with a 7.7% market share; and fifth in Whiteside County with a 10.2% market share. In addition, we ranked in first or second in deposit market share in three of the communities that we serve—first in Dixon with a 35.7% market share; second in Princeton with a 15.3% market share; and second in Rock Falls with a 16.7% market share.

•

St. Louis Metropolitan Area—We entered the St. Louis metropolitan area in 2003 with the establishment of a de novo branch office in Chesterfield, Missouri. Chesterfield, which has a population of approximately 47,000, is an affluent suburb in the St. Louis metropolitan area, as evidenced by its median household income of approximately $98,000. We significantly expanded our Chesterfield operations in October 2010 with the acquisition of WestBridge from the FDIC, as receiver. As of December 31, 2010, Chesterfield had grown to be our fourth largest office in terms of deposits. Prior to our WestBridge acquisition, in February 2009, we acquired Waterloo Bancshares, the holding company for Commercial State Bank of Waterloo, and its six branch offices located in Monroe and St. Clair counties in Illinois. The communities served by these banking offices are smaller, rural communities located in the southeast portion of the St. Louis metropolitan area, but have been growing over the past decade due to their status as bedroom communities to St. Louis with lower costs of living than in many of the suburban St. Louis communities in Missouri. For example, Monroe County had the eighth highest population growth in Illinois (among 102 counties) between 2000 and 2010 with reported population growth

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of 20.1%. As of June 30, 2010, we ranked fourth in deposit market share in Monroe County, with an 11.4% market share.

        We are continually evaluating potential expansion opportunities in markets where we believe we can leverage our initiative driven strategic plan and community banking platform to gain market share and operate profitably. We intend, however, to remain a community banking organization focused on less concentrated markets outside of major urban areas. In general, we intend to focus our future expansion efforts on the market areas that we already serve and on other market areas in Illinois, eastern Missouri and western Indiana that have demographics similar to the market areas in which we currently operate, although it is possible one or more acquisition targets could have a presence in other areas of the Midwest.

        We believe the banking landscape in Illinois, Missouri and Indiana will provide significant opportunities due to the large number of small community banks currently operating in these states. According to publicly available information from the FDIC, these three states have a total of 993 banks and thrifts with assets of less than $1.0 billion—552 in Illinois (second highest in the United States); 312 in Missouri (sixth highest in the United States); and 129 in Indiana. We believe these fragmented markets and large universe of potential targets will provide us with significant organic growth and consolidation opportunities.

Competition

        We compete in the commercial banking industry solely through the Bank. This industry is highly competitive, and the Bank faces strong direct competition for deposits, loans, wealth management and other financial-related services. We compete with other commercial banks, thrifts and credit unions. Although some of these competitors are situated locally, others have statewide or nationwide presence. In addition, we compete with large banks in major financial centers and other financial intermediaries, such as consumer finance companies, brokerage firms, mortgage banking companies, insurance companies, securities firms, mutual funds and certain government agencies as well as major retailers, all actively engaged in providing various types of loans and other financial services We believe that our banking and wealth management professionals, the range and quality of products that we offer and our emphasis on building long-lasting relationships sets the Bank apart from its competitors. We also believe that the Bank's long-standing presence in the community and personal service philosophy enhance our ability to attract and retain customers.

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        The following table lists the counties in which we operate as well as certain other information:

County		Total Number of Banking Organizations		Total Number of Banking Offices		Total Deposits in County (in thousands)		Midland States Market Share
Central Illinois
	Bond		6		9	$	286,563		17.7	%
	Champaign		32		89		3,854,775		3.1	%
	Effingham		11		21		1,266,004		30.8	%
	Fayette		7		11		348,349		19.3	%
	Marion		13		17		694,131		10.3	%
Northern Illinois
	Bureau		14		25		891,698		7.7	%
	La Salle		24		61		2,525,247		3.1	%
	Lee		15		21		717,431		22.8	%
	Ogle		11		22		966,485		2.0	%
	Stephenson		14		25		1,158,433		2.3	%
	Whiteside		16		30		1,280,753		10.2	%
	Will		58		226		9,839,132		0.1	%
St. Louis Metropolitan Area
	Monroe (IL)		11		24		729,413		11.4	%
	St. Clair (IL)		28		97		3,656,785		1.7	%
	St. Louis (MO)		54		323		32,792,045		0.1	%

Source: FDIC Summary of Deposits as of June 30, 2010.

Employees

        As of December 31, 2010, we employed approximately 376 persons. We provide extensive training to our employees in an effort to ensure that our customers receive superior customer service. None of our employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement. We believe that our relations with our employees are good.

Properties

        Our headquarters office is located at 133 West Jefferson Street, Effingham, Illinois, 62401, which also serves as the Bank's main banking office. Our headquarters was built in 1881 and has approximately 17,600 square feet. We are currently in the process of building a new 79,500 square foot corporate facility in Effingham, Illinois to serve as our new headquarters office as well as the Bank's main banking office. This new facility also will house our primary operations center. We anticipate that the new facility will be completed by September 2011. We intend to retain our existing headquarters

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office as a branch office. In addition to the foregoing and certain mobile and/or drive-up facilities, we also operate banking offices at the following locations:

Central Illinois Region	Owned or Leased	Sq. Ft.		Year Built(1)		Northern Illinois Region	Owned or Leased	Sq. Ft.		Year Built(1)
1302 Thelma Keller Avenue Effingham, Illinois 62401	Leased		3,550		—	1407 North Main Street Princeton, Illinois 61356	Owned		1,500		1990
101 South Merchant Street Effingham, Illinois 62401	Leased		750		—	815 South Main Street Princeton, Illinois 61356	Owned		14,200		1971
318 West College Greenville, Illinois 62246	Owned		3,300		2002	801 Washington Street Mendota, Illinois 61342	Owned		6,480		1958
1608 Broadmoor Drive Champaign, Illinois 61821	Leased		8,236		—	2825 Plaza Drive Peru, Illinois 61354	Owned		5,818		2004
300 West Madison Street Farina, Illinois 62838	Owned		5,200		1979	2022 4th Street Peru, Illinois 61354	Owned		1,800		1975
1611 Veterans Avenue Vandalia, Illinois 62471	Leased		3,700		—	212 North Hennepin Dixon, Illinois 61021	Owned		2,500		1997
200 South Poplar Street Centralia, Illinois 62801	Owned		4,000		2005	101 Independence Court Dixon, Illinois 61021	Owned		2,100		1976
St. Louis Metro. Area	Owned or Leased	Sq. Ft.		Year Built(1)		101 West First Street Dixon, Illinois 61021	Owned	23,648		1917
200 Quarry Road Columbia, Illinois 62236	Owned		2,769		2006	122 North Fourth Street Oregon, Illinois 61061	Leased		1,500		—
130 S. Main Hecker, Illinois 62248	Owned		950		1983	1753 South West Avenue Freeport, Illinois 61032	Owned		5,400		2004
812 North Market Waterloo, Illinois 62298	Owned		2,254		1997	941 First Avenue Rock Falls, Illinois 61071	Owned		2,307		1977
101 South Main Street Waterloo, Illinois 62298	Owned		9,370		1930	302 First Avenue Sterling, Illinois 61081	Owned		35,381		1927
500 North State Street Freeburg, Illinois 62243	Owned		2,215		2004	1540 Route 59 Joliet, Illinois 60431	Owned		4,365		2003
514 South Main Street Smithton, Illinois 62285	Owned		1,784		2006	6957 Olde Creek Road, Suite 1400 A Perryville Place	Leased		3,500		—
17107 Chesterfield Apt Rd Chesterfield, Missouri 62005	Leased		4,928		—	Rockford, Illinois 61114(2)

(1)

Year built information is provided only for our owned properties.

(2)

Our Rockford office is a trust and wealth management office only. We do not conduct banking operations out of this location.

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        In addition to the banking offices listed above, we also lease a 22,128 square foot facility in Effingham, Illinois as an operations center. We believe that the leases to which we are subject are generally on terms consistent with prevailing market terms, and none of the leases are with our directors, officers, beneficial owners of more than 5% of our voting securities or any affiliates of the foregoing. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future.

Legal Proceedings

        In the normal course of business, we are named or threatened to be named as a defendant in various lawsuits. Management, following consultation with legal counsel, does not expect the ultimate disposition of any or a combination of these matters to have a material adverse effect on our business.

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REGULATION AND SUPERVISION

General

        Financial institutions, their holding companies and their affiliates are extensively regulated under federal and state law. As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory authorities, including the Federal Reserve, the FDIC and the IDFPR. Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities and securities laws administered by the U.S. Securities and Exchange Commission, or the SEC, and state securities authorities also have an impact on our business. The effect of these statutes, regulations, regulatory policies and accounting rules may be significant, and cannot be predicted with a high degree of certainty.

        Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of financial institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than shareholders. These federal and state laws, and the regulations of the bank regulatory authorities issued under them, affect, among other things, the scope of business, the kinds and amounts of investments banks may make, reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends. In addition, turmoil in the credit markets in recent years prompted the enactment of unprecedented legislation that has allowed the U.S. Treasury to make equity capital available to qualifying financial institutions to help restore confidence and stability in the U.S. financial markets, which imposes additional requirements on institutions in which the U.S. Treasury invests.

        The following is a summary of the material elements of the supervisory and regulatory framework applicable to us. The description below does not describe all of the statutes, regulations and regulatory policies that apply to us, nor does it restate all of the requirements of those that are described. Moreover, Congress recently enacted fundamental reforms to our bank regulatory framework, the majority of which will be implemented over time by various regulatory agencies, making their impact difficult to predict. See "—Financial Regulatory Reform" below.

Financial Regulatory Reform

        As noted in the discussion of "RISK FACTORS" above, on July 21, 2010, President Obama signed the Dodd-Frank Act into law. The Dodd-Frank Act represents a sweeping reform of the supervisory and regulatory framework applicable to financial institutions and capital markets in the United States, certain aspects of which are described below in more detail. The Dodd-Frank Act creates new federal governmental entities responsible for overseeing different aspects of the U.S. financial services industry, including identifying emerging systemic risks. It also shifts certain authorities and responsibilities among federal financial institution regulators, including the supervision of holding company affiliates and the regulation of consumer financial services and products. In particular, and among other things, the Dodd-Frank Act: creates a Bureau of Consumer Financial Protection authorized to regulate providers of consumer credit, savings, payment and other consumer financial products and services; narrows the scope of federal preemption of state consumer laws enjoyed by national banks and federal savings associations and expands the authority of state attorneys general to bring actions to enforce federal consumer protection legislation; imposes more stringent capital requirements on bank holding companies and subjects certain activities, including interstate mergers and acquisitions, to heightened capital conditions; significantly expands underwriting requirements applicable to loans secured by 1-4 family residential real property; restricts the interchange fees payable on debit card transactions for issuers with $10.0 billion in assets or greater; requires the originator of a securitized loan, or the

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sponsor of a securitization, to retain at least 5% of the credit risk of securitized exposures unless the underlying exposures are qualified residential mortgages or meet certain underwriting standards to be determined by regulation; creates a Financial Stability Oversight Council as part of a regulatory structure for identifying emerging systemic risks and improving interagency cooperation; provides for enhanced regulation of advisers to private funds and of the derivatives markets; enhances oversight of credit rating agencies; and prohibits banking agency requirements tied to credit ratings.

        Numerous provisions of the Dodd-Frank Act are required to be implemented through rulemaking by the appropriate federal regulatory agencies over the next few years. It is not clear what form such regulations will ultimately take or if certain provisions of the Dodd-Frank Act will be amended prior to their implementation. Furthermore, while the reforms primarily target systemically important financial service providers, their influence is expected to filter down in varying degrees to smaller institutions over time. As a result, in many respects, the ultimate impact of the Dodd-Frank Act will not be fully known for years, and it is possible that the Dodd-Frank Act, or any other new legislative changes, could have a negative impact on our results of operations and financial condition.

The Increasing Importance of Capital

        While capital has historically been one of the key measures of the financial health of both holding companies and depository institutions, its role is becoming fundamentally more important in the wake of the financial crisis. Not only will capital requirements increase, but the type of instruments that constitute capital will also change, and, as a result of the Dodd-Frank Act, after a phase-in period, bank holding companies will have to hold capital under rules as stringent as those for insured depository institutions. Moreover, the actions of the international Basel Committee on Banking Supervision, a committee of central banks and bank supervisors, to reassess the nature and uses of capital in connection with an initiative called "Basel III," discussed below, will likely have a significant impact on the capital requirements applicable to U.S. bank holding companies and depository institutions.

Required Capital Levels

        As indicated above, the Dodd-Frank Act mandates the Federal Reserve to establish minimum capital levels for bank holding companies on a consolidated basis that are as stringent as those required for insured depository institutions. The components of Tier 1 capital will be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. As a result, the proceeds of trust preferred securities will be excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank holding companies with less than $15.0 billion of assets. As we have consolidated assets of less than $15.0 billion, we will be able to maintain our trust preferred proceeds as capital but will have to comply with new capital mandates in other respects, and will not be able to raise Tier 1 capital in the future through the issuance of trust preferred securities.

        Under current federal regulations, the Bank is subject to, and, after a phase-in period, the Company will be subject to, the following minimum capital standards: (i) a leverage requirement consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated banks with a minimum requirement of at least 4% for all others; and (ii) a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. For this purpose, Tier 1 capital consists primarily of common stock, noncumulative perpetual preferred stock and related surplus less intangible assets (other than certain loan servicing rights and purchased credit card relationships). Total capital consists primarily of Tier 1 capital plus Tier 2 capital, which includes other non-permanent capital items such as certain other debt and equity instruments that do not qualify as Tier 1 capital and a portion of the Bank's allowance for loan losses.

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        The capital requirements described above are minimum requirements. Federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a banking organization that is "well-capitalized" may qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities, may qualify for expedited processing of other required notices or applications and may accept brokered deposits. Additionally, one of the criteria that determines a bank holding company's eligibility to operate as a financial holding company (see "—Acquisitions, Activities and Changes in Control" below) is a requirement that all of its depository institution subsidiaries be "well-capitalized." Under the Dodd-Frank Act, that requirement is extended such that, as of July 21, 2011, bank holding companies, as well as their depository institution subsidiaries, will have to be well-capitalized in order to operate as financial holding companies. Under the capital regulations of the Federal Reserve and FDIC, in order to be "well-capitalized" a banking organization must maintain a ratio of total capital to total risk-weighted assets of 10% or greater, a ratio of Tier 1 capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1 capital to total assets of 5% or greater.

        Higher capital levels may also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve and FDIC's capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 capital less all intangible assets), well above the minimum levels.

        It is important to note that certain provisions of the Dodd-Frank Act and Basel III, discussed below, will ultimately establish strengthened capital standards for banks and bank holding companies, will require more capital to be held in the form of common stock and will disallow certain funds from being included in a Tier 1 capital determination. Once fully implemented, these provisions may represent regulatory capital requirements which are meaningfully more stringent than those outlined above.

Prompt Corrective Action

        A banking organization's capital plays an important role in connection with regulatory enforcement as well. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators' powers depends on whether the institution in question is "adequately capitalized," "undercapitalized," "significantly undercapitalized" or "critically undercapitalized," in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators' corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution's asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

        As of December 31, 2010: (i) the Bank was not subject to a directive from the FDIC to increase its capital to an amount in excess of the minimum regulatory capital requirements; (ii) the Bank exceeded its minimum regulatory capital requirements under FDIC capital adequacy guidelines; and (iii) the Bank was "well-capitalized," as defined by FDIC regulations. As of December 31, 2010, the Company had regulatory capital in excess of the Federal Reserve's minimum requirements.

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Basel III

        The current risk-based capital guidelines that apply to the Bank and will apply to the Company are based upon the 1988 capital accord of the international Basel Committee on Banking Supervision, a committee of central banks and bank supervisors, as implemented by the U.S. federal banking agencies on an interagency basis. In 2008, the banking agencies collaboratively began to phase-in capital standards based on a second capital accord, referred to as "Basel II," for large or "core" international banks (generally defined for U.S. purposes as having total assets of $250 billion or more or consolidated foreign exposures of $10.0 billion or more). Basel II emphasized internal assessment of credit, market and operational risk, as well as supervisory assessment and market discipline in determining minimum capital requirements.

        On September 12, 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement to a strengthened set of capital requirements for banking organizations in the United States and around the world, known as Basel III. The agreement is currently supported by the U.S. federal banking agencies. As agreed to, Basel III is intended to be fully-phased in on a global basis on January 1, 2019. However, the ultimate timing and scope of any U.S. implementation of Basel III remains uncertain. As agreed to, Basel III would require, among other things: (i) an increase in minimum required common equity to 7% of total assets; (ii) an increase in the minimum required amount of Tier 1 capital from the current level of 4% of total assets to 8.5% of total assets; (iii) an increase in the minimum required amount of Total Capital, from the current level of 8% to 10.5%. Each of these increased requirements includes 2.5% attributable to a capital conservation buffer to be phased in from January 2016 until January 1, 2019. The purpose of the conservation buffer is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. There will also be a required countercyclical buffer to achieve the broader goal of protecting the banking sector from periods of excess aggregate credit growth.

        Pursuant to Basel III, certain deductions and prudential filters, including minority interests in financial institutions, mortgage servicing rights and deferred tax assets from timing differences, would be deducted in increasing percentages beginning January 1, 2014, and would be fully deducted from common equity by January 1, 2018. Certain instruments that no longer qualify as Tier 1 capital, such as trust preferred securities, also would be subject to phase-out over a 10-year period beginning January 1, 2013.

        The Basel III agreement calls for national jurisdictions to implement the new requirements beginning January 1, 2013. At that time, the U.S. federal banking agencies, including the Federal Reserve, will be expected to have implemented appropriate changes to incorporate the Basel III concepts into U.S. capital adequacy standards. Although the Basel III changes, as implemented in the United States, will likely result in generally higher regulatory capital standards, it is difficult at this time to predict how any new standards will ultimately be applied to the Company and the Bank.

The Company

        General.    As the sole shareholder of the Bank, the Company is a bank holding company. As a bank holding company, the Company is registered with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended, or the BHCA. In accordance with Federal Reserve policy, and as now codified by the Dodd-Frank Act, the Company is legally obligated to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Company might not otherwise do so. Under the BHCA, the Company is subject to periodic examination by the Federal Reserve. The Company is also required to file with the Federal Reserve periodic reports of our operations and such additional information regarding the Company and our subsidiaries as the Federal Reserve may require.

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        Acquisitions, Activities and Change in Control.    The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits established by the BHCA and the Dodd-Frank Act), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its insured depository institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out of state depository institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore, in accordance with the Dodd-Frank Act, as of July 21, 2011, bank holding companies must be well-capitalized in order to effect interstate mergers or acquisitions. For a discussion of the capital requirements, see "—The Increasing Importance of Capital," above.

        The BHCA generally prohibits the Company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be "so closely related to banking… as to be a proper incident thereto." This authority would permit the Company to engage in a variety of banking related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage. The BHCA generally does not place territorial restrictions on the domestic activities of nonbank subsidiaries of bank holding companies.

        Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. The Company has elected (and the Federal Reserve has accepted such election) to operate as a financial holding company.

        Federal law also prohibits any person or company from acquiring "control" of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator. "Control" is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances between 10% and 24.99% ownership.

        Capital Requirements.    Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve capital adequacy guidelines, as affected by the Dodd-Frank Act and Basel III. For a discussion of capital requirements, see "—The Increasing Importance of Capital," above. If capital levels fall below the minimum required levels, a bank holding company, among other things, may be denied approval to acquire or establish additional banks or nonbank businesses.

        Dividend Payments.    Our ability to pay dividends to our shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding

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companies. As an Illinois corporation, we are subject to the limitations of the IBCA, which prohibit us from paying a dividend if, after giving effect to the dividend: (i) we would be insolvent; (ii) our net assets would be less than zero; or (iii) our net assets would be less than the maximum amount then payable to our shareholders who would have preferential distribution rights if we were liquidated.

        Additionally, as a bank holding company, our ability to declare and pay dividends is subject to the guidelines of the Federal Reserve regarding capital adequacy and dividends. The Federal Reserve guidelines generally require us to review the effects of the cash payment of dividends on common stock and other Tier 1 capital instruments (i.e., perpetual preferred stock and trust preferred securities) in light of our earnings, capital adequacy and financial condition. As a general matter, the Federal Reserve indicates that the board of directors of a bank holding company should eliminate, defer or significantly reduce the dividends if: (i) the company's net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company's capital needs and overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The Federal Reserve also possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.

        Furthermore, one of our primary sources of funds is dividends from the Bank. Under the Illinois Banking Act, Illinois-chartered banks generally may not pay dividends in excess of their net profits. The payment of dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. In addition, the various bank regulatory agencies have authority to prohibit a bank regulated by them from engaging in unsafe and unsound practices; the payment of a dividend by a bank could, depending on the circumstances, be considered such an unsafe or unsound practice.

        Corporate Governance.    The Dodd-Frank Act addresses many investor protection, corporate governance and executive compensation matters that will affect most U.S. publicly traded companies. The Dodd-Frank Act will increase stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called "golden parachute" payments, and authorizing the SEC to promulgate rules that would allow stockholders to nominate and solicit voters for their own candidates using a company's proxy materials. The legislation also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded.

The Bank

        General.    The Bank is an Illinois-chartered bank, the deposit accounts of which are insured by the DIF to the maximum extent provided under federal law and FDIC regulations. As an Illinois-chartered FDIC-insured bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the IDFPR, the chartering authority for Illinois banks, and the Federal Reserve, designated by federal law as the primary federal regulator of state-chartered, FDIC-insured banks that, like the Bank, are members of the Federal Reserve System, which are referred to as member banks. The Bank is a member of the Federal Home Loan Bank System, which provides a central credit facility primarily for member institutions.

        Deposit Insurance.    As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification.

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An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators.

        On November 12, 2009, the FDIC adopted a final rule that required insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. The FDIC determined each institution's prepaid assessment based on the institution's: (i) actual September 30, 2009 assessment base, increased quarterly by a five percent annual growth rate through the fourth quarter of 2012; and (ii) total base assessment rate in effect on September 30, 2009, increased an annualized three basis points beginning in 2011. The Bank paid this prepaid assessment to the FDIC on December 31, 2009. The FDIC began offsetting prepaid assessments on March 30, 2010. Any prepaid assessment not exhausted after collection of the amount due on June 30, 2013, will be returned to the Bank.

        Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution's deposit insurance premiums paid to the DIF will be calculated. Under the amendments, the assessment base will no longer be the institution's deposit base, but rather its average consolidated total assets less its average tangible equity. This may shift the burden of deposit insurance premiums toward those large depository institutions that rely on funding sources other than U.S. deposits. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The FDIC is given until September 3, 2020 to meet the 1.35 reserve ratio target. Several of these provisions could increase the Bank's FDIC deposit insurance premiums.

        The Dodd-Frank Act permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per insured depositor, retroactive to January 1, 2009. Furthermore, the legislation provides that non-interest bearing transaction accounts have unlimited deposit insurance coverage through December 31, 2013. This temporary unlimited deposit insurance coverage replaces the Transaction Account Guarantee Program, or TAGP, that expired on December 31, 2010. It covers all depository institution noninterest-bearing transaction accounts, but not low interest-bearing accounts. Unlike TAGP, there is no special assessment associated with the temporary unlimited insurance coverage, nor may institutions opt-out of the unlimited coverage.

        FICO Assessments.    The Financing Corporation, or FICO, is a mixed-ownership governmental corporation chartered by the former Federal Home Loan Bank Board pursuant to the Competitive Equality Banking Act of 1987 to function as a financing vehicle for the recapitalization of the former Federal Savings and Loan Insurance Corporation. FICO issued 30-year noncallable bonds of approximately $8.1 billion that mature in 2017 through 2019. FICO's authority to issue bonds ended on December 12, 1991. Since 1996, federal legislation has required that all FDIC-insured depository institutions pay assessments to cover interest payments on FICO's outstanding obligations. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the year ended December 31, 2010, the FICO assessment rate was approximately 0.01% of deposits.

        Supervisory Assessments.    Illinois-chartered banks are required to pay supervisory assessments to the IDFPR to fund the IDFPR's operations. The amount of the assessment paid by an Illinois-chartered bank to the IDFPR is calculated on the basis of the institution's total assets, including consolidated subsidiaries, as reported to the IDFPR. During the year ended December 31, 2010, the Bank paid supervisory assessments to the IDFPR totaling $139,000.

        Capital Requirements.    Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capital requirements, see "—The Increasing Importance of Capital," above. In addition, the Bank's board of directors recently directed our management team to develop a

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written growth plan and a capital plan. The Bank's board directed that the capital plan require the Bank to achieve a Tier 1 leverage ratio of at least 8.0% by December 31, 2011 and thereafter maintain such heightened ratio.

        Dividend Payments.    Our primary source of funds is dividends from the Bank. Under the Illinois Banking Act, the Bank generally may not pay dividends in excess of its net profits.

        The payment of dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2010. As of December 31, 2010, approximately $36.4 million was available to be paid as dividends by the Bank. Notwithstanding the availability of funds for dividends, however, the FDIC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.

        Insider Transactions.    The Bank is subject to certain restrictions imposed by federal law on "covered transactions" between the Bank and its "affiliates." The Company is an affiliate of the Bank for purposes of these restrictions, and covered transactions subject to the restrictions include extensions of credit to the Company, investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates as of July 21, 2011, including an expansion of the definition of "covered transactions" and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.

        Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company, to principal shareholders of the Company and to "related interests" of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank or a principal shareholder of the Company may obtain credit from banks with which the Bank maintains a correspondent relationship.

        Safety and Soundness Standards.    The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

        In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution's primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator's order is cured, the regulator may restrict the institution's rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

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        Branching Authority.    Illinois banks, such as the Bank, have the authority under Illinois law to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals.

        Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. The establishment of new interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) has historically been permitted only in those states the laws of which expressly authorize such expansion. However, the Dodd-Frank Act permits well-capitalized banks to establish branches across state lines without these impediments effective as of the day after its enactment, July 22, 2010.

        State Bank Investments and Activities.    The Bank generally is permitted to make investments and engage in activities directly or through subsidiaries as authorized by Illinois law. However, under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, that are not permissible for a national bank. Federal law and FDIC regulations also prohibit FDIC-insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank unless the bank meets, and continues to meet, its minimum regulatory capital requirements and the FDIC determines the activity would not pose a significant risk to the DIF. These restrictions have not had, and are not currently expected to have, a material impact on the Bank's operations.

        Transaction Account Reserves.    Federal Reserve regulations, as presently in effect, require depository institutions to maintain reserves against their transaction accounts (primarily NOW and regular checking accounts), as follows: for transaction accounts aggregating more than $10.7 million to $58.8 million, the reserve requirement is 3% of total transaction accounts; and for transaction accounts aggregating in excess of $58.8 million, the reserve requirement is $1.443 million plus 10% of the aggregate amount of total transaction accounts in excess of $58.8 million. The first $10.7 million of otherwise reservable balances are exempted from the reserve requirements. These reserve requirements are subject to annual adjustment by the Federal Reserve. The Bank is in compliance with the foregoing requirements.

        Consumer Financial Services.    There are numerous developments in federal and state laws regarding consumer financial products and services that impact the Bank's business. Importantly, the current structure of federal consumer protection regulation applicable to all providers of consumer financial products and services will change on July 21, 2011. In this regard, the Dodd-Frank Act creates a new Consumer Financial Protection Bureau, or the Bureau, with extensive powers to supervise and enforce consumer protection laws. The Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit "unfair, deceptive or abusive" acts and practices. The Bureau has examination and enforcement authority over providers with more than $10.0 billion in assets. Banks and savings institutions with $10.0 billion or less in assets, like the Bank, will continue to be examined by their applicable bank regulators. The Dodd-Frank Act also generally weakens the federal preemption available for national banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws. It is unclear what changes will be promulgated by the Bureau and what effect, if any, such changes would have on the Bank.

        The Dodd-Frank Act contains additional provisions that affect consumer mortgage lending. First, the new law significantly expands underwriting requirements applicable to loans secured by 1-4 residential real property and augments federal law combating predatory lending practices. In addition to numerous new disclosure requirements, the Dodd-Frank Act imposes new standards for mortgage

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loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower's ability to repay. Most significantly, the new standards limit the total points and fees that the Bank and/or a broker may charge on conforming and jumbo loans to 3% of the total loan amount. Also, the Dodd-Frank Act, in conjunction with the Federal Reserve's final rule on loan originator compensation effective April 1, 2011, prohibits certain compensation payments to loan originators and prohibits steering consumers to loans not in their interest because it will result in greater compensation for a loan originator. These standards may result in a myriad of new system, pricing and compensation controls in order to ensure compliance and to decrease repurchase requests and foreclosure defenses. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells and other asset-backed securities that the securitizer issues if the loans have not complied with the ability to repay standards. The risk retention requirement generally will be 5%, but could be increased or decreased by regulation.

        Federal and state laws further impact mortgage foreclosures and loan modifications, many of which laws have the effect of delaying or impeding the foreclosure process. Legislation has been introduced in the U.S. Senate that would amend the Bankruptcy Code to permit bankruptcy courts to compel servicers and homeowners to enter mediation before initiating foreclosure. While legislation compelling loan modifications in Chapter 13 bankruptcies was approved by the House in 2010, the legislation was not approved by the Senate, and the requirement was not included in the Dodd-Frank Act or any other legislative or regulatory reforms. The scope, duration and terms of potential future legislation with similar effect continue to be discussed.

        Illinois has enacted several laws that impact the timing of foreclosures and encourage loan modification efforts, and there is momentum for further legislation to prevent foreclosures through loss mitigation and ensure that documents submitted to the court are authentic and free from deceit and fraud. Attorney General Lisa Madigan proposed a foreclosure bill in November 2010, which would require banks, among other requirements, to: (i) comply with applicable federal, State, local or contractual loss mitigation program, and if no program results in a modification, the bank must review the mortgage under the other programs utilized by the bank; (ii) prove that the affiant has personal knowledge of the facts; (iii) produce detailed affidavits on efforts to find missing notes; (iv) provide a loss mitigation affidavit describing steps a bank took to assess a mortgage loan's eligibility for modification under designated federal programs. Proceedings must be stayed until the court determines that a lender has complied with these requirements. The Bank cannot predict whether such legislation will be passed or the impact, if any, it would have on the Bank's business. In the meantime, the DFPR released a press release on December 14, 2010 seeking voluntary compliance from Illinois lenders and loan servicers to a 9-point affidavit plan to ensure the integrity of foreclosure affidavits.

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MANAGEMENT

Directors and Executive Officers

Directors

        Pursuant to our articles and bylaws, our board of directors is divided into three classes, with each class serving staggered three-year terms. The following table sets forth certain information about our directors, including their names, ages, year in which they began serving as a director of the Company (or the Bank prior to the Company's formation in 1990) and when their current term expires.

Name	Age		Position with Midland States	Director Since		Current Term Expires
John M. Schultz(2)(3)(4)		59	Director and Chairman of the Company; Director and Chairman of the Bank		1984		2014
Leon J. Holschbach(4)		58	Director, Vice Chairman, Chief Executive Officer and President of the Company and the Bank		2007		2013
Kenneth D. Maschhoff(1)(3)(4)		51	Director of the Company and the Bank		2007		2013
Robert F. Schultz(1)		46	Director of the Company and the Bank		2002		2012
Q. Anthony Siemer(2)		67	Director of the Company and the Bank		1973		2013
Jeffrey C. Smith(1)(2)(3)		49	Director of the Company and the Bank		2005		2014
Karen D. Wolters(1)		68	Director of the Company and the Bank		2004		2012

(1)

Member, Audit Committee

(2)

Member, Compensation Committee

(3)

Member, Nominating and Corporate Governance Committee

(4)

Member, Capital Management and Mergers and Acquisitions Committee

Board Composition

        Pursuant to our articles and bylaws, our board of directors is authorized to have not less than six members nor more than 11 members and it is currently comprised of seven members. Upon the completion of this offering, we expect our board to be comprised of seven members. As discussed above, the number of directors may be changed only by resolution of our board within the range set forth in our articles (unless our shareholders act to amend our articles to amend this provision). Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. As discussed in greater detail below, our board of directors has affirmatively determined that four of our seven current directors qualify as independent directors based upon the rules of the NASDAQ Stock Market and the SEC.

        The business experience of each of the current directors is set forth below. Other than as described below, no current director has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or with any of our executive officers.

        John M. Schultz.    Mr. Schultz serves as the Chairman of the Company and the Bank. He has held these positions since 2006. Since 1986, Mr. Schultz has served as the Chief Executive Officer of Agracel, Inc., an industrial developer of facilities for manufacturing and high tech entities in small to

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midsized communities, and is the author of BoomtownUSA: The 7¹/2 Keys to Big Success in Small Towns. He also serves on the Board of Trustees of Monmouth College, a liberal arts college in Monmouth, Illinois, and the Board of Directors of Altorfer Inc., a privately held Caterpillar dealership headquartered in Peoria, Illinois with over 750 employees and 15 locations in Illinois, Iowa and Missouri, and is the past President of the Illinois State Universities Retirement System. Mr. Schultz received his B.S. in Entrepreneurism from Southern Methodist University and his M.B.A. from Harvard Business School. He is the brother of Robert F. Schultz, who is also a director of the Company and the Bank. Our board considered Mr. Schultz's experience as the chief executive of a successful business, his knowledge of and experience with real estate investment and development, his experience advising other companies in conducting business in small to midsized communities that are similar to those in our primary market areas, his experience as a trustee/director of other organizations and his knowledge of the business community in our central Illinois market area in determining that he should be a member of our board.

        Leon J. Holschbach.    Mr. Holschbach serves as the Vice Chairman, Chief Executive Officer and President of the Company and the Bank. He has held these positions since August 2007, when he joined Midland States. Prior to August 2007, Mr. Holschbach held the positions of Region Market President, Community Bank Group at AMCORE Bank, N.A., from 2000 to 2007; President and Chief Executive Officer of AMCORE Bank North Central N.A. from 1997 to 2000; and President of Citizen's State Bank in Clinton, Wisconsin, from 1979 to 1997. Mr. Holschbach received his B.A. in Economics from the University of Wisconsin in 1975. Our board considered Mr. Holschbach's 31-year career in community banking, his several years of experience running a community banking division of a regional bank in our northern Illinois market area and his long-standing relationships within the business community in determining that he should be a member of our board.

        Kenneth D. Maschhoff.    Mr. Maschhoff serves as the President and Chief Executive Officer of The Maschhoffs LLC, a family-owned pork production company operating through a network of approximately 350 farmers and one of the largest pork producers in the United States. He has been with The Maschhoffs and its predecessor since 1979. Mr. Maschhoff serves on numerous state and national boards associated with the pork industry and is on the Board of Directors for Christ Our Rock Lutheran High School. He received his B.S. from Southern Illinois University and is a graduate of the Illinois Agricultural Leadership Program. Our board considered Mr. Maschhoff's experience as the chief executive of a successful large agricultural business and his knowledge of the business community in our central Illinois market area in determining that he should be a member of our board.

        Robert F. Schultz.    Mr. Schultz serves as Managing Partner of the J.M. Schultz Investment, L.L.C., a family investment firm, and has been with this organization since 1989. Since 1996, he also has served as Chairman of the Board of Directors of AKRA Builders Inc., a national construction, design-build and project management firm headquartered in Teutopolis, Illinois. Prior to joining the Midland States board of directors, he served on the board of directors of Prime Banc Corp. and First National Bank of Dieterich. Mr. Schultz received his B.S. in Finance from the University of Illinois and a J.D. from the University of Notre Dame Law School. He is the brother of John M. Schultz, who is the Chairman of the Company and the Bank. Our board considered Mr. Schultz's business and investment experience and his knowledge of the business community in our central Illinois market area in determining that he should be a member of our board.

        Q. Anthony Siemer.    Since 1972, Mr. Siemer has been a partner of the law firm of Siemer, Austin & Fuhr in Effingham, Illinois. His areas of concentration are commercial real estate, privately held businesses, commercial law and estate planning. Mr. Siemer has been a director of the Bank for 32 years and of the Company since its inception. He also serves on the board of directors of Siemer Milling Company, a privately held provider of flour and milled products headquartered in Teutopolis, Illinois. Mr. Siemer received his B.A. in Economics from the University of Illinois and his J.D. from

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the University of Notre Dame Law School. Our board considered Mr. Siemer's legal experience and his knowledge of the business community in our central Illinois market area in determining that he should be a member of our board.

        Jeffrey C. Smith.    Mr. Smith serves as the Principal and Managing Partner of Walters Golf Management Group, a golf club management company headquartered in Chesterfield, Missouri, which currently manages fifteen properties and offers turn key management, construction management, acquisition, consulting, agronomics and remodeling/redecorating services. He has been with Walters Golf Management Group since 1996. Mr. Smith received his B.S. in Education from the University of Missouri. Our board considered Mr. Smith's business experience, his management experience as the managing partner of a business and his knowledge of the business community in our St. Louis market area in determining that he should be a member of our board.

        Karen D. Wolters.    Since 2004, Ms. Wolters has served as Chairman of the Board of Directors of Ignite USA, LLC, a marketing, product strategy, research, industrial design, graphic design, engineering, manufacturing and product management company based in Chicago, Illinois, with manufacturing resources in China and Taiwan. She founded Ignite USA in 2000 and served as its Chief Executive Officer from 2000 to 2004. Ms. Wolters also is the founder/owner of three other companies. She received her Registered Nursing degree from the DePaul School of Nursing. Our board considered Ms. Wolters's experience as the founder of four successful businesses and her knowledge of the business community in our Illinois market areas in determining that she should be a member of our board.

Executive Officers

        The following table sets forth certain information regarding our executive officers, including their names, ages and positions at the Company and the Bank:

Name	Age		Position with Midland States
Leon J. Holschbach		58	Chief Executive Officer and President of the Company and the Bank
Jeffrey G. Ludwig		39	Executive Vice President—Finance and Chief Financial Officer of the Company and the Bank
Douglas J. Tucker		52	Senior Vice President—Corporate Counsel of the Company and the Bank
Jeffrey A. Brunoehler		50	Senior Vice President—Chief Credit Officer of the Bank
Jeffrey S. Mefford		46	Senior Vice President—Community Banking of the Bank
Sharon A. Schaubert		52	Senior Vice President—Banking Services of the Bank

        The business experience of each of our executive officers is set forth below. No executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other executive officer or any of our current directors.

        Jeffrey G. Ludwig.    Mr. Ludwig, CPA (inactive status), serves as the Executive Vice President—Finance and Chief Financial Officer of the Company and the Bank. He has served as Executive Vice President since October 2010 and as Chief Financial Officer since November 2006 when he joined Midland States. In addition to his financial responsibilities at the Company level, Mr. Ludwig is responsible for the Bank's Finance, Treasury, Wealth Management, Facilities, Information Technology and Operations functions. He serves on the Company's Executive Management Committee and chairs its Asset/Liability Committee. Prior to joining Midland States, Mr. Ludwig held the positions of

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Associate Director, Corporate Reporting, for Zimmer Holdings, Inc., a New York Stock Exchange-listed company in Warsaw, Indiana, from 2005 to 2006; Director of Corporate Accounting for Novellus Systems, Inc., a NASDAQ-listed company in San Jose, California, from 2002 to 2005; and Senior Manager—Audit & Advisory Services for KPMG LLP in its banking practice in St. Louis, Missouri, from 1993 to 2000 and in its technology practice in Mountain View, California, from 2000 to 2002. Mr. Ludwig received his B.S. in Accounting from Eastern Illinois University.

        Douglas J. Tucker.    Mr. Tucker serves as the Senior Vice President—Corporate Counsel of the Company and the Bank, positions to which he was appointed in October 2010. Mr. Tucker also serves on the Company's Executive Management Committee. Prior to joining Midland States, Mr. Tucker was a Partner in the Corporate Services Group of Quarles & Brady LLP in Chicago, Illinois, having joined that firm in 2004. Mr. Tucker also served as Chair of Quarles & Brady's Chicago Securities Practice, as National Growth Partner of the Corporate Services Group, as Chair of the China Law Group and as Managing Partner of the firm's office in Shanghai, China. While at Quarles & Brady, he served as lead outside counsel for all five of our recent acquisitions. Mr. Tucker has focused his legal practice principally in the areas of corporate finance, securities and mergers and acquisitions, and served on the Board of Advisors of the Private Equity CFO Association (Midwest Chapter) from 2007 to 2010. He has been a licensed attorney since 1993, and is an Adjunct Professor at the Chicago-Kent Law School. He holds a B.A. in International Relations from Michigan State University and a J.D. from Northwestern University School of Law.

        Jeffrey A. Brunoehler.    Mr. Brunoehler serves as the Bank's Senior Vice President—Chief Credit Officer, a position he has held since July 2010. He joined the Bank in April 2010 as Vice President and Regional Credit Officer. Prior to joining the Bank, Mr. Brunoehler held positions at AMCORE Bank, N.A., as Senior Vice President and Regional Credit Officer from 2005 to 2010 and Senior Vice President and Market President from 1999 to 2004. Mr. Brunoehler received his B.S. in Agricultural Economics from the University of Illinois.

        Jeffrey S. Mefford.    Mr. Mefford serves as the Bank's Senior Vice President—Community Banking, a position to which he was appointed in October 2010. He first joined the Bank in 2003. Prior to being appointed as Head of Community Banking, Mr. Mefford served as the Bank's Illinois Region Market President, responsible for the banking offices in our central Illinois market. Prior to joining Midland States in 2003, Mr. Mefford held the position of President and Chief Executive Officer of Farmers State Bank of Camp Point in Camp Point, Illinois, from 2000 to 2003; Vice President, Mortgage Department Manager, at Marine Bank, in Springfield, Illinois, from 1998 to 2000; and Vice President, Small Business Banking Manager, for Bank One, Illinois, in Springfield, Illinois, from 1991 to 1998. Mr. Mefford received his B.S. in Business Administration from Illinois College and his M.B.A. from William Woods University.

        Sharon A. Schaubert.    Ms. Schaubert serves as the Bank's Senior Vice President—Banking Services. Her primary responsibilities include providing a strategic direction for Human Resources, Training and Marketing. Prior to joining the Bank in 2004, she held the positions of Executive Vice President of Retail Banking at Peoples National Bank in Fairfield, Illinois, from 2000 to 2004; Vice President Regional Administrative Manager at First Bank in Salem, Illinois, from 1998 to 2000; and Assistant Vice President Area Manager at the Bank of Illinois in Mt. Vernon, Illinois, from 1990 to 1998. Ms. Schaubert received her B.A. in Management and Communication from Concordia University and her M.B.A. from the University of Illinois.

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Board and Committee Matters

Director Independence

        Under the rules of the NASDAQ Stock Market, independent directors must comprise a majority of our board of directors within a specified period of time of this offering. The rules of the NASDAQ Stock Market, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors.

        Our board of directors has evaluated the independence of its members based upon the rules of the NASDAQ Stock Market and the SEC. Applying these standards, our board of directors has affirmatively determined that, with the exception of Messrs. Holschbach, John M. Schultz and Robert F. Schultz, each of our current directors is an independent director, as defined under the applicable rules.

        In its determination of Mr. Siemer's independence, the board of directors took into consideration Mr. Siemer's role as a partner in the law firm of Siemer, Austin & Fuhr, which provides periodic legal advice to the Company and the Bank, but determined that (i) the amount of fees paid by the Company and the Bank to Mr. Siemer's law firm during the current fiscal year and the prior three fiscal years did not exceed the applicable thresholds set forth in NASDAQ Stock Market rules and (ii) such relationship would not interfere with Mr. Siemer's exercise of independent judgment in his responsibilities as a director of the Company. Nevertheless, the board of directors determined that Mr. Siemer should not be eligible to serve on the Company's Audit Committee because the heightened independence standards under SEC rules applicable to audit committee members effectively preclude an attorney whose firm provides legal services to a company from serving on such company's audit committee.

        The board determined that Mr. Holschbach does not qualify as an independent director because he is an executive officer of the Company. The board determined that Mr. Robert F. Schultz does not qualify as an independent director because he is the chairman and a substantial shareholder of the construction firm acting as general construction manager for the construction of the Company's new corporate headquarters and the payments to be made by the Company to Mr. Schultz's construction firm for such project exceed the applicable thresholds set forth in NASDAQ Stock Market rules. With respect to Mr. John M. Schultz, the board determined that he does not qualify as an independent director because he is the brother of Mr. Robert F. Schultz and, according to NASDAQ Stock Market rules, the relationship between the Company and Mr. Robert F. Schultz's construction firm is effectively attributed to Mr. John M. Schultz.

Board Leadership Structure

        We currently have separate individuals serving as Chairman of our board of directors and as our Chief Executive Officer. Mr. John M. Schultz serves as Chairman and Mr. Holschbach holds the position of Chief Executive Officer. As noted above, Mr. Schultz is not considered to be "independent" according to NASDAQ Stock Market rules.

        Although our bylaws do not require our Chairman and Chief Executive Officer positions to be separate, our board believes that having separate positions and having a non-executive director serve as Chairman is the appropriate leadership structure for the company at this time and demonstrates our commitment to good corporate governance. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman to lead the board in its fundamental role of providing advice to and independent oversight of management. We believe that having a Chairman that is not an executive officer eliminates the conflicts of interest that arise when the positions are held by one person. In addition, this leadership structure allows our board to more effectively monitor and evaluate the performance of our Chief Executive Officer.

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Board Committees

        Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Capital Management and Mergers and Acquisition Committee. Prior to November 2010, the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee generally functioned at the Bank level. In connection with this anticipated offering, our board reestablished each of these three committees as a Company-level committee.

        Our board of directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our articles and bylaws.

Audit Committee

        Our Audit Committee currently consists of Robert F. Schultz (Chairman), Kenneth D. Maschhoff, Jeffrey C. Smith and Karen D. Wolters. In 2010, prior to the Audit Committee being established as a Company-level committee, the same four individuals served on the committee. Our board of directors has evaluated the independence of the members of our Audit Committee and has affirmatively determined that (i) each of the members of our Audit Committee, except for Mr. Schultz, meet the definition of "independent director" under NASDAQ Stock Market rules, (ii) each of the members satisfies the additional independence standards under applicable SEC rules for audit committee service and (iii) each of the members has the ability to read and understand fundamental financial statements. In addition, our board of directors has determined that                        has the required financial sophistication due to his experience and background, which NASDAQ Stock Market rules require at least one such Audit Committee member have. We are relying on the phase-in provisions under SEC and NASDAQ Stock Market rules for companies listing on the NASDAQ Stock Market in connection with their initial public offering to allow one non-independent director to serve on the Audit Committee for up to one year following this offering.

        Our board has determined that, at this time, none of the members of our Audit Committee qualifies as an "audit committee financial expert," as that term is defined under applicable SEC rules. The board is evaluating individuals to be appointed to the board following the completion of this offering and the board currently intends to appoint an individual who will qualify as an audit committee financial expert.

        Our Audit Committee has responsibility for, among other things:

•

selecting and reviewing the performance of our independent auditors and approving, in advance, all engagements and fee arrangements;

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reviewing the independence of our independent auditors;

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reviewing actions by management on recommendations of the independent auditors and internal auditors;

•

meeting with management, the internal auditors and the independent auditors to review the effectiveness of our system of internal control and internal audit procedures;

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reviewing our earnings releases and reports filed with the SEC;

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reviewing reports of bank regulatory agencies and monitoring management's compliance with recommendations contained in those reports;

•

reviewing and approving all related person transactions for potential conflicts of interest situations on an ongoing basis; and

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•

handling such other matters that are specifically delegated to the Audit Committee by our board of directors from time to time.

        Our Audit Committee has adopted a written charter, which sets forth the committee's duties and responsibilities. The current charter of the Audit Committee will be available on our website at www.midlandstatesbank.com upon completion of this offering.

Compensation Committee

        Our Compensation Committee currently consists of John M. Schultz (Chairman), Q. Anthony Siemer and Jeffrey C. Smith. In 2010, prior to the Compensation Committee being made a Company-level committee, these three individuals and Leon J. Holschbach served on the committee. Mr. Holschbach resigned from the Compensation Committee in 2011 in preparation for our anticipated listing on the NASDAQ Stock Market.

        Our board of directors has evaluated the independence of the members of our Compensation Committee and has affirmatively determined that Messrs. Siemer and Smith are "independent" under NASDAQ Stock Market rules. As noted above under "—Director Independence," our board of directors has determined that Mr. Schultz does not qualify as an independent director under NASDAQ Stock Market rules. We are relying on the phase-in provisions under NASDAQ Stock Market rules for companies listing on the NASDAQ Stock Market in connection with their initial public offering to allow one non-independent director to serve on the Compensation Committee for up to one year following this offering.

        Our board has determined that each of the members of the Compensation Committee qualifies as a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

        Our Compensation Committee has responsibility for, among other things:

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reviewing, monitoring and approving our overall compensation structure, policies and programs (including benefit plans) and assessing whether the compensation structure establishes appropriate incentives for our executive officers and other employees and meets our corporate objectives;

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determining the annual compensation of our Chief Executive Officer;

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reviewing the compensation decisions made by our Chief Executive Officer with respect to our other named executive officers;

•

overseeing the administration of our equity plans and other incentive compensation plans and programs and preparing recommendations and periodic reports to our board of directors relating to these matters;

•

preparing the Compensation Committee report required by SEC rules to be included in our annual report; and

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handling such other matters that are specifically delegated to the Compensation Committee by our board of directors from time to time.

        Our Compensation Committee has adopted a written charter, which sets forth the committee's duties and responsibilities. The current charter of the Compensation Committee will be available on our website at www.midlandstatesbank.com upon completion of this offering.

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Nominating and Corporate Governance Committee

        Our Nominating and Corporate Governance Committee currently consists of John M. Schultz (Chairman), Kenneth D. Maschhoff and Jeffrey C. Smith. In 2010, prior to the Nominating and Corporate Governance Committee being made a Company-level committee, these three individuals and Leon J. Holschbach served on the committee. Mr. Holschbach resigned from the Nominating and Corporate Governance Committee in 2011 in preparation for our anticipated listing on the NASDAQ Stock Market.

        Our board of directors has evaluated the independence of the members of our Nominating and Corporate Governance Committee and has affirmatively determined that Messrs. Maschhoff and Smith are "independent" under NASDAQ Stock Market rules. As noted above under "—Director Independence," our board of directors has determined that Mr. Schultz does not qualify as an independent director under NASDAQ Stock Market rules. We are relying on the phase-in schedule under NASDAQ Stock Market rules for companies listing on the NASDAQ Stock Market in connection with their initial public offering to allow one non-independent director to serve on the Nominating and Corporate Governance Committee for up to one year following this offering.

        Our Nominating and Corporate Governance Committee has responsibility for, among other things:

•

recommending persons to be selected by our board of directors as nominees for election as directors and to fill any vacancies on our board of directors;

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monitoring the functioning of our standing committees and recommending any changes, including the creation or elimination of any committee;

•

developing, reviewing and monitoring compliance with our corporate governance guidelines;

•

reviewing annually the composition of our board of directors as a whole and making recommendations; and

•

handling such other matters that are specifically delegated to the Nominating and Corporate Governance Committee by our board of directors from time to time.

        Our Nominating and Corporate Governance Committee has adopted a written charter, which sets forth the committee's duties and responsibilities. The current charter of the Nominating and Corporate Governance Committee will be available on our website at www.midlandstatesbank.com upon completion of this offering.

        In carrying out its nominating function, the Nomination and Governance Committee has developed qualification criteria for all potential nominees for election, including incumbent directors, board nominees and shareholder nominees included in the proxy statement. These criteria include the following attributes:

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integrity and high ethical standards in the nominee's professional life;

•

sufficient educational and professional experience, business experience or comparable service on other boards of directors to qualify the nominee for service to the specific board for which he or she is being considered;

•

evidence of leadership and sound judgment in the nominee's professional life;

•

whether the nominee is well recognized in the community and has a demonstrated record of service to the community;

•

a willingness to abide by any published code of ethics for the Company; and

•

a willingness and ability to devote sufficient time to carrying out the duties and responsibilities required of a board member.

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        The committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to determine whether they are "independent" in accordance with NASDAQ Stock Market rules (to ensure that, at all times, at least a majority of our directors are independent). Although we do not have a separate diversity policy, the committee does consider the diversity of its directors and nominees in terms of knowledge, experience, skills, expertise and other demographics which may contribute to the board.

        Prior to nominating an existing director for re-election to the board, the committee will consider and review the following attributes with respect to each existing director:

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board and committee attendance and performance;

•

length of board service;

•

experience, skills and contributions that the existing director brings to the board;

•

independence and any conflicts of interest; and

•

any significant change in the director's status, including the attributes considered for initial board membership.

Capital Management and Mergers and Acquisitions Committee

        Our Capital Management and Mergers and Acquisitions Committee currently consists of two non-executive directors, Messrs. John M. Schultz and Kenneth D. Maschhoff, one executive director, Mr. Leon J. Holschbach, and one non-director executive officer, Mr. Jeffrey G. Ludwig.

        Our Capital Management and Mergers and Acquisitions Committee has responsibility for, among other things, developing and overseeing the Company's acquisition strategy, reviewing potential acquisition opportunities and presenting certain opportunities to the board of directors and monitoring the Company's capital position in light of its projected growth and, if necessary, developing and implementing capital raising strategies.

Compensation Committee Interlocks and Insider Participation

        None of the members of our Compensation Committee will be or has been an officer or employee of Midland States. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.

Code of Business Conduct and Ethics

        We have a code of business conduct and ethics in place that applies to all of our directors and employees. The code sets forth the standard of ethics that we expect all of our directors and employees to follow, including our Chief Executive Officer and Chief Financial Officer. Our code of business conduct and ethics, upon the completion of this offering, will be available on our website at www.midlandstatesbank.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website, as well as any other means required by NASDAQ Stock Market rules.

Corporate Governance Guidelines

        We have adopted corporate governance guidelines to assist our board of directors in the exercise of its fiduciary duties and responsibilities to us and to promote the effective functioning of our board and its committees. Our corporate governance guidelines, upon the consummation of this offering, will be available on our website at www.midlandstatesbank.com.

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COMPENSATION OF EXECUTIVE OFFICERS

In this prospectus, the individuals who served as our chief executive officer and chief financial officer during 2010, as well as the other individuals included in the Summary Compensation Table on page 162, are collectively referred to as the "named executive officers."

Compensation Discussion & Analysis

        The following Compensation Discussion and Analysis, or CD&A, sets forth information describing our compensation philosophy and policies for 2010 and 2011 as applicable to our named executive officers, as defined under SEC rules, and as listed in the Summary Compensation Table on page 162. This CD&A explains the structure and rationale associated with each material element of our named executive officers' total compensation, and provides context for the more detailed disclosure tables and specific compensation amounts provided following this CD&A. In addition, this CD&A describes the forward-looking decisions that have been made by the Compensation Committee of our board of directors and our management with respect to 2011 compensation.

        The Compensation Committee has overall responsibility to review and approve our compensation structure, policies and programs and to assess whether the compensation structure establishes appropriate incentives for our executives and employees. The Compensation Committee determines the compensation of our chief executive officer and reviews the compensation decisions made by our chief executive officer with respect to our other named executive officers. Among other responsibilities outlined in its charter (a copy of which will be available on our website upon completion of this offering), the Compensation Committee also oversees the administration of our equity plans and incentive compensation plans. Prior to November 2010, the Compensation Committee was a Bank-level committee and its members included John Schultz, Jeff Smith, Leon Holschbach and Q. Anthony Siemer. In anticipation of this offering, the board reconstituted the Compensation Committee at the Company level and appointed the same individuals, with the exception of Mr. Holschbach, to the Committee, and this Company-level committee approved 2010 incentive compensation awards and set incentive compensation goals for 2011 for our executive officers. Each of the members of the Compensation Committee, except for Mr. Schultz, is considered to be "independent" according to NASDAQ Stock Market rules. During 2010, the Compensation Committee met five times, including meetings at the Bank level.

Executive Compensation Philosophy

        We strive to be among the top performing community banks in the nation. While our current operations are all located in Illinois and in the St. Louis metropolitan area in Missouri, we measure our performance on both a local and national level. Over the last several years, our objective has been to grow without compromising the performance or security of the Bank. Our compensation philosophy for our named executive officers reflects this vision and strategy. It is designed to align compensation with business objectives and execution, to motivate our named executive officers to enhance long-term business results (although certain shorter-term results, such as revenue, net income and earnings per share are also targeted), and to enable us to retain and reward executive officers who contribute to our financial performance and success. Importantly, our Compensation Committee is also mindful of our increasing need to attract national level talent to relocate to Effingham, Illinois, where our corporate headquarters is located, or to other smaller communities where our banks are typically located.

        We compensate our named executive officers through a mix of base salary, incentive awards, equity compensation and other benefits and perquisites. The Compensation Committee believes the current mix of these elements provides each of our named executive officers with an aggregate compensation package that is reasonable, appropriately reflects performance, links pay to performance without inappropriate risks, and takes into account applicable regulatory guidelines and requirements. There is

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no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation, except as set forth in our MIP (as described below). Rather, the Compensation Committee seeks to review all relevant information to determine the appropriate level and mix of incentive compensation.

        The Compensation Committee has worked with our executive officers to design competitive compensation programs that encourage high performance, promote accountability, enable us to retain key employees, provide disincentives for taking inappropriate levels of risk, and assure that employee interests are aligned with the interests of our shareholders. In particular, our Compensation Committee believes the Company's named executive officers' 2010 compensation program was effectively designed to:

•

Link pay and performance.  Because we believe that our named executive officers' compensation should be tied to the success of the Company and increases in shareholder value, a significant percentage of total compensation is allocated to incentive compensation that rewards our named executive officers based upon our financial performance and their individual performance. Our incentive compensation is typically delivered in the form of cash and equity. In general, the Committee's Charter permits it to base its assessment on financial metrics, progress toward or completion of non-financial Company objectives or the individual named executive officers' performance in any area deemed appropriate by the Committee. For 2010, the Compensation Committee considered generally the performance of the Company and the performance of individual named executive officers in setting the incentive compensation of our named executive officers. The Compensation Committee had full discretion with respect to determining the incentive compensation that was awarded. For 2011, the Compensation Committee has adopted the Midland States Bancorp, Inc. Management Incentive Plan, or MIP. Because MIP awards are made pursuant to the 2010 LTIP, the Compensation Committee must base annual incentive awards on one or more Company performance metrics specified in the 2010 LTIP. Based on these metrics, the Committee has determined that it will use an earnings per share performance metric, further subject to the Company meeting specified capital and asset quality levels set forth in the MIP, and specified mixtures of cash and equity (all as more fully described below), for 2011 annual performance bonuses for our named executive officers.

•

Maintain market-competitive compensation programs.  The Compensation Committee strives to maintain compensation programs that allow our named executive officers to earn base salaries and have incentive compensation opportunities that are competitive with programs offered by other similarly situated and similarly performing financial institutions.

•

Balance external competition and internal pay equity.  The Compensation Committee attempts to balance the need to maintain compensation programs that are competitive with our peers with the need to have a reasonable level of internal pay equity. The Committee recognizes that there are personality traits and intangibles unique to each of our named executive officers that cannot be adequately captured by performance metrics alone. As such, we believe that reasonable levels of internal pay equity help to create a sense of fairness among our employees and reflect an appreciation, on the part of the Committee and senior management, of the unique skills and contributions of each of our named executive officers and other employees.

•

Encourage equity ownership by our named executive officers.  We believe that it is essential that our named executive officers have an ownership interest in the Company. In our view, this is the optimal manner in which to align executive compensation with increases in shareholder value, as measured by favorable Company financial performance over the short- and long-term.

        The Compensation Committee expects that the Company will continue to provide similar compensation programs that achieve similar goals during 2011.

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Economic Environment and Company Performance During 2010

        We believe the Company achieved strong financial results in 2010 relative to the broader financial services industry. Despite the challenges posed by the economy at large, we maintained significant strength during 2010 due primarily to management's ability to execute on each of our five strategic initiatives. Specifically, our core pre-tax, pre-provision earnings and total assets grew from $11.8 million and $1.1 billion, respectively, in 2009 to $24.7 million and $1.6 billion, respectively, in 2010. Since late 2007, we have been executing a plan to grow the Company and the performance of the Bank without creating undue risk for our shareholders. With the significant growth we experienced, organically and through acquisitions, while maintaining strong asset quality and above-average returns to our shareholders, we feel 2010 was a milestone year for the Company and for accomplishing the goals of our strategic plan. In addition to completing the integration of the growth resulting from our 2009 acquisitions of Waterloo and Strategic Capital, and successfully managing the greatly expanded number of branches resulting from those acquisitions, we also completed the AMCORE and WestBridge acquisitions and opened our Joliet and Rockford de novo locations. In 2010 alone, our assets, number of banking facilities, scope of operations, earnings per share and overall position in the marketplace grew significantly. One example of this growth is that our number of employees increased from 108 as of December 31, 2008 to 397 as of December 31, 2010. As part of that increase, a number of senior level hires were completed, and our management team completely redesigned many of our reporting and supervision functions. Additionally, since the beginning of 2010, more than 200 operational changes have been effected as part of a complete review and assessment of our enterprise-wide banking and risk management systems and the implementation of our Future Bank project.

        As was the case during the last few years, we operated under difficult economic conditions in 2010. During this time, the Compensation Committee discharged its responsibilities with respect to executive compensation by focusing primarily on: (i) providing our named executive officers with total pay levels and a mix of pay that were reasonable and appropriate given each executive's performance and our overall performance; and (ii) linking pay to performance without providing incentives to take inappropriate risks. Particularly, in making its decisions with respect to 2010 compensation and in adopting the MIP, the Compensation Committee sought to balance a variety of factors, including our underlying compensation philosophy, each named executive officer's target total compensation, applicable laws and regulations, executive retention and motivation, and most importantly, individual and Company performance.

Regulatory Oversight

Federal Reserve Guidance on Sound Incentive Compensation Policies

        In June 2010, the Federal Reserve, along with the FDIC, Office of the Comptroller of the Currency and the Office of Thrift Supervision, jointly issued final "Guidance on Sound Incentive Compensation Policies," or Final Guidance. The Final Guidance sets forth a framework to be used in compensation decisions by financial institutions to assess the soundness of incentive compensation plans, programs and arrangements. The Final Guidance applies to all financial institutions, and it is designed to help ensure that incentive compensation policies do not encourage excessive risk-taking and are consistent with the safety and soundness of the organization by requiring financial institutions to adhere to three guiding principles of a sound incentive compensation system. The three principles of the Final Guidance require the Compensation Committee to ensure that:

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incentive compensation arrangements balance risk and financial results in a manner that does not provide employees with incentives to take excessive risks on the Company's behalf;

•

the Company's risk-management processes and internal controls reinforce and support the development and maintenance of balanced incentive compensation arrangements; and

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•

the Company has strong and effective corporate governance to help ensure sound compensation practices.

        The Final Guidance applies to incentive compensation arrangements for executive and non-executive personnel who have the ability to expose the Company to material risk, including arrangements for:

•

senior executives and others who are responsible for oversight of Company-wide activities or material business lines;

•

individual employees, including non-executive employees, whose activities may expose the Company to material amounts of risk; and

•

groups of employees who are subject to the same or similar incentive compensation arrangements and who, in the aggregate, may expose the Company to material risk, even if no individual employee is likely to expose the Company to material risk (e.g., loan officers who, as a group, originate loans that account for a material amount of the organization's credit risk).

SEC Risk Assessment Requirement

        The SEC also requires the Company to assess compensation policies and practices in order to determine if any such policies or practices have the potential to have a materially adverse effect on the Company. We believe our risk assessment under the Final Guidance satisfies this requirement of the SEC.

Committee Responses to Regulatory Oversight Concerns

        The Compensation Committee believes that an awareness and assessment of the impact of risk has always been, and will continue to be, an important component of its analysis and determination of executive compensation. As such, the Committee recognizes the role of risk assessment in the overall processes and procedures for establishing our compensation arrangements.

        The Committee has used the framework set forth in the Final Guidance in its consideration of future annual performance criteria. As a threshold matter, and based on its ongoing risk assessment of compensation arrangements, the Committee does not believe that any of our compensation arrangements incentivize the taking of inappropriate risks. Nevertheless, as more fully described below, to further meet the increasing demands of the regulatory landscape, the Committee and the Company's board of directors has adopted the MIP to address this landscape.

Management Incentive Plan

General

        The Company's Management Incentive Plan specifies performance- and risk-based metrics for annual performance bonuses for the Company and the Bank's executive officers, with complete or partial forfeitures of annual bonuses if the risk-based metrics are not met. The MIP also provides for annual performance bonuses to be paid pursuant to specified levels of cash and equity. Any cash or equity bonus paid under the MIP will be awarded pursuant to the terms and conditions of our 2010 LTIP.

Performance- and Risk-Based Metrics

        The MIP requires the Compensation Committee to select for any year, one or more performance metrics set forth in our 2010 LTIP. The Committee has determined that earnings per share, adjusted for extraordinary events (such as, for example, one-time gains from acquisitions), is currently the most appropriate measure of corporate performance. As such, the MIP provides that the portion of each

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named executive officer's annual performance bonus to be based upon corporate performance will be based on a target percentage of annual salary (as set forth in each executive's employment agreement), with a sliding scale for performance above or below the level of earnings per share performance specified by the Committee, which for 2011 is based on the level of growth over our 2010 adjusted earnings per share. The earnings per share targets selected by the Committee for annual performance bonuses may or may not bear a relationship to the Company's internal budgets and forecasts, and should not be relied upon or considered by third parties as "guidance" or any other reflection of the Company's, its board of directors' or management's expectations of annual performance.

        The MIP also includes risk-based metrics to help insure that the Company's executive officers are not rewarded for taking excessive risks. In this regard, the Committee, with input from our Risk Management Officer, has determined that maintaining specified capital levels and asset quality levels is critical to the Company's long-term performance, and has selected each of these as appropriate risk-based metrics under the MIP. As such, regardless of earnings per share performance, each executive officer's annual bonus is subject to partial or complete forfeiture if these risk-based metrics are not satisfied. With respect to capital levels, the MIP requires that as of the close of business for any given bonus year, the Bank's Tier 1 leverage, Tier 1 risk-based capital and total risk-based capital ratios each exceed the "well capitalized" regulatory standards by at least 1.0%. If any of the Bank's capital levels are between 1.0% and 0.5% above the "well capitalized" regulatory standards, each executive officer's performance bonus for such year will be decreased proportionately. In the event any of the three capital levels is less than 0.5% above the "well capitalized" regulatory standards, each executive officer's performance bonus for that year will be forfeited in its entirety.

        With respect to asset quality, as of the close of business of the respective fiscal year, the Bank must meet or be lower than the average ratio of asset quality, defined as the sum of nonperforming loans plus other real estate owned divided by the sum of total loans plus other real estate owned (in each case after adjusting for the guaranteed portion of such nonperforming assets under a loss-sharing agreement with the FDIC), attained by its peers, as reported in the Uniform Bank Performance Report published by the Federal Financial Institutions Examination Council. However, regardless of the average level of the applicable peer group, the metric will be deemed to be satisfied if the Bank's ratio is equal to or less than 1.0%. If the Bank's asset ratio is above 1.0% and exceeds its peer group average, performance-based bonuses will be proportionately reduced.

        In the event that either of the risk-based metrics are not fully achieved, and therefore performance bonuses for the respective year were partially or completely forfeited, the MIP provides that each executive officer will be eligible for a restoration bonus in the following year if the appropriate levels of capital and/or asset quality are restored, as of the end of that next fiscal year.

        The MIP also establishes the percentage of any annual performance bonus to be paid in cash and equity. Under the MIP, bonuses up to 125% (in the case of our chief executive officer and chief financial officer) and 150% (in the case of our other executive officers) of the officer's annual salary will be payable solely in cash. Bonuses above such amounts, up to 200% of the annual base salary maximum allowable under the MIP, will be payable in equity awards. In determining these percentages, the Committee considered a variety of factors, including the significant aggregate equity ownership of our executive management team (including substantial cash investments in Company shares) and the after-tax consequences to our executives of granting bonuses in the form of equity.

        Under the MIP, the Committee has the full discretion to adjust downward (but not upward) any performance-based compensation.

Role of Executive Officers in Compensation Decisions

        The Compensation Committee is responsible for all compensation decisions affecting Leon Holschbach, our Chief Executive Officer, and for the equity compensation of all employees.

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Mr. Holschbach annually reviews the performance of each other named executive officer. This review is generally based on each executive's individual performance and contribution toward our performance during the year. Based on these reviews, Mr. Holschbach makes determinations regarding adjustments to the base salary for each of the named executive officers other than himself and discusses such adjustments openly within the Compensation Committee prior to such adjustments becoming effective. Mr. Holschbach does not participate in or make recommendations with respect to his own compensation. In addition, our Risk Management Officer attends all meetings of the Compensation Committee, but does not vote with respect to any Committee action.

Use of Compensation Consultants and Executive Compensation Competitive Benchmarking

        The Compensation Committee has authority to retain, at the Company's expense, outside counsel, experts, compensation consultants and other advisors, as needed. As part of its decision making process in the fall of 2010, and in recognition of the fact that the Company was preparing to become a "publicly traded" company by virtue of completing this offering, the Compensation Committee retained the firm Frederic W. Cook & Co., Inc., or F.W. Cook, as its independent compensation consultant to serve in an advisory capacity in determining or recommending the amount and form of executive compensation based on a survey of a market reference group. F.W. Cook's specific services to the Compensation Committee have included support in the Committee's effort to review and update, as appropriate, our compensation philosophy; assistance with the Committee's review of potential risks associated with our compensation programs; analysis of named executive officer compensation levels; analysis of our equity utilization; and reporting to the Committee on market compensation trends and developments.

        In establishing named executive officer compensation programs, the Compensation Committee has historically considered competitive compensation market survey data, but has not undertaken a formal benchmarking process. As noted above, in late 2010, the Compensation Committee engaged an external consultant, F.W. Cook, to assist in the collection of external market data on a market reference group and comparison of our compensation programs to those of our identified peer group. The Committee has used this information in establishing compensation for our named executive officers in 2011. As established by F.W. Cook, our compensation peers consist of 16 similar publicly traded financial companies with assets between $900 million and $3 billion, with net interest margins in excess of 3% and market capitalizations of not less than 8% of assets, and that provide banking and related services in the central U.S. Our compensation peers are as follows:

Southwest Bancorp, Inc.	Southside Bancshares, Inc.	Bank of the Ozarks, Inc.
ViewPoint Financial Group, Inc.	Lakeland Financial Corporation	First Financial Corporation
S.Y. Bancorp, Inc.	Hills Bancorporation	BankFinancial Corporation
MidWestOne Financial Group, Inc.	NASB Financial, Inc.	German American Bancorp, Inc.
OmniAmerican Bancorp, Inc.	MidSouth Bancorp, Inc.	Meta Financial Group, Inc.
Ames National Corporation

        The Compensation Committee does not utilize any stated weighting of external market data with which to benchmark compensation levels of our named executive officers. Instead, the Compensation Committee evaluated the market data prepared by F.W. Cook along with the other factors listed in this discussion to determine the appropriate 2011 compensation levels of each of the named executive officers.

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Elements of Compensation

        The Compensation Committee believes the executive compensation packages that we provide to our executives, including the named executive officers, should include both cash and equity compensation that reward performance as measured against established corporate and individual goals. By dividing compensation between cash and equity compensation, the Compensation Committee seeks to incentivize executives by rewarding them for performance that results in both short-term and long-term improvements in shareholder value. For 2010, the principal elements of compensation for named executive officers were:

•

base salary;

•

incentive awards;

•

equity awards; and

•

benefits and other perquisites.

        Each element is designed to achieve a specific purpose and to contribute to a total package that is competitive with similar packages provided by other institutions that compete for the services of individuals like our named executive officers, appropriately performance-based, and valued by the named executive officers. We expect these fundamental elements of compensation to continue for 2011 compensation.

Base Salary

        The Compensation Committee approved the 2010 base salaries of our named executive officers. In setting the base salary of each named executive officer, the Committee relied on market data provided by our internal human resources department.

        Salary levels are typically considered annually as part of our performance review process as well as upon a promotion or other change in job responsibility. For 2010, salaries increased by amounts ranging from 24.26% to 37.25%. For 2011, salaries increased by amounts ranging from 12.2% to 56.76%. 2010 and 2011 base salaries for our named executive officers are shown in the table immediately below:

Name	Position	2010 Base Salary		2011 Base Salary
Leon J. Holschbach	Chief Executive Officer and President	$	334,000	$	452,000
Jeffrey G. Ludwig	Executive Vice President—Finance and Chief Financial Officer	$	185,000	$	290,000
Jeffrey S. Mefford	Senior Vice President—Head of Community Banking	$	158,000	$	205,000
Douglas J. Tucker*	Senior Vice President—Corporate Counsel	$	200,000	$	200,000
Jeffrey A. Brunoehler*	Senior Vice President—Chief Credit Officer	$	165,000	$	185,000
Sharon A. Schaubert	Senior Vice President—Banking Services	$	140,000	$	160,000

*

Mr. Brunoehler joined the Bank in April 2010 and Mr. Tucker joined the Company and the Bank in October 2010.

        In establishing base salaries for 2011, the Compensation Committee has relied on the external market data provided by F.W. Cook. In addition to considering the information provided by F.W. Cook, the Committee considered:

•

individual scope of responsibility;

•

years of experience;

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•

internal pay equity;

•

external equity defined by competitive market data; and

•

individual performance of each named executive officer.

Incentive Awards

        All of our named executive officers are eligible to participate in our bonus program, under which they can receive incentive awards, normally in the form of a year-end bonus payment. Annual incentive awards are intended to recognize and reward those named executive officers who contribute meaningfully to our performance for the year.

        For 2010, the named executive officers had targeted incentives of up to 40% of their base salaries. Actual incentive payouts ranged from 45% to 312% of base salaries as a result of our performance during 2010. In determining 2010 incentive awards, the Compensation Committee considered various factors, including personal goals, consolidated net income, consolidated revenue and earnings per share.

        Based on our strong performance in 2010, the Compensation Committee determined 2010 bonuses for each of the named executive officers as shown in the table immediately below:

Name	Position	2010 Incentive Award
Leon J. Holschbach	Chief Executive Officer and President	$	700,000
Jeffrey G. Ludwig	Executive Vice President—Finance and Chief Financial Officer	$	300,000
Jeffrey S. Mefford	Senior Vice President—Community Banking	$	79,576
Douglas J. Tucker*	Senior Vice President—Corporate Counsel	$	26,042
Jeffrey A. Brunoehler*	Senior Vice President—Chief Credit Officer	$	36,929
Sharon A. Schaubert	Senior Vice President—Banking Services	$	44,660

*

Mr. Brunoehler joined the Bank in April 2010 and Mr. Tucker joined the Company and the Bank in October 2010.

        All of the awards reflected in the table immediately above were paid completely in cash, except for Mr. Holschbach's award, $209,984 of which was paid in Company stock, and Mr. Ludwig's award, $89,983 of which was paid in Company stock.

        In addition to the bonuses reflected in the table immediately above, Mr. Tucker received a signing bonus of $40,000 in connection with his joining the Company and the Bank in October 2010.

        For 2011, the Compensation Committee intends to base all performance-based incentive awards on the terms of the MIP with respect to the portion of each executive's bonus that is based upon Company performance, and on the level of attainment of personal goals for the remaining portion of the bonus. As described above, the MIP performance target is based on adjusted earnings per share, and all awards are subject to meeting the capital level and asset quality risk-based metrics specified in the MIP. Under the MIP, the Compensation Committee retains the discretion to adjust downward (but not upward) any awards determined by the formula to ensure that the final awards made to particular participants are consistent with those made to other executives based on relative performance and duties and to make adjustments to the financial performance objectives for extraordinary events.

Equity Awards

        The Company believes that equity awards tie named executive officer's compensation to our long-term financial performance and further serve to align each officer's interests with those of our shareholders. We have two equity incentive plans: the Midland States Bancorp, Inc. Omnibus Stock

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Ownership and Long Term Incentive Plan, or Omnibus Plan; and the 2010 LTIP. Our Omnibus Plan has been in place for several years and no more grants will be made under this plan (as more fully described below). The plan allowed participants, including our named executive officers, to receive equity awards, including stock options, restricted stock, restricted stock units, and long-term incentive compensation units and stock appreciation rights. The 2010 LTIP was adopted as of October 18, 2010, and provides us with the ability to issue a wide variety of forms of equity incentives, as deemed appropriate by the Compensation Committee. Upon adoption of the 2010 LTIP, the Omnibus Plan was frozen. The 2010 LTIP was recently amended and restated to give effect to our reincorporation in Illinois and the ten-for-one exchange of our common stock in connection with the reincorporation. The general terms of both plans are described below.

        The Compensation Committee typically grants equity awards to each named executive officer at the time the individual is hired and, thereafter, on an annual basis as part of our overall performance appraisal process. The size of each award reflects the overall number of shares available to the Company under our equity incentive plans, the named executive officer's role and performance, and consideration of available market compensation data. There is no predetermined formula or performance metric that guides the granting of an equity award to particular named executive officers. Rather, the equity awards are made in the sole discretion of the Compensation Committee. During 2010, the Compensation Committee awarded 66,300 stock options and 8,770 shares of restricted stock to our named executive officers. Each grant vests annually in equal portions over four years, with the exception of Mr. Tucker's options, which vest annually in equal portions over three years. Each grant also vests in full upon a change in control of the Company. The exercise price of Mr. Tucker's and Mr. Brunoehler's options is $17.50, while the per share exercise price of the other named executive officers' options is $18.16, in each case representing the deemed per share fair market value of the Company's common stock on the date of grant.

Name	Position	Options		Restricted Stock
Leon J. Holschbach	Chief Executive Officer and President		11,820		3,940
Jeffrey G. Ludwig	Executive Vice President—Finance and Chief Financial Officer		16,790		2,260
Jeffrey S. Mefford	Senior Vice President—Community Banking		9,520		1,510
Douglas J. Tucker*	Senior Vice President—Corporate Counsel		25,000		—
Jeffrey A. Brunoehler*	Senior Vice President—Chief Credit Officer		25,000		—
Sharon A. Schaubert	Senior Vice President—Banking Services		3,170		1,060

*

Reflects awards made in connection with hiring and granted under our Omnibus Plan. All other awards reflected in the table above were granted under our 2010 LTIP.

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        Because the Compensation Committee believes strongly in having a direct tie between executive compensation and increases to shareholder value, in February 2011, in contemplation of our initial public offering, the Committee acted to award the named executive officers additional stock options to purchase our common shares, subject to the completion of the offering, as follows:

Name	Position	Options
Leon J. Holschbach	Chief Executive Officer and President		35,000
Jeffrey G. Ludwig	Executive Vice President—Finance and Chief Financial Officer		20,000
Jeffrey S. Mefford	Senior Vice President—Community Banking		10,000
Douglas J. Tucker	Senior Vice President—Corporate Counsel		15,000
Jeffrey A. Brunoehler	Senior Vice President—Chief Credit Officer		7,500
Sharon A. Schaubert	Senior Vice President—Banking Services		7,500

        The above options have a term of ten years and vest annually in equal portions over four years; the exercise price per share will be based on our initial offering price. Each grant also vests in full upon a change in control of the Company.

Benefits and Other Perquisites

        The named executive officers are eligible to participate in the same benefit plans designed for all of our full-time employees, including health, dental, vision, disability and basic group life insurance coverage. We also provide our employees, including our named executive officers, with various retirement benefits. Our retirement plans are designed to assist our employees, including our named executive officers, in planning for retirement and securing appropriate levels of income during retirement. The purpose of our retirement plans is to attract and retain quality employees, including executives, by offering benefit plans similar to those typically offered by our competitors.

        Midland States Bank 401(k) Profit Sharing Plan.    The Midland States Bank 401(k) Profit Sharing Plan, or the 401(k) Plan, is designed to provide retirement benefits to all eligible full-time and part-time employees. The 401(k) Plan provides employees the opportunity to save for retirement on a tax-favored basis. Named executive officers, all of whom were eligible during 2010, may elect to participate in the 401(k) Plan on the same basis as all other employees. Employees may defer 1% to 100% of their compensation to the 401(k) Plan up to the applicable IRS limit. We match employee contributions on the first 6% of employee compensation (50 cents for each $1). The Company match is contributed in the form of cash and is invested according to the employee's current investment allocation.

        Midland States Bancorp, Inc. Employee Stock Purchase Plan.    We maintain the Midland States Bancorp, Inc. Employee Stock Purchase Plan for the benefit of our eligible employees. The plan is not intended to constitute an "employee stock purchase plan" within the meaning of Section 423 of the Code. Any employee who has been employed by us or any subsidiary for at least 3 months is eligible to participate in the plan. Pursuant to the plan, participating employees are permitted to use after-tax dollars, up to a maximum of the lesser of $25,000 or 10% per calendar year of their compensation, to purchase shares of our common stock at the end of each calendar quarter. The purchase price for the stock is typically 90 percent of the stock's fair market value as of the first day of each quarterly offering period. However, if the fair market value on the purchase date is lower than the predetermined purchase price, participants are permitted to buy the stock at the lower fair market value as of the purchase date.

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        Second Amended and Restated Deferred Compensation Plan for Directors and Executives of Midland States Bancorp, Inc.    We maintain the Second Amended and Restated Deferred Compensation Plan for Directors and Executives of Midland States Bancorp, Inc., or the Deferred Compensation Plan, for the benefit of our directors and certain senior executives. The plan provides directors and executives an opportunity to better plan for their financial futures by providing a vehicle for the deferral of current income taxation. Under the plan, directors and eligible senior executives are permitted to elect to defer all or a portion of their annual director fees, salary and/or bonus, as the case may be. Any deferrals are credited to a plan account and earn interest based on the hypothetical investment elections of the directors and executives. One available hypothetical investment alternative is Company stock units, which track the value of our common stock. As an incentive to elect our common stock as a measurement for investment return, and thereby further tie the individual's financial success to the Company, any director who defers all of his or her annual director fees and directs their investment to common stock units will receive an additional matching credit to his or her plan account equal to 25% of his or her deferred director fees. The matching contribution vests equally over the four years following crediting to a participant's plan account. The vesting will be accelerated in the case of a change in control of the Company or the participant's death, disability or retirement after reaching age 70. Participants can elect to receive their distributions in a lump sum or in installments spread over a period of up to 15 years.

        Health and Welfare Benefits.    Our named executive officers are eligible to participate in our standard health and welfare benefits program, which offers medical, dental, vision, life, accident, and disability coverage to all of our eligible employees. We do not provide the named executive officers with any health and welfare benefits that are not generally available to our other employees, except for Mr. Holschbach, to whom we provide supplemental life insurance coverage pursuant to the terms of his employment agreement.

        Perquisites.    We provide our named executive officers with certain perquisites that we believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers. Based on this periodic review, perquisites are awarded or adjusted on an individual basis. The perquisites received by our named executive officers in 2010 included the following:

•

allowance for annual country club/social club dues; and

•

use of a Company-owned automobile.

        We encourage members of our senior management to belong to country clubs or social clubs so that they have an entertainment forum for customers and appropriate interaction with their communities. A company car is only provided for our Chief Executive Officer.

Employment Agreements

        We entered into employment agreements with each of our named executive officers as of December 1, 2010. The agreements generally describe the position and duties of each of the named executive officers, provide for a specified term of employment, describe base salary, bonus opportunity and other benefits and perquisites to which each executive officer is entitled, if any, set forth the duties and obligations of each party in the event of a termination of employment prior to expiration of the employment term and provide us with a measure of protection by obligating the named executive officers to abide by the terms of restrictive covenants during the terms of their employment and thereafter for a specified period of time. The base salary, incentive award opportunity, equity awards and benefits and other perquisites of each named executive officer are described in more detail above.

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        Our employment agreement with Mr. Holschbach provides for an initial term of three years, with an automatic renewal for one-year periods unless either party provides written notice of nonrenewal 90 days prior to the second anniversary and each anniversary thereafter. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Following Mr. Holschbach's termination of employment, he will be subject to non-competition and non-solicitation restrictions for a period of 18 months (12 months if such termination occurs within six months before or 12 months after a change in control of the Company).

        The agreements with our other named executive officers provide for an initial term of two years (except for Mr. Ludwig's agreement, which provides for an initial term of three years), with automatic renewals for one-year periods unless either party to the agreement provides at least 90 days' written notice of nonrenewal prior to the first anniversary and each anniversary thereafter. If a change in control of the Company occurs during the term of the agreements, the agreements will remain in effect for the two-year period following the change in control. Following the termination of employment of any of our named executive officers, other than Mr. Holschbach, the officer will be subject to non-competition and non-solicitation restrictions for a period of 12 months.

        Our financial obligations under the employment agreements upon certain terminations of employment or the change in control of the Company are described below under the heading "Potential Payments Upon Termination or Change in Control." Our obligation to pay any severance is conditioned upon the execution by the named executive officer of a full release of any and all claims with respect to his or her employment with us or the termination thereof.

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Additional Information Regarding Executive Compensation

Summary Compensation Table

        The following table sets forth information regarding 2010 compensation for each of our 2010 named executive officers; 2009 and 2008 compensation is presented for officers who were also named executive officers in 2009 and 2008. While we are not required to include Mr. Tucker as a named executive officer for 2010, we have included him because of his significant position at the Company and the Bank. Salary includes amounts deferred at the officer's election.

Name and Position			Year		Salary(1) ($)		Bonus ($)			Stock Awards(6) ($)		Option Awards(6) ($)		Nonqualified Deferred Compensation Earnings(7) ($)		All Other Compensation(8) ($)		Total ($)
Leon J. Holschbach				2010		334,000		700,000	(2)		71,550		27,068		—		55,917		1,188,535
	Chief Executive Officer			2009		253,000		900,000			253,440		133,173		—		49,444		1,589,057
		and President		2008		240,000		45,000			—		21,165		—		24,109		330,274
Jeffrey G. Ludwig				2010		185,000		300,000	(3)		41,042		38,449		—		17,946		582,437
	Executive Vice President—			2009		148,878		600,000			138,688		72,138		—		18,538		978,242
		Finance and Chief Financial Officer		2008		139,157		32,000			—		17,430		—		9,680		198,267
Jeffrey S. Mefford				2010		158,000		79,576	(4)		27,422		21,801		—		14,128		300,927
	Senior Vice President—			2009		126,984		55,238			57,024		51,660		—		16,558		307,464
		Community Banking		2008		124,800		15,000			—		17,430		—		9,139		166,369
Douglas J. Tucker				2010		41,667		66,042	(5)		—		53,000		—		—		160,709
	Senior Vice President—Corporate Counsel
Jeffrey A. Brunoehler				2010		123,750		36,929	(4)		—		53,000		—		13,292		226,971
	Senior Vice President—Chief Credit Officer
Sharon A. Schaubert				2010		140,000		44,660	(4)		19,250		7,259		—		10,174		221,343
	Senior Vice President—			2009		102,738		45,900			45,760		33,150		—		11,452		239,000
		Banking Services		2008		128,961		7,738			—		7,893		—		7,249		151,841

(1)

Mr. Brunoehler joined the Bank in April 2010 and Mr. Tucker joined the Company and the Bank in October 2010. Their salary levels for their initial year of hire reflect the actual amounts earned during their partial year of service.

(2)

Amount reflects a discretionary 2010 annual bonus, $209,984 of which was paid in Company stock, and the rest of which was paid in cash.

(3)

Amount reflects a discretionary 2010 annual bonus, $89,983 of which was paid in Company stock, and the rest of which was paid in cash.

(4)

Amount reflects a discretionary 2010 annual bonus, all of which was paid in cash.

(5)

Amount reflects a discretionary 2010 annual bonus of $26,042, all of which was paid in cash, and a $40,000 cash signing bonus Mr. Tucker received in connection with joining the Company and the Bank in October 2010.

(6)

The amounts set forth in the "Stock Awards" and "Option Awards" columns reflect the aggregate grant date fair value of stock and option awards for the years ended December 31, 2010, 2009 and 2008 in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in Note 13 to our consolidated financial statements as of December 31, 2010 and 2009 and for each of the years in the three-year period ended December 31, 2010.

(7)

The rate of return on Mr. Holschbach's account under the Deferred Compensation Plan is based on the rate of return on Company common stock. The rate of return on Mr. Brunoehler's account under the Deferred Compensation Plan is based on the rate of return of investment funds that he chooses that are selected by the Committee and made available under the plan.

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(8)

"All Other Compensation" for the named executive officers during fiscal 2010 is summarized below.

Name	Perquisites(i) ($)		Company 401(k) Match(ii) ($)		Company Profit Sharing Contribution(iii) ($)		Supplemental Life Insurance(iv) ($)		Bank Board Fees(v) ($)		Total "All Other Compensation" ($)
Leon J. Holschbach		4,709		11,188		8,575		1,570		29,875		55,917
Jeffrey G. Ludwig		2,240		9,075		6,631		—		—		17,946
Jeffrey S. Mefford		2,240		6,400		5,488		—		—		14,128
Douglas J. Tucker		—		—		—		—		—		—
Jeffrey A. Brunoehler		6,091		3,284		3,917		—		—		13,292
Sharon A. Schaubert		—		5,437		4,737		—		—		10,174

(i)

Amount for Mr. Holschbach reflects club dues and use of a Company-owned vehicle; for Messrs. Ludwig and Mefford, club dues; and for Mr. Brunoehler, a one-time moving allowance.

(ii)

Amount reflects Company matching contribution under the 401(k) Plan.

(iii)

Amount reflects Company profit sharing contribution under the 401(k) Plan.

(iv)

Amount reflects premiums paid by the Company during fiscal 2010 with respect to supplemental life insurance.

(v)

Amount reflects $26,500 of fees for services on the Bank's board of directors ($13,500 of which was deferred under the Deferred Compensation Plan), as well as $3,375 of Company matching contributions under the Deferred Compensation Plan.

Grants of Plan-Based Awards

        The following table sets forth information regarding the grants of equity awards made to each of our named executive officers during 2010.

Name	Type of Award	Grant Date	Stock Awards: Number of Shares of Stock or Units(1) (#)		Option Awards: Number of Securities Underlying Options1) (#)		Exercise or Base Price of Option Awards ($ / share)(1)		Grant Date Fair Value of Stock and Option Awards ($)(2)
Leon J. Holschbach	Restricted Stock	12/06/2010		3,940		—		—		71,550
	Stock Options	12/06/2010		—		11,820	$	18.16		27,068
Jeffrey G. Ludwig	Restricted Stock	12/06/2010		2,260		—		—		41,042
	Stock Options	12/06/2010		—		16,790	$	18.16		38,449
Jeffrey S. Mefford	Restricted Stock	12/06/2010		1,510		—		—		27,422
	Stock Options	12/06/2010		—		9,520	$	18.16		21,801
Douglas J. Tucker	Stock Options	10/15/2010		—		25,000	$	17.50		53,000
Jeffrey A. Brunoehler	Stock Options	08/02/2010		—		25,000	$	17.50		53,000
Sharon A. Schaubert	Restricted Stock	12/06/2010		1,060		—		—		19,250
	Stock Options	12/06/2010		—		3,170	$	18.16		7,259

(1)

Share and option amounts, and the exercise prices of options, are adjusted to reflect the ten-for-one exchange effected in connection with our reincorporation in Illinois, effective December 31, 2010. All awards vest in 25% increments on the first, second, third and fourth anniversary of the date of grant, with the exception of Mr. Tucker's awards, which vest in 33¹/3% increments on the first, second and third anniversary of the date of grant. All equity awards are accelerated and vest in full upon a change in control of the Company.

(2)

The amounts reflected in this column reflect the aggregate grant date fair value of stock and option awards for the year ended December 31, 2010, in accordance with FASB ASC Topic 718.

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Outstanding Equity Awards at Fiscal Year End

        The following table provides information for each of our named executive officers regarding outstanding stock options and unvested stock awards held by the officers as of December 31, 2010. Market values are presented as of the end of 2010 (based on the assumed per share fair market value of our common stock of $18.16 on December 31, 2010) for outstanding stock awards, which include 2010 grants and prior-year grants.

	Option Awards							Stock Awards
	Number of Securities Underlying Unexercised Options(1)							Number of Shares or Units of Stock That Have Not Vested(1) (#)
										Market Value of Shares or Units of Stock That Have Not Vested ($)
					Option Exercise Price ($)
Name	(#) Exercisable		(#) Unexercisable				Option Expiration Date
Leon J. Holschbach		37,500		12,500		14.60	08/15/17		—		—
		4,250		4,250		14.70	05/05/18		—		—
		7,048		21,143		11.75	06/22/19		—		—
		7,875		23,625		15.20	12/31/19		—		—
		—		11,820		18.16	12/06/20		—		—
		—		—		—	—		25,540		463,806
Jeffrey G. Ludwig		25,000		—		14.30	11/06/16		—		—
		3,500		3,500		14.70	05/05/18		—		—
		4,548		13,643		11.75	06/22/19		—		—
		3,750		11,250		15.20	12/31/19		—		—
		—		16,790		18.16	12/06/20
		—		—		—	—		14,080		255,693
Jeffrey S. Mefford		5,000		—		10.00	07/31/13		—		—
		6,880		—		13.50	01/01/16		—		—
		3,500		3,500		14.70	05/05/18		—		—
		3,750		11,250		11.75	06/22/19		—		—
		1,875		5,625		15.20	12/31/19		—		—
		—		9,520		18.16	12/06/20		—		—
		—		—		—	—		6,370		115,679
Douglas J. Tucker		—		25,000		17.50	10/15/20		—		—
Jeffrey A. Brunoehler		—		25,000		17.50	08/02/20		—		—
Sharon A. Schaubert		10,000		—		12.00	03/15/14		—		—
		5,550		—		13.50	01/01/16		—		—
		3,250		3,250		14.70	05/05/18		—		—
		1,875		5,625		11.75	06/22/19		—		—
		1,875		5,625		15.20	12/31/19		—		—
		—		3,170		18.16	12/06/20		—		—
		—		—		—	—		4,960		90,074

(1)

All awards vest in 25% increments on the first, second, third and fourth anniversary of the date of grant, with the exception of Mr. Tucker's awards, which vest in 33¹/3% increments on the first, second and third anniversary of the date of grant. All equity awards are accelerated and vest in full upon a change in control of the Company.

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Option Exercises and Restricted Stock Vested in 2010

        The following table provides information for each of our named executive officers regarding vesting of stock awards during 2010. There were no exercises of stock options by our named executive officers in 2010.

Name	Number of Shares Acquired on Exercise (#)		Value Realized Upon Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized Upon Vesting(1) ($)
Leon J. Holschbach		—		—		7,200		109,440
Jeffrey G. Ludwig		—		—		3,940		59,888
Jeffrey S. Mefford		—		—		1,620		24,624
Douglas J. Tucker		—		—		—		—
Jeffrey A. Brunoehler		—		—		—		—
Sharon A. Schaubert		—		—		1,300		19,760

(1)

Based on the assumed per share fair market value of our common stock of $15.20 on May 5, 2010, the date of vesting.

Nonqualified Deferred Compensation Table

        The following table provides information for each of our named executive officers regarding aggregate officer and Company contributions and aggregate earnings for 2010 and year-end account balances under the Deferred Compensation Plan.

Name	Executive Contributions in Last Fiscal Year ($)		Registrant Contributions in Last Fiscal Year ($)			Aggregate Earnings in Last Fiscal Year ($)			Aggregate Withdrawals / Distributions ($)		Aggregate Balance at Last Fiscal Year End ($)
Leon J. Holschbach		13,500		3,375	(1)		9,361	(2)		0		54,641	(4)
Jeffrey G. Ludwig		—		—			—			—		—
Jeffrey S. Mefford		—		—			—			—		—
Douglas J. Tucker		—		—			—			—		—
Jeffrey A. Brunoehler		66,317		0			5,430	(3)		0		71,747
Sharon A. Schaubert		—		—			—			—		—

(1)

Amount reflects a Company matching contribution under the Deferred Compensation Plan, which is also reflected in the "All Other Compensation" column in the Summary Compensation Table above.

(2)

The rate of return on Mr. Holschbach's account under the Deferred Compensation Plan is based on the rate of return on Company common stock.

(3)

The rate of return on Mr. Brunoehler's account under the Deferred Compensation Plan is based on the rate of return of investment funds that he chooses that are selected by the Committee and made available under the plan.

(4)

Amount includes $4,800 of Company matching contributions under the Deferred Compensation Plan for 2008 and 2009 combined, which are also reflected in the "All Other Compensation" column for those years in the Summary Compensation Table above.

        The Company maintains the Deferred Compensation Plan, which allows participants to defer compensation beyond the limits provided under the Company's 401(k) Plan. Directors and certain senior executives of the Company are eligible to participate in the Deferred Compensation Plan. Under the plan, participants may defer up to 100% of compensation, and all deferrals are pre-tax. Accounts

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under the plan are credited with earnings and losses based upon the performance of the investments selected by participants. Directors may choose to invest in Company stock units, which track the return of Company common stock. The Company provides a matching contribution of 25% for deferrals of director fees into Company stock unit accounts. These matching contributions vest in equal annual installments over a period of four years, and also vest fully upon the participant's death, disability or retirement, or upon a change in control of the Company. All contributions to the Deferred Compensation Plan other than Company matching contributions are 100% vested at all times. Participants can elect to receive distributions in a lump sum or two to fifteen equal annual installments upon any permissible payment event under Internal Revenue Code Section 409A.

Potential Payments Upon Termination or Change in Control

        The following table reflects the estimated amount of incremental compensation payable to each of our named executive officers in connection with a change in control of the Company and certain terminations of employment. The amounts shown assume that the change in control of the Company or termination was effective as of December 31, 2010 and that the price of our stock on which certain of the calculations are made was $18.16.

        All cash severance payments, continued medical and dental insurance coverage, continued life insurance coverage, and pro rata bonus payments reflected in the table are paid pursuant to the terms of the respective named executive officer's employment agreement. Under the employment agreements, all severance benefits are strictly conditioned upon the execution and non-revocation by the named executive officer of a release of claims with respect to the officer's employment and the termination thereof. If such release is not provided to us, or has not become irrevocable, on or before the 60th day following a termination of employment, we would have no obligation to pay or provide any severance or other benefits to the officer.

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Name and Benefits		Change in Control— No Termination ($)			Change in Control— Termination Without Cause or For Good Reason ($)			No Change in Control— Termination Without Cause or For Good Reason ($)
Leon J. Holschbach
Cash severance			—			1,764,667	(1)		1,323,500	(2)
Continued medical and dental			—			1,215	(3)		1,215	(3)
Continued life insurance			—			2,355	(4)		2,355	(4)
Pro rata bonus			—			700,000	(5)		700,000	(5)
Vesting of stock options			264,662	(6)		—			—
Vesting of restricted stock			463,806	(7)		—			—
Vesting of deferred compensation			2,699	(8)		—			2,699	(8)
	Total		731,167			2,468,237			2,029,769
Jeffrey G. Ludwig
Cash severance			—			743,500	(9)		495,667	(10)
Continued medical and dental			—			1,215	(11)		810	(12)
Pro rata bonus			—			300,000	(5)		300,000	(5)
Vesting of stock options			132,861	(6)		—			—
Vesting of restricted stock			255,693	(7)		—			—
	Total		388,554			1,044,715			796,477
Jeffrey S. Mefford
Cash severance			—			207,938	(13)		79,000	(17)
Continued medical and dental			—			0	(15)		0	(15)
Pro rata bonus			—			79,576	(16)		—
Vesting of stock options			100,873	(6)		—			—
Vesting of restricted stock			115,679	(7)		—			—
	Total		216,552			287,514			79,000
Douglas J. Tucker
Cash severance			—			226,042	(13)		113,021	(14)
Continued medical and dental			—			848	(15)		848	(15)
Pro rata bonus			—			26,042	(16)		—
Vesting of stock options			16,500	(6)		—			—
Vesting of restricted stock			—			—			—
	Total		16,500			252,932			113,869
Jeffrey A. Brunoehler
Cash severance			—			160,679	(13)		0	(17)
Continued medical and dental			—			848	(15)		848	(15)
Pro rata bonus			—			36,929	(16)		—
Vesting of stock options			16,500	(6)		—			—
Vesting of restricted stock			—			—			—
	Total		16,500			198,456			848
Sharon A. Schaubert
Cash severance			—			172,766	(13)		70,000	(17)
Continued medical and dental			—			375	(15)		375	(15)
Pro rata bonus			—			44,660	(16)		—
Vesting of stock options			63,951	(6)		—			—
Vesting of restricted stock			90,074	(7)		—			—
	Total		154,025			217,801			70,375

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        For purposes of the footnotes below, "base compensation" includes an amount equal to the sum of: (1) the greater of the officer's then current annual base salary or the officer's annual base salary as of the date one day prior to a change in control of the Company and (2) the average of the annual cash incentive bonus award paid (or payable) to the officer for our three most recently completed fiscal years.

        For purposes of the footnotes below, "covered period" means the period that is six months before and 24 months after a change in control of the Company.

(1)

Upon a termination of Mr. Holschbach's employment by us without cause or by him for good reason during a covered period, we would owe him an amount equal to two times his base compensation.



(2)

Upon a termination of Mr. Holschbach's employment by us without cause or by him for good reason outside of a covered period, we would owe him an amount equal to one and one-half times his base compensation.



(3)

Upon a termination of Mr. Holschbach's employment by us without cause or by him for good reason, we must supplement any COBRA coverage obtained by him for a period of 18 months to the extent necessary so that he pays no more for such COBRA coverage than he would have paid for such insurance coverage had he continued in our employ.



(4)

Upon a termination of Mr. Holschbach's employment by us without cause or by him for good reason, we must continue his life insurance coverage for a period of 18 months.



(5)

Upon a termination of Mr. Holschbach's or Mr. Ludwig's employment by us without cause or by him for good reason, we must pay him a "pro rata bonus" for the year of termination.



(6)

Under the Midland States Bancorp, Inc. 1999 Stock Option Plan, or the 1999 Stock Option Plan, all unvested stock options vest upon a change in control of the Company. All outstanding stock options under the Omnibus Plan vest upon a change in control of the Company. Under the 2010 LTIP, all unvested stock options vest upon a change in control of the Company.



(7)

Under the Omnibus Plan, the Compensation Committee has discretion to vest all unvested restricted stock before a change in control of the Company. Under the 2010 LTIP, all unvested restricted stock vests upon a change in control of the Company.



(8)

Under the Deferred Compensation Plan, Mr. Holschbach's matching contribution account vests upon a change in control of the Company, his death or disability or his separation from service after age 69.



(9)

Upon a termination of Mr. Ludwig's employment by us without cause or by him for good reason during a covered period, we would owe him an amount equal to one and one-half times his base compensation.



(10)

Upon a termination of Mr. Ludwig's employment by us without cause or by him for good reason outside of a covered period, we would owe him an amount equal to his base compensation.



(11)

Upon a termination of Mr. Ludwig's employment by us without cause or by him for good reason during a covered period, we must supplement any COBRA coverage obtained by him for a period of 18 months to the extent necessary so that he pays no more for such COBRA coverage than he would have paid for such insurance coverage had he continued in our employ.

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(12)

Upon a termination of Mr. Ludwig's employment by us without cause or by him for good reason outside of a covered period, we must supplement any COBRA coverage obtained by him for a period of 12 months to the extent necessary so that he pays no more for such COBRA coverage than he would have paid for such insurance coverage had he continued in our employ.



(13)

Upon a termination of the officer's employment by us without cause or by the officer for good reason during a covered period, we would owe the officer an amount equal to the officer's base compensation.



(14)

Upon a termination of Mr. Tucker's employment by us without cause or by him for good reason outside of a covered period, we would owe him an amount equal to one-half of his base compensation.



(15)

Upon a termination of the officer's employment by us without cause or by the officer for good reason, we must supplement any COBRA coverage obtained by the officer for a period of 12 months to the extent necessary so that the officer pays no more for such COBRA coverage than the officer would have paid for such insurance coverage had the officer continued in our employ.



(16)

Upon a termination of the officer's employment by us without cause or by the officer for good reason during a covered period, we must pay the officer a "pro rata bonus" for the year of termination.



(17)

Upon a termination of the officer's employment by us without cause or by the officer for good reason outside of a covered period, we would owe the officer the benefit available under the Midland States Severance Plan.

Director Compensation

        The following table sets forth information regarding 2010 compensation for each of our nonemployee directors.

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Nonqualified Deferred Compensation Earnings(1) ($)		All Other Compensation ($)(2)		Total ($)
Kenneth D. Maschhoff		26,500		—		—		6,625		33,125
John M. Schultz		41,500		—		—		10,375		51,875
Robert F. Schultz		32,500		—		—		8,125		40,625
Q. Anthony Siemer		26,500		—		—		6,625		33,125
Jeffrey C. Smith		29,500		—		—		—		29,500
Karen D. Wolters		23,500		—		—		—		23,500

(1)

The rate of return on directors' accounts under the Deferred Compensation Plan is based on the rate of return on Company common stock.

(2)

Reflects amounts accrued during 2010 as the matching portion of director fees deferred under the Deferred Compensation Plan paid by the Company or the Bank.

        Director fees for 2010 were based upon a per meeting attended schedule, with additional fees paid for serving as Chairman of the full Board of Directors or of a committee of the Board. At its March 2011 meeting, the Compensation Committee approved a chairperson fee, annual retainer fee, and committee fee structure that becomes effective May 2, 2011 and will remain in effect until the election of board members at the Company's 2012 annual meeting of shareholders.

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Equity Incentive Plan Information

        As noted above, we currently have equity awards outstanding pursuant to two equity incentive plans: the Omnibus Plan and the 2010 LTIP. The general terms of each are described here.

Midland States Bancorp, Inc. Omnibus Stock Ownership and Long Term Incentive Plan

        The Company adopted this plan in 2008 to encourage and motivate selected key employees to contribute to the successful performance of the Company and to the growth in the value of our common stock and to help retain such employees. This plan replaced our 1999 Stock Option Plan, which was expiring. Under the plan, we were permitted to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, and long-term incentive compensation units and stock appreciation rights. We had reserved up to 100,000 shares of common stock for issuance under the plan; however, after approval of our 2010 LTIP, no additional grants may be made under this plan. Awards that were granted under this plan will vest, become exercisable and contain such other terms and conditions as determined by the Compensation Committee and set forth in individual agreements with the employees receiving the awards. The plan enabled the Committee to set specific performance criteria to be met before an award vests under the plan. The plan allows for acceleration of vesting and exercise privileges of grants if a participant's termination of employment is due to a change in control, death or total disability. If a participant's job is terminated for cause, then all unvested awards expire at the date of termination.

Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan

        The Company adopted the 2010 LTIP to ensure continued availability of equity awards that will assist the Company in attracting, retaining and rewarding key employees, directors and other service providers. Pursuant to the 2010 LTIP, the Compensation Committee is allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. Up to 1,500,000 shares of common stock are available for issuance under the plan. Awards that are granted will vest, become exercisable and contain such other terms and conditions as determined by the Compensation Committee and set forth in individual agreements with the employees receiving the awards. The 2010 LTIP was adopted by our board on October 18, 2010 and approved by our shareholders on November 23, 2010, and, after that date, no new awards may be granted under the Omnibus Plan. The plan enables the Compensation Committee to set specific performance criteria that must be met before an award vests under the plan. The 2010 LTIP allows for acceleration of vesting and exercise privileges of grants if a participant's termination of employment is due to a change in control, death or total disability. If a participant's job is terminated for cause, then all unvested awards expire at the date of termination. The 2010 Plan was recently amended and restated to reflect our reincorporation in Illinois and the ten-for-one exchange of our common stock in connection with the reincorporation.

170

Securities Authorized for Issuance Under Equity Compensation Plans

        The following table sets forth certain information regarding shares of our common stock authorized for issuance under equity compensation plans as of April 30, 2011:

Plan Category		Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by shareholders			548,870	$	14.72		1,403,310
Equity compensation plans not approved by shareholders			—		—		—
	Total		548,870	$	14.72		1,403,310

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        In connection with this offering, we have adopted a formal written policy concerning related party transactions. A related party transaction is a transaction, arrangement or relationship involving us or a consolidated subsidiary (whether or not we or the subsidiary is a direct party to the transaction), on the one hand, and (i) a director, executive officer or employee of us or a consolidated subsidiary, his or her immediate family members or any entity that any of them controls or in which any of them has a substantial beneficial ownership interest; or (ii) any person who is the beneficial owner of more than 5% of our voting securities or a member of the immediate family of such person and exceeds $120,000, exclusive of employee compensation and directors' fees. Upon completion of this offering, a copy of our procedures may be found on our website at www.midlandstatesbank.com.

        Our policy assigns to our Audit Committee the duty to ascertain that there is an ongoing review process of all related party transactions for potential conflicts of interest and requires that our Audit Committee approve any such transactions. Our Audit Committee evaluates each related party transaction for the purpose of recommending to the disinterested members of our board whether the transaction is fair, reasonable and within our policy, and should be ratified and approved by our board. Relevant factors include the benefits of the transaction to us, the terms of the transaction and whether the transaction was on an arm's-length basis and in the ordinary course of our business, the direct or indirect nature of the related party's interest in the transaction, the size and expected term of the transaction and other facts and circumstances that bear on the materiality of the related party transaction under applicable law and listing standards. At least annually, management will provide our Audit Committee with information pertaining to related party transactions. Related party transactions entered into, but not approved or ratified as required by our policy concerning related party transactions, will be subject to termination by us or the relevant subsidiary, if so directed by our Audit Committee or our board, taking into account factors as deemed appropriate and relevant. Lending and other banking transactions in the ordinary course of business are not treated as related party transactions under this policy and, instead, these transactions are monitored and approved, if necessary, by the Bank's board.

        Our directors, officers, beneficial owners of more than 5% of our voting securities and their associates were customers of and had transactions with us in the past, and additional transactions with these persons are expected to take place in the future. All outstanding loans, commitments to loan, and certificates of deposit and depository relationships, in the opinion of management, were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features. All such loans are approved by the Bank's board of directors in accordance with the bank regulatory requirements.

        The following is a description of transactions since January 1, 2008, to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or indirect material interest.

Issuance of Preferred Stock

        On May 30, 2009, we sold and issued 2,360 shares of our Series C Preferred Stock for aggregate gross proceeds of $23.6 million to accredited investors, including certain of our directors, officers, beneficial holders of more than 5% of our voting securities and their affiliates as set forth in the table below. Each share of Series C Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of our common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series C Preferred Stock is $11.75, provided

172

that if, as of the date of conversion, we have not declared and paid dividends on the Series C Preferred Stock with respect to two or more dividend periods, then the conversion price per share will be adjusted downward to $9.243.

        On March 31, 2010, we also sold and issued 2,377 shares of our Series D Preferred Stock for aggregate gross proceeds of $23.8 million to certain accredited investors, including certain of our directors, officers, beneficial holders of more than 5% of our voting securities and their affiliates as set forth in the table below. Each share of Series D Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of our common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series D Preferred Stock is $23.00.

        The following table lists the number of shares of Series C Preferred Stock and Series D Preferred Stock, as well as the aggregate purchase price for each, purchased by our directors, officers, beneficial holders of more than 5% of our voting securities and their affiliates:

	Series C Preferred Stock				Series D Preferred Stock
Name	Number of Shares		Aggregate Purchase Price		Number of Shares		Aggregate Purchase Price
Leon J. Holschbach		65	$	650,000		40	$	400,000
Jeffrey G. Ludwig(1)		35	$	350,000		65	$	650,000
Jeffrey S. Mefford		30	$	300,000		—		—
John M. Schultz(2)		268	$	2,680,000		123	$	1,230,000
Robert F. Schultz(3)		75	$	750,000		50	$	500,000
Jeffrey C. Smith		10	$	100,000		25	$	250,000
Karen D. Wolters		50	$	500,000		50	$	500,000
Siemer Milling Company		100	$	1,000,000		400	$	4,000,000
Richard C. Siemer(4)		—		—		20	$	200,000
Austin Crews Group, L.P.		50	$	500,000		—		—
Dr. Richard E. Workman(5)		370	$	3,700,000		—		—

(1)

The 65 shares of Series D Preferred Stock beneficially owned by Mr. Ludwig include 25 shares owned by JQ Properties, LLC. Mr. Ludwig is a member of JQ Properties, LLC, and shares voting and investment power over the shares of Series C Preferred Stock owned by JQ Properties, LLC.

(2)

The 268 shares of Series C Preferred Stock beneficially owned by Mr. Schultz include 50 shares owned by Agracel, Inc. Mr. Schultz is the Chief Executive Officer and a substantial shareholder of Agracel, Inc. The 123 shares of Series D Preferred Stock beneficially owned by Mr. Schultz include 110 shares owned by JNJ, LLC. Mr. Schultz is the sole member of JNJ, LLC and, as such, has sole voting and investment power over the shares of Series D Preferred Stock owned by JNJ, LLC.

(3)

The 75 shares of Series C Preferred Stock beneficially owned by Mr. Schultz include 25 shares purchased by his spouse and 50 shares purchased by AKRA Builders, Inc. Mr. Schultz is a shareholder of AKRA Builders and currently serves as its Chairman. The 50 shares of Series D Preferred Stock attributable to Mr. Schultz were purchased by AKRA Investments, LLC. Mr. Schultz is a managing member of AKRA Investments and currently serves as its President.

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(4)

Mr. Siemer is the President and a shareholder of, and has voting and dispositive power over the shares held by, Siemer Milling Company. The shares shown in the table for Siemer Milling Company do not include Mr. Siemer's 20 shares of Series D Preferred Stock.

(5)

As described below under "Subordinated Notes and Warrants to Acquire Preferred Stock," the Richard E. Workman 2001 Trust purchased from us an $11.3 million subordinated note in connection with our sale of shares of Series C Preferred Stock and a $5.0 million subordinated note in connection with our sale of shares of Series D Preferred Stock. In connection with such investment, the Richard E. Workman 2001 Trust also received warrants to purchase 630 shares of our Series E Preferred Stock, which have substantially identical terms to our Series C Preferred Stock, and 500 shares of our Series F Preferred Stock, which have substantially identical terms to our Series D Preferred Stock.

Subordinated Notes and Warrants to Acquire Preferred Stock

        On May 29, 2009, we entered into a credit agreement with the Richard E. Workman 2001 Trust, the beneficial owner of approximately 9.5% of our outstanding common stock on an as-converted basis, for which Dr. Richard E. Workman serves as trustee, pursuant to which we sold and issued a subordinated note, or the 2009 subordinated note, with a principal amount of $11.3 million at 100% of its face amount. The 2009 subordinated note bears interest at a per annum rate of 15.0%. On March 31, 2010, we entered into an amendment to the credit agreement with the Richard E. Workman 2001 Trust, pursuant to which we issued an additional subordinated note, or the 2010 subordinated note, with a principal amount of $5.0 million at 100% of its face amount. The 2010 subordinated note bears interest at a per annum rate of 12.0%.

        On December 31, 2010, we and the Richard E. Workman 2001 Trust agreed to amend and restate the credit agreement pursuant to which the subordinated notes were issued to modify certain provisions thereof to ensure that the subordinated notes satisfied the criteria for Tier 2 capital treatment under Federal Reserve regulations. The principal amount of and interest rate on the subordinated notes remained unchanged. The maturity date of both subordinated notes is April 1, 2020. The 2009 subordinated note may be redeemed by us, in whole or in part, at any time on or after July 1, 2013. The 2010 subordinated note may be redeemed by us, in whole or in part, at any time on or after April 1, 2016. As part of the amendment process, we also enhanced our right to require the Richard E. Workman 2001 Trust to exercise the warrants in certain circumstances, as discussed in the last paragraph of this section.

        In connection with the Richard E. Workman 2001 Trust's investment in these subordinated notes, we issued to him a warrant to acquire up to 630 shares of our Series E Preferred Stock at an exercise price of $10,000 per share and a warrant to acquire up to 500 shares of our Series F Preferred Stock at an exercise price of $10,000 per share. The terms of our Series E Preferred Stock are substantially identical to the terms of our Series C Preferred Stock, and the terms of our Series F Preferred Stock are substantially identical to the terms of our Series D Preferred Stock. Prior to July 1, 2013, payment of the exercise price pursuant to the Series E warrant may only be made by exchanging the principal amount of the 2009 subordinated note. Between July 1, 2013 and expiration, payment of the exercise price pursuant to the Series E Warrant may be made by exchanging the principal amount of the 2009 subordinated note, in cash or by cashless exercise. With respect to the Series F warrant, payment of the exercise price may only be made by exchanging the principal amount of the 2010 subordinated note. Both warrants have an expiration date of April 1, 2016.

        On December 31, 2010, we also entered into agreements with the Richard E. Workman 2001 Trust which, among things, requires it to exercise the warrants to acquire shares of our Series E Preferred Stock and Series F Preferred Stock upon Dr. Workman's receipt of a notice of non-objection from the Federal Reserve with respect to a CBCA application (described below), which would enable him to

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beneficially own 10% or more (but not more than 24.9%) of the outstanding shares of our common stock. There can be no guarantee that he will receive the required notice of non-objection. Under these agreements, we also have the right to require the Richard E. Workman 2001 Trust to exercise the warrants up to the maximum extent possible without causing Dr. Workman or any of his affiliates, including the Richard E. Workman 2001 Trust to be deemed, for purposes of the BHCA or the CBCA, to own 10% or more of our outstanding shares of common stock. Accordingly, following this offering, we will be able to require the Richard E. Workman 2001 Trust to partially exercise the warrants to acquire shares of Series E Preferred Stock to take account of the increased number of shares of our common stock that we will be outstanding following the offering.

Registration Rights

        We have granted the Richard E. Workman 2001 Trust registration rights pursuant to a registration rights agreement. For a further description of these rights, see "DESCRIPTION OF OUR CAPITAL STOCK—Registration Rights."

Other Transactions

        On February 26, 2010, we purchased a parcel of land, on which our new corporate headquarters facility is being constructed, from Effingham Hi-Tech Partners, an entity controlled by Agracel, Inc., a real estate management and development company, at a cost of approximately $443,000. We also purchased an additional parcel of land at the same site from Effingham Hi-Tech Partners for $312,000 on January 28, 2011. Mr. John M. Schultz, our Chairman, is a substantial shareholder of Agracel, Inc. and currently serves as its Chief Executive Officer.

        On April 16, 2010, we entered into a contract with AKRA Builders, Inc. to act as general construction manager for the construction of our new corporate headquarters facility. The total cost of the facility is expected to be approximately $22.0 million. Because AKRA Builders serves as the general contractor the project, we make payments directly to AKRA Builders, which in turn makes payments to subcontractors and pays material and equipment costs and labor expenses. Under the contract, AKRA Builders' general contractor fee is set at 7.0% of the total construction cost. We estimate AKRA Builders' general contractor fee will be approximately $1.2 million. Mr. Robert F. Schultz, a member of our board of directors, is a substantial shareholder of AKRA Builders and currently serves as its Chairman.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table and accompanying footnotes set forth information with respect to the beneficial ownership of our common stock as of April 30, 2011 by:

•

each person who is known by us to own beneficially more than 5% of such shares;

•

each member of our board of directors;

•

each of our named executive officers; and

•

all of our directors and named executive officers as a group (12 persons).

        Except as otherwise indicated, the address for each beneficial owner is c/o Midland States Bancorp, Inc., 133 West Jefferson Avenue, Effingham, Illinois 62401.

        We have determined beneficial ownership in accordance with the rules and regulations of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own.

        The applicable percentage ownership is based on 4,249,777 shares of our common stock outstanding as of April 30, 2011 plus, on an individual basis, the right of that person to obtain common stock upon (i) conversion of shares of our Series C Preferred Stock or Series D Preferred held by such person and (ii) exercise of stock options held by such person that are exercisable within 60 days of April 30, 2011. Pursuant to SEC rules, we did not deem these shares outstanding for the purpose of computing the percentage ownership of any other person.

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        For purposes of the table below, we have assumed that                        shares of our common stock will be outstanding upon completion of this offering. Beneficial ownership representing less than one percent is denoted with an "*".

	Shares beneficially owned prior to offering					Shares beneficially owned after offering
Name	Number of Shares(1)		Percentage(2)			Number of Shares(1)	Percentage, assuming no exercise of underwriters' option to purchase additional shares(2)	Percentage, assuming full exercise of underwriters' option to purchase additional shares(2)
Officers and Directors
Leon J. Holschbach(3)		182,911		4.2	%
Kenneth D. Maschhoff(4)		50,500		1.2	%
John M. Schultz(5)		345,422		7.6	%
Robert F. Schultz(6)		362,868		8.4	%
Q. Anthony Siemer		31,050		*
Jeffrey C. Smith(7)		24,379		*
Karen D. Wolters(8)		92,162		2.1	%
Jeffrey A. Brunoehler		—		—
Jeffrey G. Ludwig(9)		146,469		3.4	%
Jeffrey S. Mefford(10)		57,295		1.3	%
Sharon A. Schaubert(11)		30,085		*
Douglas J. Tucker		—		—
All executive officers and directors as a group (12 persons)		1,323,141		26.4	%
5% Security Holders
J.M. Schultz Investment, L.L.C.(12) 200 N. 3rd St., Suite 201 Effingham, Illinois 62401		250,030		5.9	%
Richard E. Workman 2001 Trust(13) 5180 Vardon Drive Windemere, Florida 34786		433,683		9.5	%
Austin Crews Group, L.P.(14) c/o Siemer, Austin & Fuhr 307 North Third Street Effingham, Illinois 62401		283,683		6.6	%
Richard C. Siemer c/o Siemer Milling Company(15) P.O. Box 670 Teutopolis, Illinois 62467		406,364		9.0	%

(1)

Beneficial ownership does not include: (i) any shares of common stock that may be purchased in this offering by the person listed; or (ii) with respect to officers and directors, common stock-equivalent units owned by such officer and director in the Amended and Restated Deferred Compensation Plan for Directors and Executives of Midland States Bancorp, Inc.

(2)

Ownership percentages reflect the person's ownership percentage assuming that such person, but no other person, (i) converts all shares of our Series C Preferred Stock or Series D Preferred Stock held by such person into shares of our common stock and (ii) exercises all options or rights to acquire shares of our common stock held by such person that are either currently exercisable or exercisable within 60 days of April 30, 2011. The ownership percentage of all executive officers and directors, as a group, assumes that all 12 persons, but no other person, (i) convert all shares of our Series C Preferred Stock or Series D Preferred

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Stock held by such persons into shares of our common stock and (ii) exercise all options or rights to acquire shares of our common stock held by such persons that are either currently exercisable or exercisable within 60 days of April 30, 2011.

(3)

Consists of: (i) 23,793 shares of our common stock held by Mr. Holschbach individually, including through a self-directed IRA; (ii) 25,540 shares of our common stock held individually that are restricted as to transferability; (iii) 2,070 shares of our common stock held by Mr. Holschbach jointly with his spouse; (iv) 65 shares of our Series C Preferred Stock convertible into 55,319 shares of our common stock held by Mr. Holschbach individually; (v) 40 shares of our Series D Preferred Stock convertible into 17,391 shares of our common stock held by Mr. Holschbach individually; and (vi) 58,798 options to purchase shares of our common stock that are currently exercisable or are exercisable within 60 days of April 30, 2011.

(4)

Consists of: (i) 8,000 shares of our common stock held by Mr. Maschhoff individually; and (ii) 42,500 shares of our common stock held by Gateway Investments, LLC. Mr. Maschoff is a managing member, and has voting and investment power over the shares held by, Gateway Investments, LLC, but disclaims beneficial ownership of such shares extent to the extent of his pecuniary interest therein.

(5)

Consists of: (i) 56,070 shares of our common stock held by Mr. Schultz individually, including through self-directed IRAs; (ii) 4,790 shares of our common stock held by Mr. Schultz's spouse individually, including through a self-directed IRA; (iii) 218 shares of Series C Preferred Stock convertible into 185,531 shares of our common stock held by Mr. Schultz individually, including through a self-directed IRA; (iv) 50 shares of Series C Preferred Stock convertible into 42,553 shares of our common stock held by Agracel, Inc.; (v) 13 shares of Series D Preferred Stock convertible into 5,652 shares of our common stock held by Mr. Schultz individually through a self-directed IRA; (vi) 110 shares of Series D Preferred Stock convertible into 47,826 shares of our common stock held by JNJ, LLC, a family investment vehicle; and (vii) 3,000 options to purchase shares of our common stock that are currently exercisable or are exercisable within 60 days of April 30, 2011. Mr. Schultz is: (i) the Chief Executive Officer and a shareholder of Agracel, Inc.; and (ii) the managing member of JNJ, LLC. He has voting and investment power over the shares held by Agracel, Inc. and JNJ, LLC, but disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(6)

Consists of: (i) 12,870 shares of our common stock held by Mr. Schultz individually, including through a self-directed IRA; (ii) 2,100 shares of our common stock held by Mr. Schultz's spouse; (iii) 9,800 shares of our common stock held by Mr. Schultz's minor children; (iv) 2,500 shares of our common stock held by AKRA Builders, Inc.; (v) 250,030 shares of our common stock held by J.M. Schultz Investment, L.L.C.; (vi) 25 shares of our Series C Preferred Stock convertible into 21,276 shares of our common stock, which are held by Mr. Schultz's spouse; (vii) 50 shares of our Series C Preferred Stock convertible into 42,553 shares of our common stock, which are held by AKRA Builders, Inc.; and (viii) 50 shares of our Series D Preferred Stock convertible into 21,739 shares of our common stock, which are held by AKRA Investments, LLC. Mr. Schultz is: (i) the Chairman and a substantial shareholder of AKRA Builders, Inc.; (ii) the managing member of J.M. Schultz Investment, L.L.C.; and (iii) the President and a managing member of AKRA Investments, LLC. He has voting and investment power over the shares held by AKRA Builders, Inc., J.M. Schultz Investment, L.L.C. and AKRA Investments, LLC, but disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein.

(7)

Consists of: (i) 5,000 shares of our common stock held jointly with Mr. Smith's spouse; (ii) 10 shares of our Series C Preferred Stock convertible into 8,510 shares of our common stock held individually; and (iii) 25 shares of our Series D Preferred Stock convertible into 10,869 shares of our common stock held jointly with Mr. Smith's spouse.

(8)

Consists of: (i) 9,460 shares of our common stock held by Ms. Wolters individually through a revocable grantor trust; (ii) 2,240 shares of our common stock held jointly with Ms. Wolters's spouse; (iii) 10,530 shares of our common stock held by Ms. Wolters's spouse individually through a revocable grantor trust; (iv) 50 shares of Series C Preferred Stock convertible into 42,553 shares of our common stock held by Ms. Wolters individually; (v) 50 shares of Series D Preferred Stock convertible into 21,739 shares of our common stock held by Ms. Wolters's spouse individually through a revocable grantor trust; and (vi) 5,640 shares of our common stock held in a custodial capacity by Ms. Wolters and her spouse for their grandchildren.

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(9)

Consists of: (i) 35,795 shares of our common stock held individually, including through a self-directed IRA; (ii) 14,080 shares of our common stock held individually that are restricted as to transferability; (iii) 10 shares of Series C Preferred Stock convertible into 8,510 shares of our common stock held individually through a self-directed IRA; (iv) 25 shares of Series C Preferred Stock convertible into 21,276 shares of our common stock held jointly with Mr. Ludwig's spouse; (v) 40 shares of Series D Preferred Stock convertible into 17,391 shares of our common stock held individually; (vi) 25 shares of Series D Preferred Stock convertible into 10,869 shares of our common stock held by JQ Properties, LLC; and (vii) 38,548 options to purchase shares of our common stock that are currently exercisable or are exercisable within 60 days of April 30, 2011. Mr. Ludwig is a Manager and a member of, and has shared voting and investment power over the shares held by, JQ Properties, LLC, but disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(10)

Consists of: (i) 2,639 shares of our common stock held individually; (ii) 6,370 shares of our common stock held individually that are restricted as to transferability; (iii) 30 shares of our Series C Preferred Stock convertible into 25,531 shares of our common stock held individually; and (iv) 22,755 options to purchase shares of our common stock that are currently exercisable or are exercisable within 60 days of April 30, 2011.

(11)

Consists of: (i) 1,000 shares of our common stock held individually; (ii) 4,960 shares of our common stock held individually that are restricted as to transferability; and (iii) 24,125 options to purchase shares of our common stock that are currently exercisable or are exercisable within 60 days of April 30, 2011.

(12)

Robert F. Schultz, one of our directors, is the managing member of J.M. Schultz Investment, L.L.C.

(13)

Consists of: (i) 118,790 shares of our common stock held by the Richard E. Workman 2001 Trust; and (ii) 370 shares of our Series C Preferred Stock convertible into 314,893 shares of our common stock. Dr. Richard E. Workman is the trustee of the Richard E. Workman 2001 Trust. Excludes: (i) 630 shares of Series E Preferred Stock convertible into 536,170 shares of our common stock that may be acquired upon exercise of an outstanding warrant held by the Richard E. Workman 2001 Trust; and (ii) 500 shares of Series F Preferred Stock convertible into 217,391 shares of our common stock that may be acquired upon exercise of an outstanding warrant held by the Richard E. Workman 2001 Trust. The warrants held by the Richard E. Workman 2001 Trust will not be exercisable within 60 days of April 30, 2011. However, the number of shares to be beneficially owned after the offering reflects the additional shares of Series E Preferred Stock, and the shares of our common stock into which such additional shares of Series E Preferred Stock are convertible, that we estimate the Richard E. Workman 2001 Trust will acquire upon consummation of the offering (upon a forced partial exercise of the outstanding warrant to acquire 630 shares of Series E Preferred Stock) to increase its as-converted ownership percentage, calculated pursuant to the Federal Reserve's guidelines under the CBCA, to 9.9%.

(14)

Consists of: (i) 241,130 shares of our common stock; and (ii) 50 shares of Series C Preferred Stock convertible into 42,553 shares of our common stock. The general partner of Austin Crews Group, L.P. is William W. Austin. Mr. Austin is a partner of Siemer, Austin & Fuhr, a law firm which provides legal services to us and our affiliates. Q. Anthony Siemer, one of our directors, is a partner of Mr. Austin in Siemer, Austin & Fuhr.

(15)

Consists of: (i) 5,750 shares of our common stock held individually; (ii) 132,900 shares of our common stock held by Siemer Milling Company; (iii) 100 shares of our Series C Preferred Stock convertible into 85,106 shares of our common stock held by Siemer Milling Company; (iv) 20 shares of our Series D Preferred Stock convertible into 8,695 shares of our common stock held individually; and (v) 400 shares of our Series D Preferred Stock convertible into 173,913 shares of our common stock held by Siemer Milling Company. Mr. Siemer is the President and a shareholder of, and has voting and investment power over the shares held by, Siemer Milling Company. Mr. Siemer is the brother of Q. Anthony Siemer, one of our directors.

        There are no arrangements currently known to us, the operation of which may at a subsequent date result in a change of control of the Company.

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DESCRIPTION OF OUR CAPITAL STOCK

        The following is a summary of the material rights of our capital stock and related provisions of our articles of incorporation, or articles, including the statements of resolution establishing series of preferred stock, and bylaws, as they each will be in effect prior to the completion of this offering. The following description of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by, our articles and bylaws, which we have included as exhibits to the registration statement of which this prospectus is a part. We urge you to read these documents for a more complete understanding of shareholder rights.

        Our articles authorize the issuance of up to 40,000,000 shares of common stock, par value $0.01 per share, and up to 4,000,000 shares of preferred stock, par value $2.00 per share. At April 30, 2011, we had issued and outstanding 4,249,777 shares of our common stock, 4,737 shares of preferred stock, 2,360 of which are designated as Series C Preferred Stock and 2,377 of which are designated as Series D Preferred Stock. We also have designated 630 shares of preferred stock as Series E Preferred Stock and 500 shares as Series F Preferred Stock, all of which are reserved for future issuance upon exercise of outstanding warrants. In addition to the shares of our common stock that are currently outstanding, a significant number of shares of our common stock may be acquired upon conversion or exercise of outstanding securities, as follows:

•

573,870 shares of our common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $14.72 per share;

•

125,000 shares of our common stock that will be issuable upon exercise of outstanding stock options that will become effective upon consummation of this offering at an exercise price equal to the per share initial public offering price;

•

2,008,510 shares of our common stock issuable upon conversion of the 2,360 outstanding shares of our Series C Preferred Stock (based on the conversion price as of the date of this prospectus);

•

1,033,478 shares of our common stock issuable upon conversion of the 2,377 outstanding shares of our Series D Preferred Stock;

•

536,170 shares of our common stock issuable upon conversion of the 630 shares of our Series E Preferred Stock (based on the conversion price as of the date of this prospectus) that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes; and

•

217,391 shares of our common stock issuable upon conversion of the 500 shares of our Series F Preferred Stock that may be acquired upon exercise of an outstanding warrant held by the holder of our outstanding subordinated notes.

Governing Documents

Preferred Stock

        Holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock have the rights set forth in our articles, including the applicable statement of series establishing series, our bylaws and Illinois law.

Common Stock

        Holders of shares of our common stock have the rights set forth in our articles, our bylaws and Illinois law.

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Dividends and Distributions

Preferred Stock

        The shares of our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock rank senior to our common stock and any other stock that is expressly junior to the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock as to payment of dividends, except dividends paid in junior ranking stock. Dividends on the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock are payable semiannually on December 1 and June 1 of each year and are not mandatory or cumulative. Holders of shares of our Series C Preferred Stock and Series D Preferred Stock are entitled to receive dividends when, as and if declared by our board of directors, out of funds legally available for dividends, at an annual rate of 9% of the liquidation preference per share of $10,000, or $900 per share. Upon future issuance, holders of shares of our Series E Preferred Stock and Series F Preferred Stock also will be entitled to receive dividends when, as and if declared by our board of directors, out of funds legally available for dividends, at an annual rate of 9% of the liquidation preference per share of $10,000, or $900 per share.

Common Stock

        The holders of our common stock are entitled to share equally in any dividends that our board of directors may declare from time to time out of funds legally available for dividends, subject to limitations under Illinois law and the preferential rights of holders of any outstanding shares of our preferred stock, including our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.

        In general, so long as any shares of preferred stock remain outstanding, we cannot declare, set apart or pay any dividends on shares of our common stock unless all accrued or declared and unpaid dividends on our preferred stock have been paid or are contemporaneously paid or declared and set apart for payment.

Ranking

Preferred Stock

        The Series C Preferred Stock and Series D Preferred Stock rank (and, when issued, the Series E Preferred Stock and Series F Preferred Stock will rank) senior to our common stock with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company. The Series C Preferred Stock and Series D Preferred Stock are equal (and, when issued, the Series E Preferred Stock and Series F Preferred Stock will be equal) in right of payment with each other. The liquidation preference of the shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock is $10,000 per share, plus declared but unpaid dividends thereon.

Common Stock

        Our common stock ranks junior with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company to all other securities and indebtedness of the Company.

        Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of our common stock are entitled to share equally, on a per share basis, in all of our assets available for distribution, after payment to creditors and subject to any prior distribution rights granted to holders of any outstanding shares of preferred stock.

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Conversion Rights

Preferred Stock

        Optional Conversion.    Each share of our Series C Preferred Stock is (and, when issued, each share of our Series E Preferred Stock will be) convertible at any time, at the option of the holder, into the number of shares of our common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series C Preferred Stock and Series E Preferred Stock is $11.75 (which gives effect to the ten-for-one exchange of common stock in the reincorporation), provided that if, as of the date of conversion, the Company has not declared and paid dividends on the Series C Preferred Stock or Series E Preferred Stock with respect to two or more dividend periods, then the conversion price per share will be adjusted downward to $9.243.

        Each share of our Series D Preferred Stock is (and, when issued, each share of our Series F Preferred Stock will be) convertible at any time, at the option of the holder, into the number of shares of our common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series D Preferred Stock and Series F Preferred Stock is $23.00 (which gives effect to the ten-for-one exchange of common stock in the reincorporation).

        Based on the 2,360 shares of Series C Preferred Stock and the $11.75 conversion price, a total of 2,008,510 shares of our common stock may be issued upon conversion of the outstanding shares of Series C Preferred Stock. Based on the 2,377 shares of Series D Preferred Stock and the $23.00 conversion price, a total of 1,033,478 shares of our common stock may be issued upon conversion of the outstanding shares of Series D Preferred Stock.

        Upon issuance, the 630 shares of Series E Preferred Stock and the 500 shares of Series F Preferred Stock that may be acquired upon exercise of the outstanding warrants held by the holder of our outstanding subordinated notes will be convertible into 536,170 and 217,391 shares of our common stock, respectively (based on a conversion price of $11.75 in the case of the Series E Preferred Stock and $23.00 in the case of the Series F Preferred Stock).

        Mandatory Conversion.    At any time after May 30, 2014, we will have the right to call and convert all (but not less than all) of the outstanding shares of Series C Preferred Stock into shares of common stock if, on the date that we provide the conversion notice to the holders of Series C Preferred Stock, the book value per share of our common stock equals or exceeds $10.629, which amount equals 115% of the book value per share of our common stock as of December 31, 2008 (after giving effect to the ten-for-one exchange of common stock in the reincorporation).

        At any time after March 31, 2015, we will have the right to call and convert all (but not less than all) of the outstanding shares of Series D Preferred Stock into shares of common stock if, on the date that we provide the conversion notice to the holders of Series D Preferred Stock, the book value per share of our common stock equals or exceeds $18.487, which amount equals 115% of the book value per share of our common stock as of December 31, 2009 (giving effect to the ten-for-one exchange of common stock in the reincorporation).

        The mandatory conversion terms of the Series E Preferred Stock and the Series F Preferred Stock are the same the Series C Preferred Stock and Series D Preferred Stock, respectively, except that the date after which we will have the right to call and convert the outstanding shares of such preferred stock will be five years after such shares have been acquired upon exercise of the applicable warrant.

        Reduction of Conversion Price Due to Certain Subsequent Common Stock Issuance.    The conversion price for our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock will be reduced if we at any time while such preferred stock remains outstanding issue

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or sell additional shares of our common stock for a per share price that is less than the applicable conversion price. In such case, the applicable conversion price shall be reduced to a price determined by multiplying the then-current conversion price by a fraction, the numerator of which shall be the sum of the number of shares of common stock outstanding immediately prior to such issuance or sale plus the number of shares of common stock that the aggregate consideration received by us for the total number of additional shares of common stock so issued would purchase at the then-current conversion price, and the denominator of which will be the sum of the number of shares of common stock outstanding immediately prior to such issuance or sale plus the number of such additional shares of common stock so issued.

        Adjustments to Conversion Price for Stock Splits and Combinations and Certain Distributions.    The conversion price for our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock will be proportionally decreased or increased, as applicable, for stock splits, stock combinations, dividends or distributions payable in shares of our common stock.

Common Stock

        Our common stock is not convertible into any other shares of our capital stock.

Preemptive Rights

Preferred Stock

        Holders of our Series C Preferred Stock and Series D Preferred Stock do not, and holders of our Series E Preferred Stock and Series F Preferred Stock will not, have any preemptive rights.

Common Stock

        Holders of our common stock do not have any preemptive rights.

Voting Rights

Preferred Stock

        Holders of our Series C Preferred Stock and Series D Preferred Stock do not, and holders of our Series E Preferred Stock and Series F Preferred Stock will not, have any voting rights, except as follows:

•

holders of at least 75% of the shares of applicable series of preferred stock, each voting as a separate class, must approve: (i) any amendment to our articles to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the applicable series of preferred stock with respect to payment of dividends or distribution of assets on liquidation of the Company; (ii) any amendment to our articles or bylaws that would alter or change the voting powers, preferences or special rights of the applicable series of preferred stock so as to materially and adversely affect such holders (provided, however, that an amendment to authorize, create or increase the authorized amount of any shares of any class or series of stock of the Company ranking on a parity with or junior to the applicable series of preferred stock will not be deemed to materially and adversely affect the voting powers, preferences or special rights of such stock); and (iii) any share exchange, reclassification involving the applicable series of preferred stock or merger or consolidation unless such transaction does not affect the powers, preferences and special rights of the applicable series of preferred stock; and

•

subject to certain conditions and limitations, holders of the outstanding shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, voting together as a single class, have the right to elect two additional directors to our

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board of directors if dividends on the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock have not been paid for three or more dividend periods, whether or not consecutive.

Common Stock

        The holders of our common stock are entitled to one vote per share on any matter to be voted on by the shareholders. The holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors, which means that a plurality of the shares voted shall elect all of the directors then standing for election at a meeting of shareholders at which a quorum is present.

        Our board of directors is divided into three classes of directors, each serving a staggered three-year term. Class I directors hold office initially for a term expiring at the annual meeting of shareholders to be held in 2011, Class II directors hold office initially for a term expiring at the annual meeting of shareholders to be held in 2012 and Class III directors hold office initially for a term expiring at the annual meeting of shareholders to be held in 2013. At each annual meeting following this initial classification, the successors to the class of directors whose terms expire at that meeting will be elected for a term of office to expire at the third succeeding annual meeting after their election and until their successors have been duly elected and qualified.

Redemption

Preferred Stock

        Optional Redemption by the Company.    We may, at our option, redeem all but not less than all of the outstanding shares of our Series C Preferred Stock at any time after May 30, 2014, subject to prior approval of the Federal Reserve Bank of St. Louis, at a price of $10,000 per share plus any declared but unpaid dividends at the date fixed for redemption.

        Additionally, we may, at our option, redeem all but not less than all of the outstanding shares of our Series D Preferred Stock at any time after March 31, 2015, subject to prior approval of the Federal Reserve Bank of St. Louis, at a price of $10,000 per share plus any declared but unpaid dividends at the date fixed for redemption.

        Upon issuance of the Series E Preferred Stock and Series F Preferred Stock, we will have the option to redeem all or any part of the outstanding shares of such stock at any time after the fifth anniversary of the issuance date, subject to prior approval of the Federal Reserve Bank of St. Louis, at a price of $10,000 per share plus any declared but unpaid dividends at the date fixed for redemption.

        Redemption at the Option of the Holder.    The shares of Series C Preferred Stock and Series D Preferred Stock are not, and the shares of the Series E Preferred Stock and Series F Preferred Stock will not be, redeemable at the option of the holders.

Common Stock

        We have no obligation or right to redeem our common stock.

Registration Rights

        We have entered into a Registration Rights Agreement, dated as of January 18, 2011 (as amended by an Amendment Agreement, dated May 11, 2011), with the Richard E. Workman 2001 Trust, the holder of our $16.3 million of subordinated notes and a significant shareholder. Pursuant to the registration rights agreement, the Richard E. Workman 2001 Trust has the right to demand (but only once) that we, at our expense, prepare and file a registration statement to register under the Securities Act the shares of our common stock that it owns; provided that the aggregate amount of common stock

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registered must be at least $5.0 million. Such demand right does not become operative until 180 days following the effective date of the registration statement of which this prospectus is a part. The Richard E. Workman 2001 Trust also has piggyback registration rights, which gives it the right to require us to include in a registration statement filed by us the shares of common stock it owns. The registration rights agreement terminates on the earlier of April 1, 2016, and the date on which no party with rights under the agreement owns any shares of our common stock.

Stock Exchange Listing

Preferred Stock

        Our shares of Series C Preferred Stock and Series D Preferred Stock are not listed, and our shares of Series E Preferred Stock and Series F Preferred Stock will not upon issuance be listed, on a national securities exchange.

Common Stock

        We have applied to list our common stock on the NASDAQ Stock Market under the symbol "MSBI."

Anti-Takeover Considerations and Special Provisions of Our Articles, Bylaws and Illinois Law

        Illinois law and certain provisions of our articles and bylaws could have the effect of delaying or deferring the removal of incumbent directors or delaying, deferring or discouraging another party from acquiring control of us, even if such removal or acquisition would be viewed by our shareholders to be in their best interests. These provisions, summarized below, are intended to encourage persons seeking to acquire control of us to first negotiate with our board of directors. These provisions also serve to discourage hostile takeover practices and inadequate takeover bids. We believe that these provisions are beneficial because the negotiation they encourage could result in improved terms of any unsolicited proposal.

Classified Board of Directors; Noncumulative Voting for Directors

        Our articles provide that our board of directors is classified into three classes of directors, with the members of one class to be elected each year, which prevents a majority of our directors from being removed at a single annual meeting. In addition, our articles specify that, as permitted by the IBCA, directors may be removed during their three-year terms only for "cause." See the discussion below under "—Filling of Board Vacancies; Removals" for the definition of "cause."

        Our articles also provide for noncumulative voting for directors, which may make it more difficult for a non-company nominee to be elected to our board of directors.

Authorized But Unissued Capital Stock

        We have authorized but unissued shares of preferred stock and common stock, and our board of directors may authorize the issuance of one or more series of preferred stock without shareholder approval. These shares could be used by our board of directors to make it more difficult or to discourage an attempt to obtain control of us through a merger, tender offer, proxy contest or otherwise.

Limitation on Right to Call a Special Meeting of Shareholders

        Our bylaws provide that special meetings of shareholders may only be called by our board or our president or by the holders of not less than 20 percent of our outstanding shares of capital stock entitled to vote for the purpose or purposes for which the meeting is being called.

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Advance Notice Provisions

        Our bylaws generally require a shareholder desiring to propose new business at a shareholder meeting to provide advance written notice to our corporate secretary, not less than 90 days nor more than 120 days prior to the date of the meeting, containing certain information about the shareholder and the business to be brought. Only business within the purposes described in the notice of the meeting may be conducted at a special meeting. This provision could delay shareholder actions that are favored by the holders of a majority of our outstanding stock until the next shareholders' meeting.

        Additionally, our bylaws provide that nominations for directors must be made in accordance with the provisions of our bylaws, which generally require, among other things, that such nominations be provided in writing to our corporate secretary, not less than 90 days nor more than 120 days prior to the meeting, and that the notice to our corporate secretary contain certain information about the shareholder and the director nominee.

No Action By Written Consent of Shareholders

        Our articles of incorporation provide that any action required or permitted to be taken by the holders of our capital stock must be effected at a duly called annual or special meeting of the holders of our capital stock and may not be effected by any consent in writing by our shareholders.

Filling of Board Vacancies; Removals

        Any vacancies in our board of directors and any directorships resulting from any increase in the number of directors may be filled by the board, acting by not less than two-thirds of the directors then in office, although less than a quorum, and any directors so chosen will hold office until the next election of the class for which such directors have been chosen and until their successors have been elected and qualified. Furthermore, our articles specify that directors may only be removed by shareholders for "cause," and that removal of a director for cause by our shareholders requires the affirmative vote of the holders of not less than 70% of the outstanding shares of capital stock entitled to vote generally in the election of directors. "Cause" will be deemed to exist only if the director whose removal is proposed has been convicted of a felony or has been adjudged by a court to be liable for gross negligence or willful misconduct in the performance of such director's duty to us and such adjudication is no longer subject to direct appeal.

Amendment of the Bylaws

        Our articles and bylaws provide that our bylaws may be altered, amended or repealed by our board without prior notice to or approval by our shareholders. Accordingly, our board could take action to amend our bylaws in a manner that could have the effect of delaying, deferring or discouraging another party from acquiring control of us.

Supermajority Voting Provisions

        Our articles provide for certain heightened voting thresholds needed to consummate a change in control transaction, such as a merger, the sale of substantially all of our assets or other similar transaction. Accordingly, we will not be able to consummate a change in control transaction or sell all or substantially all of our assets without obtaining the affirmative vote of the holders of shares of our capital stock having at least 70% of the voting power of all outstanding capital stock entitled to vote thereon. Notwithstanding the foregoing, if at least 66²/3% of our directors approve any such transaction, then the supermajority voting provisions set forth in our articles will not apply and only a majority vote of our shareholders will be required to approve such transaction.

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Illinois Law

        Our articles expressly provide that Section 7.85 of the IBCA, which applies to interested shareholder transactions, will apply to the Company. Section 7.85 requires that, except in limited circumstances, a "business combination" with an "interested shareholder" be approved by (i) the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares entitled to vote generally in the election of directors; and (ii) the affirmative vote of a majority of the voting shares of stock held by "disinterested shareholders." An "disinterested shareholder" is a shareholder who is not an "interested shareholder" or an affiliate or an associate of an interested shareholder. An "interested shareholder" means: (i) a person that is the owner of 15% or more of the outstanding voting shares of the Company or is an affiliate or associate of the Company and was the owner of 15% or more of the outstanding voting shares of the Company at any time within the three year period immediately before the date on which it is sought to be determined whether the person is an interested shareholder; and (ii) the affiliates and associates of that person. This provision may have the effect of inhibiting a non-negotiated merger or other business combination involving us, even if such event would be beneficial to our shareholders.

        Notwithstanding the foregoing, the higher vote requirement set forth in Section 7.85 of the IBCA will not be applicable to any transaction if either: (i) the transaction has been approved by 66²/3% of the disinterested directors; or (ii) the transaction satisfies certain fair price and procedure requirements.

Consideration of Non-Shareholder Interests

        Section 8.85 of the IBCA provides that, in discharging their duties, the board of directors, committees of the board, individual directors and individual officers of an Illinois corporation may, in considering the best long term and short term interests of the corporation, consider the effects of any action (including without limitation, action which may involve or relate to a change or potential change in control of the corporation) upon employees, suppliers and customers of the corporation or its subsidiaries, communities in which offices or other establishments of the corporation or its subsidiaries are located, and all other pertinent factors. Our articles incorporate the concept in Section 8.85 of the IBCA and permit our board to consider, in connection with the exercise of its judgment in determining what is in the best interests of the Company and our shareholders when evaluating a potential change in control transaction, a variety of interests beyond the direct financial interests of our shareholders, including the social and economic effects of the transaction on the Company and the other elements of the communities in which we operate.

Limitation on Liability and Indemnification of Officers and Directors

        Our articles provide that, to the fullest extent permitted by Illinois law, our directors will not be liable to us or our shareholders for monetary damages for breach of fiduciary duty in such director's capacity as a director.

        Our articles also provide that, subject to the limits of applicable federal and state banking laws and regulations, we must indemnify each of our directors and officers in accordance with and to the fullest extent permitted by law.

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is IST Shareholder Services.

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SHARES ELIGIBLE FOR FUTURE SALE

Market Information

        Prior to this offering, there has been no established public trading market or publicly available quotations for our common stock. Upon completion of this offering, approximately                        shares of our common stock will be outstanding, or                        shares of common stock if the underwriters' option if exercised in full. Additionally, upon completion of the offering, there will be: (i) a total of 3,041,998 shares of our common stock, in the aggregate, issuable upon conversion of the outstanding shares of Series C Preferred Stock and Series D Preferred Stock; (ii) a total of 753,561 shares of our common stock, in the aggregate, issuable upon conversion of shares of Series E Preferred Stock and Series F Preferred Stock that may be acquired upon exercise of the outstanding warrants held by the holder of our subordinated notes; and (iii)                          shares of our common stock issuable upon exercise of outstanding stock options. We expect that the                        shares of our common stock sold in this offering, or                        shares of our common stock if the underwriters' option is exercised in full, will be freely tradable without restriction under the Securities Act, except for shares held by our "affiliates," as defined in Rule 144 under the Securities Act.

Rule 144

        Pursuant to Rule 144 promulgated under the Securities Act, all shares held by non-affiliates that have been issued and outstanding for more than six months are eligible for resale (and shares held by affiliates are eligible for resale up to the volume limitation for each affiliated holder). Future sales of large numbers of shares into a limited trading market or the concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be. Upon consummation of the offering and subject where applicable to the volume limitation of Rule 144, up to approximately            shares of our common stock could be sold pursuant to Rule 144 immediately following this offering and approximately            shares of our common stock could be sold upon the expiration of the 180-day lock-up period described below.

Registration Statements

        Following the completion of this offering, we intend to file a registration statement on Form S-8 registering the issuance of shares of our common stock issuable upon the exercise of outstanding options and options that may be issued in the future under our equity incentive plan. Shares covered by this registration statement will be available for sale immediately upon issuance, subject to the lock-up arrangements described below.

Lock-Up Arrangements

        In connection with this offering, we, our directors, our executive officers and certain of our shareholders have each agreed to enter into lock-up agreements that restrict the sale of our common stock for a period of 180 days after the date of this prospectus, subject to an extension in certain circumstances. Sandler O'Neill + Partners, L.P., in its sole discretion, may release any of the shares of our common stock subject to these lock-up agreements at any time without notice. See "UNDERWRITING."

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UNDERWRITING

        We are offering the shares of our common stock described in this prospectus in an underwritten offering in which We and Sandler O'Neill + Partners, L.P., as representative of the underwriters for the offering, will enter into an underwriting agreement with respect to the common stock being offered. Subject to the terms and conditions contained in the underwriting agreement, each underwriter named below has severally agreed to purchase the respective number of shares of our common stock set forth opposite its name below:

Name		Number of Shares
Sandler O'Neill + Partners, L.P.
Stifel, Nicolaus & Company, Incorporated
	Total

        The underwriting agreement provides that the underwriters' obligation to purchase shares of our common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:

•

the representations and warranties made by us are true and agreements have been performed;

•

there is no material adverse change in their determination in the financial markets or in our business; and

•

we deliver customary closing documents.

        Subject to these conditions, the underwriters are committed to purchase and pay for all of the shares of our common stock offered by this prospectus, if any such shares are purchased. However, the underwriters are not obligated to take or pay for the shares of our common stock covered by the underwriters' over-allotment option described below, unless and until that option is exercised.

Over-Allotment Option

        We have granted the underwriters an option, exercisable no later than 30 days after the date of the underwriting agreement, to purchase up to an aggregate of                        additional shares of common stock at the public offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus. We will be obligated to sell these shares of common stock to the underwriters to the extent the over-allotment option is exercised. The underwriters may exercise this option only to cover over-allotments, if any, made in connection with the sale of our common stock offered by this prospectus.

Commissions and Expenses

        The underwriters propose to offer our common stock directly to the public at the offering price set forth on the cover page of this prospectus and to dealers at the public offering price less a concession not in excess of $            per share. The underwriters may allow, and the dealers may re-allow, a concession not in excess of $            per share on sales to other brokers and dealers. After the public offering of our common stock, the underwriters may change the offering price, concessions and other selling terms.

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        The following table shows the per share and total underwriting discounts and commissions that we will pay to the underwriters and the proceeds we will receive before expenses. These amounts are shown assuming both no exercise and full exercise of the underwriters' over-allotment option.

	Per share	Total without over-allotment exercise	Total with over-allotment exercise
Public offering price	$	$	$
Underwriting discount	$	$	$
Proceeds to us (before expenses)	$	$	$

        In addition to the underwriting discount, we will reimburse the underwriters for their reasonable out-of-pocket non-legal expenses, up to $35,000, incurred in connection with their engagement as underwriters, regardless of whether this offering is consummated, including, without limitation, marketing, syndication and travel expenses. Further, we will reimburse the underwriters for their legal fees of up to $250,000 incurred in connection with their engagement as underwriters, regardless of whether this offering is consummated. We estimate that the total expenses of this offering, exclusive of the underwriting discounts and commissions, will be approximately $            , and are payable by us.

Offering Price Determination

        Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representative and us. In determining the initial public offering price of our common stock, the representative will consider:

•

the history and prospects for the industry in which we compete;

•

our financial information;

•

our earning prospects;

•

the prevailing securities markets at the time of this offering; and

•

the recent market prices of and the demand for publicly traded stock of comparable companies.

Indemnification

        We have agreed to indemnify the underwriters, and persons who control the underwriters, against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of these liabilities.

Lock-Up Agreement

        We and our executive officers and directors have entered into lock-up agreements with the underwriters. Under these agreements, for a period of 180 days after the date of the underwriting agreement, we and each of these persons may not, without the prior written approval of the underwriters, subject to limited exceptions:

•

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any of our common stock or any securities convertible into or exchangeable or exercisable for our common stock, whether now owned or hereafter acquired or with respect to which such person has or hereafter acquires the power of disposition, or file any registration statement under the Securities Act, with respect to any of the foregoing, or

190

•

enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of our common stock, whether any such swap or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise.

        The 180-day restricted period described in the preceding paragraph will be extended if:

•

during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the 180-day restricted period and ends on the last day of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs, or

•

prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 17-day period beginning on the last day of the 180-day restricted period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the earnings release is issued or the material news or material event relating to us occurs.

Listing on the NASDAQ Stock Market

        We have applied to list our common stock on the NASDAQ Stock Market under the symbol "MSBI."

Stabilization

        In connection with this offering, the underwriters may, but are not obligated to, engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids.

•

Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or mitigating a decline in the market price of the common stock while the offering is in progress.

•

Over-allotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position that may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market.

•

Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.

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•

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on the NASDAQ Stock Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Our Relationship with the Underwriters

        Certain of the underwriters and/or their affiliates have engaged, and may in the future engage, in commercial and investment banking transactions with us in the ordinary course of their business. They have received, and expect to receive, customary compensation and expense reimbursement for these commercial and investment banking transactions.

LEGAL MATTERS

        The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Barack Ferrazzano Kirschbaum & Nagelberg LLP, Chicago, Illinois. Jones Day, Chicago, Illinois, is acting as counsel for the underwriters in connection with this offering.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

        McGladrey & Pullen LLP, or McGladrey, served as our independent registered public accounting firm since 1999, auditing our financial statements for each fiscal year ending since that time, through and including the fiscal year ended December 31, 2008. Subsequent to the audit of our financial statements for the fiscal year ended December 31, 2008, our Audit Committee sought competitive proposals for audit services from a group of independent registered public accounting firms. As a result of this process, our Audit Committee dismissed McGladrey as our independent registered public accounting firm, and approved the engagement of KPMG LLP as our independent registered public accounting firm. On September 9, 2010, we engaged KPMG to audit our financial statements for the fiscal years ended December 31, 2010 and 2009. In addition, in conjunction with this offering, we also retained KPMG to audit our financial statements for the fiscal year ended December 31, 2008 for use in this prospectus.

        For the fiscal year ended December 31, 2008, McGladrey's report on our consolidated financial statements did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal year ended December 31, 2008, and through the date hereof, there have been no reportable events described in Item 304(a)(1)(v) of Regulation S-K, as promulgated by the SEC. Additionally, there were no disagreements with McGladrey on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of McGladrey, would have caused McGladrey to make reference thereto in its report on our financial statements for such year.

        We provided McGladrey with a copy of the foregoing disclosures set forth above and requested that McGladrey review such disclosures and furnish a letter addressed to the SEC stating whether or

192

not McGladrey agrees with such statements. McGladrey's response letter was attached as an exhibit to the registration statement of which this prospectus forms a part.

        During the fiscal years ended December 31, 2010, 2009 and 2008, we did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or regarding any other matters or reportable events described under Item 304(a)(2) of Regulation S-K.

EXPERTS

        The consolidated financial statements of Midland States Bancorp, Inc. and subsidiaries as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010 have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        The statement of assets acquired and liabilities assumed by Midland States Bank, a wholly owned subsidiary of Midland States Bancorp, Inc. dated March 26, 2010 has been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our common stock offered hereby. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits or schedules filed therewith. For further information about us and our common stock that we propose to sell in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or any other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed as an exhibit to the registration statement.

        Following the offering, we will become subject to the full informational requirements of the Exchange Act and will file periodic reports and other information with the SEC. We maintain an Internet site at www.midlandstatesbank.com. Information on, or accessible through, our website is not part of this prospectus.

        You may also read and copy any document we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You can also obtain copies of the documents upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

MIDLAND STATES BANCORP, INC.

Consolidated Financial Statements
As of and for the years ended December 31, 2010, 2009 and 2008
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2010 and 2009	F-3
Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008	F-4
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2010, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-8
Statements of Assets Acquired and Liabilities Assumed
Acquisition of Certain Branches, Assets and Deposit Liabilities of AMCORE Bank, N.A.
Report of Independent Registered Public Accounting Firm	F-66
Statement of Assets Acquired and Liabilities Assumed as of March 26, 2010	F-67
Notes to Statement of Assets Acquired and Liabilities Assumed	F-68

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors
Midland States Bancorp, Inc.:

        We have audited the accompanying consolidated balance sheets of Midland States Bancorp, Inc. and subsidiary ("the Company") as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Midland States Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

St. Louis, Missouri
May 13, 2011

F-2

MIDLAND STATES BANCORP, INC.

Consolidated Balance Sheets

December 31, 2010 and 2009

(In thousands, except for share data)

				2010			2009
Assets
Cash and due from banks				$	57,068		$	83,846
Federal funds sold					88			91
			Cash and cash equivalents		57,156			83,937
Investment securities available-for-sale at fair value ($134,029 and $151,619 covered by FDIC loss-share at December 31, 2010 and 2009, respectively)					391,742			298,662
Loans ($137,041 and $131,740 covered by FDIC loss-share at December 31, 2010 and 2009, respectively)					1,047,144			624,456
Allowance for loan losses					(28,488	)		(19,766	)
			Total loans, net		1,018,656			604,690
Loans held for sale					866			803
Indemnification asset due from FDIC					67,538			72,699
Premises and equipment, net					32,521			10,904
Other real estate owned ($10,904 and $4,319 covered by FDIC loss-share at December 31, 2010 and 2009, respectively)					13,906			5,713
Nonmarketable equity securities					9,630			8,880
Accrued interest receivable					8,495			5,811
Intangible assets					13,235			1,073
Goodwill					7,582			7,582
Cash surrender value of life insurance policies					5,568			5,324
Other assets					7,427			7,674
			Total assets	$	1,634,322		$	1,113,752
Liabilities and Shareholders' Equity
Liabilities:
	Deposits:
		Noninterest bearing		$	173,875		$	64,356
		Interest bearing			1,190,642			853,736
			Total deposits		1,364,517			918,092
Short term borrowings					56,718			13,191
FHLB borrowings					71,279			76,970
Subordinated debt					16,300			11,300
Trust preferred debentures					10,000			10,000
Accrued interest payable					2,755			2,077
Other liabilities					6,218			8,830
			Total liabilities		1,527,787			1,040,460
Commitments and contingencies (note 18)
Shareholders' Equity:
	Preferred stock, Series C, $2 par value, $10,000 liquidation value; 3,130 shares authorized; 2,360 shares issued and outstanding				23,600			23,600
	Preferred stock, Series D, $2 par value, $10,000 liquidation value; 4,400 shares authorized; 2,377 shares issued and outstanding				23,770			—
	Common stock, $0.01 par value; 40,000,000 shares authorized; 5,000,000 shares outstanding at December 31, 2010; $0.20 par value; 15,000,000 shares authorized; 5,000,000 shares outstanding at December 31, 2009				50			1,000
	Capital surplus				9,447			8,221
	Retained earnings				56,949			50,199
	Accumulated comprehensive loss				(180	)		(2,559	)
	Treasury stock, at cost, 835,970 and 856,360 shares at December 31, 2010 and 2009, respectively				(7,101	)		(7,169	)
			Total shareholders' equity		106,535			73,292
			Total liabilities and shareholders' equity	$	1,634,322		$	1,113,752

See accompanying notes to consolidated financial statements.

F-3

MIDLAND STATES BANCORP, INC.

Consolidated Statements of Income

Years ended December 31, 2010, 2009 and 2008

(In thousands, except for share data)

				2010			2009		2008
Interest income:
	Loans:
		Taxable		$	60,352		$	34,068	$	18,485
		Tax exempt			809			494		458
	Investment securities:
		Taxable			16,545			10,646		2,347
		Tax exempt			5,407			4,037		1,029
	Federal funds sold and cash investments				206			156		118
			Total interest income		83,319			49,401		22,437
Interest expense:
	Deposits				19,831			17,392		8,324
	Short term borrowings				439			266		447
	FHLB borrowings				1,990			1,293		478
	Subordinated debt				2,281			1,079		—
	Trust preferred debentures				583			549		639
			Total interest expense		25,124			20,579		9,888
			Net interest income		58,195			28,822		12,549
Provision for loan losses					13,580			20,728		1,051
			Net interest income after provision for loan losses		44,615			8,094		11,498
Noninterest income:
	Service charges on deposit accounts				3,083			1,386		1,046
	Wealth management revenue				2,479			1,212		595
	Mortgage banking revenue				2,224			1,634		431
	Gain on bargain purchase				8,704			25,031		—
	FDIC loss-sharing income				1,043			10,496		—
	(Amortization) accretion of FDIC indemnification asset, net				(1,232	)		1,912		—
	Gain on sales of investment securities				2			399		751
	Other than temporary impairment on investment securities				(252	)		—		—
	Other income				2,826			1,055		614
			Total noninterest income		18,877			43,125		3,437
Noninterest expense:
	Salaries and employee benefits				22,413			11,453		6,280
	Occupancy and equipment				4,612			2,457		1,418
	Data processing				3,020			1,451		964
	FDIC insurance				1,986			1,595		182
	Professional				3,492			1,298		596
	Other real estate owned				1,410			350		297
	Intangible assets amortization				2,082			279		120
	Impairment of customer relationship intangible				—			1,003		—
	Other				7,830			3,724		2,336
			Total noninterest expense		46,845			23,610		12,193
			Income before income taxes		16,647			27,609		2,742
Income taxes					4,577			9,272		603
			Net income		12,070			18,337		2,139
Preferred stock dividends and discount accretion					3,668			2,291		—
			Net income available to common shareholders	$	8,402		$	16,046	$	2,139
Per common share data:
	Basic earnings per common share			$	1.99		$	3.83	$	0.52
	Diluted earnings per common share			$	1.62		$	3.11	$	0.52
	Weighted average common shares outstanding				4,214,820			4,180,620		4,134,710
	Weighted average diluted common shares outstanding				6,824,310			5,665,850		4,134,780

See accompanying notes to consolidated financial statements.

F-4

MIDLAND STATES BANCORP, INC.

Consolidated Statements of Shareholders' Equity and Comprehensive Income

Years ended December 31, 2010, 2009 and 2008

(In thousands, except for share data)

				Preferred stock			Common stock			Capital surplus			Retained earnings			Accumulated other comprehensive (loss) income			Treasury stock			Total
Balances, December 31, 2007				$	—		$	1,000		$	7,582		$	34,980		$	(4	)	$	(7,623	)	$	35,935
	Comprehensive income:
		Net income			—			—			—			2,139			—			—			2,139
		Other comprehensive income, net of tax:
			Change in fair value of investment securities, available-for-sale, net of tax of $530		—			—			—			—			1,090			—			1,090
			Reclassification adjustment for realized gains on sales of investment securities, available for sale, included in net income, net of taxes of $(255)		—			—			—			—			(496	)		—			(496	)
			Change in fair value of interest rate swap in a cash flow hedge, net of tax of $(93)		—			—			—			—			(180	)		—			(180	)
			Total comprehensive income																				2,553
	Excess tax benefit related to disqualified dispositions				—			—			2			—			—			—			2
	Exercise of stock options				—			—			72			—			—			94			166
	Compensation expense for stock option grants				—			—			131			—			—			—			131
	Common dividends declared ($0.30 per share)				—			—			—			(1,194	)		—			—			(1,194	)
	Purchase of treasury stock				—			—			—			—			—			(342	)		(342	)
	Issuance of treasury stock under employee benefit plans				—			—			29			—			—			21			50
Balances, December 31, 2008				$	—		$	1,000		$	7,816		$	35,925		$	410		$	(7,850	)	$	37,301
	Comprehensive income:
		Net income			—			—			—			18,337			—			—			18,337
		Other comprehensive income, net of tax:
			Change in fair value of investment securities, available-for-sale, net of tax of $(1,451)		—			—			—			—			(2,675	)		—			(2,675	)
			Reclassification adjustment for realized gains on sales of investment securities, available for sale, included in net income, net of taxes of $(140)		—			—			—			—			(259	)		—			(259	)
			Change in fair value of interest rate swap in a cash flow hedge, net of tax of $(23)		—			—			—			—			(35	)		—			(35	)
			Total comprehensive income																				15,368
	Exercise of stock options				—			—			168			—			—			558			726
	Compensation expense for stock option grants				—			—			131			—			—			—			131
	Amortization of restricted stock awards				—			—			101			—			—			—			101
	Common dividends declared ($0.42 per share)				—			—			—			(1,772	)		—			—			(1,772	)
	Preferred dividends declared				—			—			—			(1,727	)		—			—			(1,727	)
	Issuance of Series A preferred stock and warrants				9,625			—			482			—			—			—			10,107
	Issuance of Series B preferred stock				509			—			(509	)		—			—			—			—
	Issuance of Series C preferred stock				23,600			—			(100	)		—			—			—			23,500
	Accretion of Series A preferred stock discount				564			—			—			(564	)		—			—			—
	Retirement of Series A and Series B preferred stock				(10,698	)		—			—			—			—			—			(10,698	)
	Purchase of treasury stock				—			—			—			—			—			(20	)		(20	)
	Issuance of treasury stock under employee benefit plans				—			—			132			—			—			143			275
Balances, December 31, 2009				$	23,600		$	1,000		$	8,221		$	50,199		$	(2,559	)	$	(7,169	)	$	73,292
	Comprehensive income:
		Net income			—			—			—			12,070			—			—			12,070
		Other comprehensive income, net of tax:
			Change in fair value of investment securities, available-for-sale, net of tax of $1,205		—			—			—			—			2,252			—			2,252
			Reclassification adjustment for realized gains on sales of investment securities, available for sale, included in net income, net of taxes of $(1)		—			—			—			—			(1	)		—			(1	)
			Change in fair value of interest rate swap in a cash flow hedge, net of tax of $69		—			—			—			—			128			—			128
			Total comprehensive income																				14,449
	Change in par value of Company stock				—			(950	)		950			—			—			—			—
	Compensation expense for stock option grants				—			—			243			—			—			—			243
	Amortization of restricted stock awards				—			—			147			—			—			—			147
	Common dividends declared ($0.39 per share)				—			—			—			(1,652	)		—			—			(1,652	)
	Preferred dividends declared				—			—			—			(3,668	)		—			—			(3,668	)
	Issuance of Series D preferred stock				23,770			—			(93	)		—			—			—			23,677
	Purchase of treasury stock				—			—			—			—			—			(88	)		(88	)
	Issuance of treasury stock under employee benefit plans				—			—			(21	)		—			—			156			135
Balances, December 31, 2010				$	47,370		$	50		$	9,447		$	56,949		$	(180	)	$	(7,101	)	$	106,535

See accompanying notes to consolidated financial statements.

F-5

MIDLAND STATES BANCORP, INC.

Consolidated Statements of Cash Flows

Years ended December 31, 2010, 2009 and 2008

(In thousands)

					2010			2009			2008
Cash flows from operating activities:
	Net income				$	12,070		$	18,337		$	2,139
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan losses				13,580			20,728			1,051
		Depreciation on premises and equipment				1,618			969			605
		Amortization of intangible assets				2,082			279			120
		Amortization (accretion) of FDIC indemnification asset, net				1,232			(1,912	)		—
		FDIC loss-sharing income				(1,043	)		(10,496	)		—
		Amortization of restricted stock awards				147			101			—
		Compensation expense for stock option grants				243			131			131
		Excess tax benefit related to disqualified dispositions				—			—			2
		Increase in cash surrender value of life insurance				(244	)		(242	)		(82	)
		Provision for deferred income taxes				(1,024	)		647			48
		Investment securities amortization (accretion), net				303			(47	)		(36	)
		Other than temporary impairment on investment securities				252			—			—
		Gain on sales of investment securities				(2	)		(399	)		(751	)
		Loss on disposal of premises and equipment				—			44			—
		Loss (gain) on sale of other real estate owned				115			(64	)		30
		Write-down of other real estate owned				1,001			210			207
		Origination of loans held for sale				(79,928	)		(78,309	)		(22,061	)
		Proceeds from sale of loans held for sale				79,865			77,981			21,669
		Gain on bargain purchase				(8,704	)		(25,031	)		—
		Impairment of customer relationship intangible				—			1,003			—
		Net change in operating assets and liabilities:
			Accrued interest receivable			(801	)		665			223
			Accrued interest payable			(575	)		(610	)		(54	)
			Other assets			1,255			(1,074	)		(381	)
			Other liabilities			(3,545	)		6,109			571
				Net cash provided by operating activities		17,897			9,020			3,431
Cash flows from investing activities:
	Investment securities available-for-sale:
		Purchases				(200,197	)		(21,766	)		(59,044	)
		Sales and maturities				92,200			39,050			52,520
		Paydowns				43,415			30,997			7,324
	Sales of non-marketable securities					907			—			—
	Net increase (decrease) in loans					16,420			(80,074	)		(27,495	)
	Purchases of premises and equipment					(10,651	)		(1,391	)		(696	)
	Purchase of bank owned life insurance					—			—			(5,000	)
	Purchases of non-marketable securities					(750	)		(1,482	)		—
	Proceeds from sales of other real estate owned					3,210			2,255			338
	Proceeds from FDIC loss-sharing agreement					21,662			18,350			—
	Net cash acquired in acquisitions					54,636			52,919			(7,486	)
				Net cash provided by (used in) investing activities		20,852			38,858			(39,539	)
Cash flows from financing activities:
		Net (decrease) increase in deposits				(108,057	)		622			26,822
		Net increase (decrease) in short term borrowings				43,527			(17,193	)		1,875
		Proceeds from FHLB borrowings				—			60,000			67,500
		Payments made on FHLB borrowings				(24,493	)		(52,459	)		(63,206	)
		Proceeds from issuance of subordinated debt				5,000			11,300			—
		Proceeds from issuance of Series A preferred stock and warrants				—			10,107			—
		Proceeds from issuance of Series C preferred stock				—			23,500			—
		Payment for retirement of Series A and Series B preferred stock				—			(10,698	)		—
		Proceeds from issuance of Series D preferred stock				23,677			—			—
		Proceeds from exercise of stock options				—			726			166
		Cash dividends paid on preferred stock				(3,579	)		(1,455	)		—
		Cash dividends paid on common stock				(1,652	)		(1,360	)		(1,194	)
		Proceeds from issuance of treasury stock under employee benefit plans				135			275			50
		Purchase of treasury stock				(88	)		(20	)		(342	)
			Net cash (used in) provided by financing activities			(65,530	)		23,345			31,671
			Net (decrease) increase in cash and cash equivalents			(26,781	)		71,223			(4,437	)

See accompanying notes to consolidated financial statements.

F-6

MIDLAND STATES BANCORP, INC.

Consolidated Statements of Cash Flows (Continued)

Years ended December 31, 2010, 2009 and 2008

(In thousands)

			2010		2009		2008
Cash and cash equivalents:
	Beginning of year		$	83,937	$	12,714	$	17,151
	End of year		$	57,156	$	83,937	$	12,714
Supplemental disclosures of cash flow information:
	Cash payments for:
		Interest paid on deposits and borrowed funds	$	24,658	$	19,574	$	9,915
		Income tax paid		11,378		852		822
Supplemental disclosures of noncash investing and financing activities:
	Transfer of loans to other real estate owned		$	11,139	$	2,765	$	763

See accompanying notes to consolidated financial statements.

F-7

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies

Nature of Operations

        Midland States Bancorp, Inc. (the Company, we, our, or us) is a financial and bank holding company headquartered in Effingham, Illinois. As of December 31, 2010, the Company had consolidated assets of $1.6 billion, deposits of $1.4 billion and total shareholders' equity of $106.5 million. Through its wholly-owned bank subsidiary, Midland States Bank (the Bank), the Company delivers a comprehensive range of banking products and services to individuals, businesses, municipalities and other entities through its branch locations in three market areas, central Illinois, northern Illinois and the St. Louis metropolitan area. The Bank is subject to competition from other financial institutions and nonfinancial institutions providing financial products and services. Additionally, the Company is subject to regulations from certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

        Since late 2007, the Company has pursued an aggressive growth strategy, pursuant to which it has completed five acquisitions and grown its balance sheet to $1.6 billion of assets at December 31, 2010. The Company expanded its operations in 2010 with the acquisition of 12 banking offices from AMCORE Bank, N.A. (AMCORE) in March 2010 and a portfolio of loans, investment securities, trust and brokerage account relationships and deposit liabilities associated with those offices, and WestBridge Bank & Trust Company (WestBridge) through the FDIC as receiver in October 2010. In 2009, the Company acquired Waterloo Bancshares, Inc. (Waterloo) and its wholly-owned subsidiary Commercial State Bank of Waterloo in February 2009 and Strategic Capital Bank (Strategic) through the FDIC as receiver in May 2009. In 2008, we acquired the Effingham and Vandalia, Illinois branches of People's National Bank. Their operating results have been included in the consolidated financial statements from their respective dates of acquisition. See Note 2 for additional information about the Company's acquisitions.

Basis of Presentation

        The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (GAAP).

Business Segments

        The Company's financial information is primarily reported and evaluated in two principal lines of business: Banking and Wealth Management. Banking services include various type of deposit accounts; safe deposit boxes; automated teller machines; consumer, mortgage and commercial loans; mortgage loan sales and servicing; letters of credit; and corporate treasury management services. Wealth Management includes trust and fiduciary services, brokerage and retirement planning services.

Principles of Consolidation

        All material intercompany accounts and transactions have been eliminated in consolidation. Assets held for customers in a fiduciary or agency capacity, other than trust cash on deposit with the Bank, are not assets of the Company and, accordingly, are not included in the accompanying consolidated financial statements.

F-8

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

Use of Estimates

        In preparing the consolidated financial statements, we are required to make estimates and assumptions, which significantly affect the amounts reported in the consolidated financial statements. Significant estimates which are particularly susceptible to change in a short period of time include fair value of investment securities, the determination of the allowance for loan losses, estimated fair values of purchased loans, valuation of real estate and other properties acquired in connection with foreclosures or in satisfaction of amounts due from borrowers on loans and the carrying value of the indemnification asset due from FDIC. While Company management uses its best judgment, actual results might differ from those estimates. Current economic and market conditions increase the intricacy of the judgments.

Cash and Cash Equivalents

        Cash and cash equivalents include cash on hand, amounts due from banks, which includes amounts on deposit with the Federal Reserve, interest-bearing deposits with banks or other financial institutions, federal funds sold, and securities purchased under agreements to resell with original maturities of less than 90 days. Generally federal funds are sold for one-day periods, but not longer than 30 days.

Investment Securities

        Investment securities consist of debt securities of the U.S. Treasury, government sponsored entities, states, counties, municipalities, agency mortgage backed securities and covered nonagency mortgage backed securities. Securities transactions are recorded on a trade date basis. The Company classifies its securities as trading, available-for-sale, or held to maturity at the time of purchase. Securities purchased with the intention of recognizing short-term profits or which are actively bought and sold are classified as trading account securities and reported at fair value. Unrealized gains and losses on trading securities are included in earnings. Held to maturity securities are those debt instruments which the Company has the positive intent and ability to hold until maturity. Held to maturity securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. All other securities are classified as available-for-sale. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale securities are reported as a separate component of shareholders' equity until realized.

        On a quarterly basis, the Company makes an assessment to determine whether there have been any events or circumstances to indicate that a security for which there is an unrealized loss is impaired on an other-than-temporary basis. This determination requires significant judgment. A decline in the fair value of any available for sale or held to maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. In estimating other-than-temporary impairment losses, we consider the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; projected cash flows on covered nonagency mortgage backed securities; and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value.

F-9

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

        Purchase premiums are amortized and purchase discounts are accreted over the estimated life of the related investment security as an adjustment to yield using the effective interest method. Unamortized premiums, unaccreted discounts, and early payment premiums are recognized in interest income upon disposition of the related security. Interest and dividend income are recognized when earned. Realized gains and losses from the sale of available for sale securities are included in earnings using the specific identification method.

        Covered investment securities.    Covered investment securities include nonagency mortgage-backed securities acquired from the FDIC as receiver of Strategic. Investment securities covered under loss-sharing agreements with the FDIC are reported exclusive of the expected reimbursement cash flows from the FDIC. Reimbursements can be claimed for realized losses including losses realized on the sale of the securities and losses due to other than temporary impairment. The securities are initially recorded at fair value at the acquisition date and continue to be carried at fair value. Declines in the fair value of available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses, net of a corresponding increase in the estimated FDIC reimbursement, in other than temporary impairment of investment securities on the consolidated statements of income. See the section titled "Indemnification Asset Due from FDIC" for additional information.

        Nonmarketable equity securities include the Bank's required investment in the stock of the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank (FRB). The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

        The Bank is also a member of its regional Federal Reserve Bank. FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans

        As a result of the Waterloo, Strategic and Westbridge acquisitions, we have loans classified as Purchased Credit Impaired (PCI), which are loans acquired with deteriorated credit quality. Loans classified as non-PCI are loans we originated or were purchased without deteriorated credit quality. PCI and non-PCI loans are described more fully below.

        In addition, as a result of the Strategic and WestBridge acquisitions, we have loans that are covered by loss-sharing agreements with the FDIC which we refer to as "covered loans." When we refer to non-covered loans, we are referring to loans not covered by our loss-sharing agreements with the FDIC.

        Covered loans.    We refer to "covered loans" as those loans that we acquired in the Strategic and WestBridge acquisitions for which we will be reimbursed for a substantial portion of any future losses under the terms of the FDIC loss-sharing agreements. Loans covered under loss-sharing or similar credit protection agreements with the FDIC are reported in loans exclusive of the expected

F-10

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

reimbursement cash flows from the FDIC. Covered loans are initially recorded at fair value at the acquisition date. Subsequent decreases in the amount expected to be collected results in a provision for loan losses and a corresponding increase is recorded to the indemnification asset due from FDIC on the consolidated balance sheet. Covered loans are accounted for as either non-PCI loans or PCI loans, as discussed below.

        Non-Purchased Credit Impaired loans.    Non-PCI loans are stated at the principal amount outstanding, net of any unearned discount or unamortized premium. Interest income is recorded on the accrual basis in accordance with the terms of the respective loan. Loans are considered delinquent when principal or interest payments are past due 30 days or more; delinquent loans may remain on accrual status between 30 days and 89 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan's principal balance is deemed collectible. Loans are restored to accrual status when the loans become both well-secured and are in the process of collection. Nonrefundable loan fees and related direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The net deferred fees or costs are recognized as an adjustment to interest income over the contractual life of the loans using the interest method or taken into income when the related loans are paid off or sold. The amortization of loan fees or costs is discontinued when a loan is placed on nonaccrual status.

        Purchased Credit Impaired loans.    We account for loans under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("acquired impaired loan accounting") when we acquire loans deemed to be impaired or when there is evidence of credit deterioration since their origination and it is probable at the date of acquisition that we would be unable to collect all contractually required payments. In connection with the Waterloo, Strategic, and WestBridge acquisitions, we applied acquired impaired loan accounting to $20.9 million, $70.9 million and $34.3 million of the acquired loans, respectively. Revolving credit agreements, such as commercial lines of credit and home equity lines, are excluded from PCI loans.

        For PCI loans, we (i) determined the contractual amount and timing of undiscounted principal and interest payments (the "undiscounted contractual cash flows") and (ii) estimated the amount and timing of undiscounted expected principal and interest payments including expected prepayments (the "undiscounted expected cash flows"). Under acquired impaired loan accounting, the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The nonaccretable difference represents an estimate of the loss exposure of principal and interest related to the PCI loans and such amount is subject to change over time based on the performance of such loans. The carrying value of PCI loans is initially determined as the discounted expected cash flows. The carrying value of PCI loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income on a level-yield basis over the estimated life of the acquired loans.

F-11

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

        The excess of expected cash flows at acquisition over the initial fair value of the PCI loans is referred to as the "accretable yield" and is recorded as interest income over the estimated life of the loans using the effective yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequent to acquisition, the Company aggregates loans into pools of loans with common credit risk characteristics such as loan type and risk rating. Increases in expected cash flows compared to those previously estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in expected cash flows compared to those previously estimated decrease the accretable yield and usually result in a provision for loan losses and the establishment of an allowance for loan losses. As the accretable yield increases or decreases from changes in cash flow expectations, the offset is a decrease or increase to the nonaccretable difference or an addition to accretable yield. The accretable yield is measured at each financial reporting date based on information then currently available and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans.

        Under acquired impaired loan accounting, PCI loans are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, PCI loans that are contractually past due are still considered to be accruing and performing loans as long as there is an expectation that the estimated cash flows will be received. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual loans.

        Impaired loans.    A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include loans on nonaccrual status and performing restructured loans. Income from loans on nonaccrual status is recognized to the extent cash is received and when the loan's principal balance is deemed collectible. Depending on a particular loan's circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. The impairment amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.

        Troubled Debt Restructurings.    A loan is classified as a troubled debt restructuring when we grant a concession to a borrower experiencing financial difficulties. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans restructured at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from restructured loan disclosures in years subsequent to the restructuring if the loans are in compliance with their modified terms. A loan that has been placed on nonaccrual that is subsequently restructured will usually remain on nonaccrual status until the borrower is able to demonstrate repayment performance in compliance with the restructured terms for a sustained period, typically for six months. A restructured loan may return to accrual status sooner based on other significant events or mitigating circumstances. A loan that has not been placed on nonaccrual may be restructured and such loan may remain on accrual status after such restructuring. In these circumstances, the borrower has made payments before and after the restructuring. Generally, this restructuring involves a reduction in the loan interest rate and/or

F-12

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

a change to interest-only payments for a period of time. The restructured loan is considered impaired despite the accrual status and a specific reserve is calculated based on the present value of expected cash flows discounted at the loan's effective interest rate.

        Allowance for Loan Losses.    The allowance for loan losses (allowance) provides for probable losses in the loan portfolio that have been identified with specific customer relationships and for probable losses believed to be inherent in the remainder of the loan portfolio but that have not been specifically identified. The allowance is comprised of specific allowances (assessed for loans that have known credit weaknesses), general allowances based on historical loan loss experience for each loan type and other factors for imprecision in the subjective nature of the general allowance methodology and an allowance for PCI loans. Management evaluates the allowance on a quarterly basis in an effort to ensure the level is adequate to absorb probable losses inherent in the loan portfolio. Our federal and state banking regulators, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Our regulators may require the Company to recognize additions to the allowance based on their judgments related to information available to them at the time of their examinations.

        Acquired non-PCI and PCI loans were recorded at their estimated fair value at the date of acquisition, with the estimated fair value including a component for estimated credit losses. These loans however, may require an allowance subsequent to their acquisition. An allowance may be set aside in the future for acquired non-PCI loans based on our allowance methodology for non-PCI loans. An allowance may be set aside in the future for PCI loans if the PCI loan pools experience a decrease in expected cash flows as compared to those projected at the acquisition date. An allowance related to PCI loans was required at December 31, 2010 and 2009 due to changes in expected cash flows since the date of acquisition.

        In determining the allowance and the related provision for loan losses, the Company considers three principal elements: (i) valuation allowances based upon probable losses identified during the review of impaired commercial, commercial real estate, construction and land development loans, (ii) allocations, by loan classes, on loan portfolios based on the most recent two years of historical loan loss experience and on other factors for the imprecision in the overall allowance methodology and (iii) valuation allowances on PCI loan pools based on decreases in expected cash flows.

        The first element reflects the Company's estimate of probable losses based upon the systematic review of impaired commercial, commercial real estate, construction and land development loans in the non-purchased credit impaired loan portfolios. These estimates are based upon a number of objective factors, such as payment history, financial condition of the borrower and collateral exposure. The Company measures the investment in an impaired loan based on one of three methods: the loan's observable market price; the fair value of the collateral; or the present value of expected future cash flows discounted at the loan's effective interest rate. At December 31, 2010 and 2009 loans in the commercial loan portfolio that were in nonaccrual status were valued based on the fair value of the collateral securing the loan, while the impaired loans in the commercial loan portfolio that were modified under troubled debt restructurings and in an accrual status were valued based on the present value of expected future cash flows discounted at the loan's effective interest rate. It is the Company's general policy to, at least annually, obtain new appraisals on impaired loans that are primarily secured by real estate. When the Company determines that the net realizable value of the collateral is less than

F-13

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

the carrying value of an impaired loan on nonaccrual status and a portion is deemed not collectible, the portion of the impairment that is deemed not collectible is charged off and deducted from the allowance. The remaining carrying value of the impaired loan is classified as a nonperforming loan. When the Company determines that the net realizable value of the collateral is less than the carrying value of an impaired loan but believes it is probable it will recover this impairment, the Company establishes a valuation allowance for such impairment.

        The second element is determined by assigning allocations to non-impaired loans based upon the two-year average of loss experience for each class of loan and other factors for the imprecision inherent in the overall allowance methodology. The other factors that are applied to loan portfolios are an attempt to ensure that the overall allowance appropriately reflects a margin of imprecision inherent in the estimates of loan losses. This component considers the lagging impact of historical charge-off ratios in periods where future loan charge-offs are expected to increase or decrease, trends in delinquencies and nonaccrual loans, the changing portfolio mix in terms of collateral, average loan balance, loan growth and the degree of seasoning in the various loan portfolios. This portion of the allowance also takes into consideration economic conditions within the State of Illinois, Missouri and nationwide, including unemployment levels, industry-wide loan delinquency rates, declining commercial and residential real estate values and historically high inventory levels of residential lots, condominiums and single family houses held for sale.

        The third element relates to PCI loans. PCI loans are aggregated into pools based upon common risk characteristics. On a quarterly basis the expected future cash flow of each pool is estimated based on various factors including changes in property values of collateral dependent loans, default rates and loss severities. Decreases in estimates of expected cash flows within a pool generally result in a charge to the provision for loan losses and a corresponding increase in the allowance allocated to PCI loans for the particular pool. Increases in estimates of expected cash flows within a pool generally result in, first, a reduction in the allowance allocated to PCI loans for the particular pool to the extent an allowance has been previously recorded, and then as an adjustment to the accretable yield for the pool, which will increase amounts recognized in interest income in subsequent periods.

        Covered loans include PCI and non-PCI loans and are subject to our internal and external credit review. If and when credit deterioration occurs subsequent to the acquisition dates, a provision for loan losses for covered loans will be charged to earnings for the full amount without regard to the FDIC loss-sharing agreements. The portion of the loss on covered loans reimbursable from the FDIC is recorded in noninterest income as "FDIC loss-sharing income, net" and increases the FDIC indemnification asset.

F-14

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

Loans Held for Sale

        Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income recorded as a reduction to mortgage banking revenue in the consolidated statements of income.

Premises and Equipment

        Premises, furniture and equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation expense is computed principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the life of the asset or the lease term. Estimated useful lives of premises and equipment range from 10 to 40 years and from 3 to 10 years, respectively. Maintenance and repairs are charged to operating expenses as incurred, while improvements that extend the useful life of assets are capitalized and depreciated over the estimated remaining life.

        In 2010, we began the construction of new corporate office space in Effingham, Illinois. The project is scheduled for completion during the third quarter of 2011. The amount of capitalizable expenses incurred in 2010 related to this project was $5.6 million, including interest of $32,000.

        We periodically review the carrying value of our long-lived assets to determine if an impairment has occurred or whether changes in circumstances have occurred that would require a revision to the remaining useful life. In making such determination, we evaluate the performance, on an undiscounted basis, of the underlying operations or assets which give rise to such amount.

Other Real Estate Owned

        Other real estate owned (OREO) represents properties acquired through foreclosure or other proceedings and is initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost basis. After foreclosure, OREO is held for sale and is carried at the lower of cost or fair value less estimated costs of disposal. Any write-down to fair value at the time of transfer to OREO is charged to the allowance for loan losses. Property is evaluated regularly to ensure the recorded amount is supported by its fair value less estimated costs to dispose. Revenue and expense from the operations of OREO and decreases in valuations are included in other real estate owned expense on the consolidated statements of income.

        Other real estate owned covered under a loss-sharing agreement with the FDIC is reported exclusive of expected reimbursement cash flows from the FDIC. Upon transferring covered loan collateral to covered other real estate owned status, acquisition date fair value discounts on the related loan is also transferred to covered other real estate owned. Fair value adjustments on covered other real estate owned result in a reduction of the covered other real estate carrying amount and a corresponding increase in the estimated FDIC indemnification asset, with the estimated net loss charged against earnings in other real estate owned expense on the consolidated statements of income.

F-15

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

Intangible Assets and Goodwill

        Intangible assets are being amortized over a period ranging from 1 to 10 years using an accelerated method. On a periodic basis, we evaluate events and circumstances that may indicate a change in the recoverability of the carrying value.

        Goodwill and other intangible assets with indeterminable lives are reviewed at least annually for impairment or more often if events or changes in circumstances between tests indicate that carrying amounts may not be recoverable. We conducted our annual impairment test at September 30, 2010 and 2009. No indications of impairment were identified.

Cash Surrender Value of Life Insurance Policies

        We have purchased life insurance policies on the lives of certain officers and key employees and are the owner and beneficiary of the policies. These policies provide an efficient form of funding for long-term retirement and other employee benefits costs. These policies are recorded as cash surrender value of life insurance policies in the consolidated balance sheets at each policy's respective cash surrender value, with changes in fair value recorded in noninterest income in the consolidated statements of income.

Indemnification Asset Due from FDIC

        As part of the Strategic and WestBridge transactions (see Note 2 for further information), the Company entered into loss-share agreements with the FDIC.

        Under the Strategic loss-share agreement, the FDIC is obligated to reimburse the Company for losses with respect to covered assets, which include nonagency mortgage backed securities, certain loans and other real estate owned. Under the terms of the agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on the first $167 million of losses on covered assets and absorb 95% of losses and receive 95% of loss recoveries on covered assets exceeding $167 million. The term for loss-sharing on residential real estate loans is ten years, the term for loss-sharing on nonresidential real estate loans is five years with respect to losses and seven years with respect to recoveries and the term for loss-sharing on investment securities is seven years with respect to losses and ten years with respect to recoveries.

        Under the Westbridge loss-share agreement, the FDIC is obligated to reimburse the Company for losses with respect to covered assets, which include certain loans and other real estate owned. Under the terms of the agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries. The term for loss-sharing on residential real estate loans is ten years and the term for loss-sharing on nonresidential real estate loans is five years with respect to losses and eight years with respect to recoveries.

        An increase in the expected amount of losses on the covered assets, which is primarily due to a decrease in expected cashflows, will increase the indemnification asset by recording FDIC loss-sharing income. Recoveries on previous losses paid to us by the FDIC or increases in expected cash flow will reduce the indemnification asset by a charge to FDIC loss-sharing income. Since the indemnification asset was initially recorded at estimated fair value using a discount rate, a portion of the discount is

F-16

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

recognized as (amortization) accretion of FDIC indemnification asset, net in the consolidated statements of income.

        The Bank submits claims to the FDIC thirty days after each quarter end for losses incurred in the quarter. Claims consist of charge-offs on loans, write-downs on OREO, other than temporary losses on nonagency mortgage-backed securities and expense reimbursements, net of any recoveries. Claims are typically paid by the FDIC within thirty days of submitting the claims. The FDIC indemnification asset, net, is reduced when the payment is received.

Derivative Financial Instruments

        All derivatives are recognized on the consolidated balance sheet as a component of other assets or liabilities at their fair value. On the date the derivative contract is entered into, the derivative is designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability "cash flow" hedge. Changes in the fair value of a derivative that is highly effective as—and that is designated and qualifies as—a cash flow hedge are recorded in accumulated other comprehensive income, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings).

        We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedged transactions. This process includes linking all derivatives that are designated as cash-flow hedges to specific assets and liabilities on the balance sheet or forecasted transactions. We also formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, hedge accounting is prospectively discontinued, as discussed below.

        Hedge accounting is prospectively discontinued when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item (including forecasted transactions); (b) the derivative expires or is sold, terminated, or exercised; (c) the derivative is no longer designated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; or (d) management determines that designation of the derivative as a hedge instrument is no longer appropriate.

        When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the consolidated balance sheet at its fair value, and gains and losses that were in accumulated other comprehensive income will be recognized immediately in earnings. In all other situations in which hedge accounting is discontinued, the derivative will be carried at its fair value on the consolidated balance sheet, with subsequent changes in its fair value recognized in current-period earnings.

Income Taxes

        We file consolidated Federal and State income tax returns, with each organization computing its taxes on a separate return basis. The provision for income taxes is based on income as reported in the consolidated financial statements.

F-17

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

        Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. The deferred tax assets and liabilities are computed based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

        When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. Interest and penalties associated with unrecognized tax benefits are to be classified as additional income taxes in the consolidated statements of income. The Company evaluated its tax positions and concluded that it had taken no uncertain tax positions that require adjustment in the consolidated financial statements. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, states or local tax authorities for the years before 2007.

Stock Compensation Plans

        The Company accounts for share-based compensation using the modified prospective transition method. Under this transition method, compensation cost is recognized in the consolidated financial statements beginning January 1, 2006 for all share-based payments granted after that date and based on prior accounting guidance for all unvested awards granted prior to 2006. Share-based compensation expense for stock options is measured based upon the fair value of these awards, utilizing a Black-Scholes model, as of their grant date. Restricted stock awards are valued based upon their current market price on the date of grant.

        Compensation cost is recognized in a straight line basis over the required service period for the entire award, generally defined as the vesting period.

Comprehensive Income

        Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and on cash flow hedges, are reported as a separate component of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income.

F-18

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

Earnings per Share

        Earnings per share are calculated utilizing the two-class method. Basic earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards using the treasury stock method (outstanding stock options and unvested restricted stock), convertible preferred stock and convertible subordinated debt.

Reincorporation

        Effective December 31, 2010, the Company reincorporated in Illinois through the merger of its then existing Delaware corporation with and into New Midland States, Inc., a newly-formed Illinois corporation (the "Merger"). Immediately following the effective time of the Merger, the name of the Illinois entity was changed to Midland States Bancorp, Inc. The Merger Agreement provided for 10 shares of common stock of the Illinois corporation to be issued for each one share of common stock of the Delaware corporation issued and outstanding immediately prior to the time of the Merger. Additionally, the provisions pertaining to the conversion of the Illinois corporation's Series C Preferred Stock and Series D Preferred Stock into shares of the Illinois corporation's common stock include conversion prices set at 10% of the conversion prices that were included in the Delaware corporation's Series C Preferred Stock and the Series D Preferred Stock to reflect the ten-for-one exchange ratio of the common stock in the Merger. All share and per share data has been restated to reflect this 10 for one stock split.

        Prior to the reincorporation, our authorized capital stock included 1,500,000 shares of common stock, $2.00 par value per share and 150,000 shares of preferred stock, $2.00 par value per share. The authorized capital stock of the new Illinois corporation consists of 40,000,000 shares of common stock, $0.01 par value per share, and 4,000,000 shares of preferred stock, $2.00 par value per share. The change in par value of common stock resulted in a $950,000 transfer from common stock to surplus at December 31, 2010, as reflected on the 2010 consolidated balance sheet.

Reclassifications

        Certain reclassifications have been made to the balances as of December 31, 2009, with no effect on net income, to be consistent with the classifications adopted for December 31, 2010.

Impact of New Financial Accounting Standards

        FASB ASC 860—In June 2009, the Financial Accounting Standards Board (FASB) issued new guidance impacting Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 860, Transfers and Servicing (Statement No. 166—Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140). The new guidance removes the concept of a qualifying special-purpose entity and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire financial asset to an entity

F-19

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The new standard became effective for the Company on January 1, 2010 and did not have a material impact on the Company's consolidated financial position or results of operations. The Company has loan participations, which qualify as participating interests, with other financial institutions. The loan participations convey proportionate ownership rights with equal priority to each participating interest holder, involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder, all cash flows are divided among the participating interest holders in proportion to each holder's share of ownership and no holder has the right to pledge the entire financial asset unless all participating interest holders agree.

        FASB ASC 310—In April 2010, the FASB issued Accounting Standard Update (ASU) No. 2010-18, Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset, impacting FASB ASC 310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality. Under the amendments, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. This update became effective for the Company in its annual financial statements for the year ending December 31, 2010 and did not have a material impact on the Company's consolidated financial statements or results of operations.

        FASB ASC 310—In July 2010, the FASB issued new guidance (ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses) impacting FASB ASC 310-10, Receivables—Overall, requiring expanded disclosures about the credit quality of financing receivables and the allowance for loan losses. Disclosures must be disaggregated by portfolio segment and class and include, among other things, a rollforward of the allowance for loan losses, credit quality indicators, expanded information about past due and impaired loans and the related allowance, an aging of past due loans, and information about troubled debt restructurings. The required disclosures of information as of the end of a reporting period were effective for the Company in its annual financial statements for the year ending December 31, 2010. The new guidance impacts financial statement disclosures but will not have an effect on the Company's consolidated financial condition, results of operations or cash flows.

        FASB ASC 350—In December 2010, the FASB issued an update (ASU No. 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts) impacting FASB ASC 350-20, Intangibles—Goodwill and Other—Goodwill. The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For these reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. This update becomes effective for the Company for annual reporting periods beginning after December 15, 2010. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

F-20

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(1) Summary of Significant Accounting Policies (Continued)

        FASB ASC 805—In December 2010, the FASB issued an update (ASU No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations) impacting FASB ASC 805-10, Business Combinations—Overall. The amendments specify that if an entity presents comparative financial statements, the entity should disclose pro forma information, including pro forma revenue and earnings, for the combined entity as though the business combination that occurred in the current year had occurred as of the beginning of the comparable prior annual reporting period. Supplemental pro forma disclosures should include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This update becomes effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The new guidance impacts financial statement disclosures but will not have an effect on the Company's consolidated financial condition, results of operations or cash flows.

        FASB ASC 860—In May 2011, the FASB issued an update (ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements impacting FASB ASC 860-40, Transfers and Servicing.) Entities that enter into repurchase and similar agreements will be required to account for even more of the transactions as secured borrowings. The amendment changes the assessment of effective control by focusing on the transferor's contractual rights and obligations and removing the criterion to assess its ability to exercise those rights or honor those obligations. This update becomes effective for the Company on a prospective basis for new transfers and modifications of existing transactions as of the beginning of the first interim or annual period beginning on or after December 15, 2011. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

F-21

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(2) Acquisitions

        The following table presents the fair value of assets acquired and liabilities assumed, both tangible and intangible as of the acquisition date for acquisitions completed in 2010 and 2009 (in thousands):

			WestBridge October 15, 2010		AMCORE March 26, 2010		Strategic May 22, 2009		Waterloo February 12, 2009
Assets acquired:
	Cash and cash equivalents		$	6,405	$	48,231	$	48,533	$	12,415
	Investment securities			11,819		15,453		263,141		15,390
	Loans			48,072		407,245		143,112		71,495
	Premises and equipment			15		12,569		—		5,183
	Other real estate owned			4,193		—		3,356		691
	Indemnification asset due from FDIC			13,887		—		78,541		—
	Goodwill			—		—		—		3,770
	Intangible assets			—		14,244		1,304		942
	Accrued interest receivable			149		1,734		3,397		564
	Other assets			191		50		4,810		5,651
		Total assets acquired		84,731		499,526		546,194		116,101
Liabilities assumed:
	Deposits			61,122		493,360		467,531		98,074
	Short term borrowings			—		—		620		2,213
	FHLB borrowings			19,014		—		51,535		7,301
	Accrued interest payable			87		1,166		1,312		303
	Other liabilities			15		789		165		181
		Total liabilities assumed		80,238		495,315		521,163		108,072
		Purchase price							$	8,029
		Gain on bargain purchase	$	4,493	$	4,211	$	25,031	$	—

        On October 15, 2010, Midland States Bank acquired certain assets and certain deposits and other liabilities through the FDIC, as receiver, of WestBridge Bank & Trust Company. The acquisition consisted of assets with an estimated fair value of $84.7 million and liabilities with an estimated fair value of approximately $80.2 million.

        The Bank and the FDIC entered into an agreement under which losses on loans covered under the agreement will be shared. No allowance for loan losses was established related to covered loans acquired at October 15, 2010. The loss-sharing agreement is subject to servicing procedures specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at an estimated fair value of $13.9 million on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, a $4.5 million gain on bargain purchase was recorded in the 2010 consolidated statement of income and a deferred tax liability of $1.7 million was recorded in 2010.

        The determination of the initial fair value of assets acquired and liabilities assumed in the transaction involves a high degree of judgment and complexity. The carrying value of the acquired loans and other real estate and the FDIC indemnification asset reflect management's best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that we realize on these assets could differ materially from the carrying value reflected in these financial statements, based upon the timing and amount of collections on the acquired loans in future periods. To the extent

F-22

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(2) Acquisitions (Continued)

the actual values realized for the acquired loans are different from the estimate, the indemnification asset will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

        On March 26, 2010, the Bank acquired certain assets and assumed certain liabilities of AMCORE Bank, NA and AMCORE Investment Services, Inc. in a purchase transaction. Under the terms of the acquisition, we acquired 12 branch facilities and two stand-alone drive-thru facilities from AMCORE Bank. We also acquired certain trust, brokerage and wealth management assets attributable to the branch locations from AMCORE Investment Services, Inc. We acquired assets with a fair value of approximately $499.5 million and assumed liabilities of approximately $495.3 million. Under the terms of the Branch Sale Agreement, we paid a 1.5% deposit premium and a $1.5 million trust premium to AMCORE. Based upon the acquisition date fair values of the net assets acquired, a $4.2 million gain on bargain purchase was recorded in the 2010 consolidated statement of income and a deferred tax liability of $1.7 million was recorded in 2010.

        No loans purchased in the AMCORE transaction were considered purchased credit impaired loans as we only acquired loans that were performing. The fair value of net assets acquired includes fair value adjustments to certain loans that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. We believe that all contractual cash flows related to these financial instruments will be collected.

        On May 22, 2009, the Bank acquired the banking operations, including substantially all of the assets and deposits and certain other liabilities, of Strategic Capital Bank from the FDIC, as receiver, pursuant to which we acquired assets with a fair value of $546.2 million, including loans with a fair value of $143.1 million, and assumed deposits with a fair value of $467.5 million. Based upon the acquisition date fair values of the net assets acquired, a $25.0 million gain on bargain purchase was recorded in the 2009 consolidated statement of income.

        On February 12, 2009, the Company acquired Waterloo Bancshares, Inc. and its wholly-owned subsidiary, Commercial State Bank of Waterloo, for $8.0 million in cash. The assets acquired of $116.1 million and liabilities assumed of $108.1 million were recorded at fair value. We recorded $3.8 million of goodwill associated with this acquisition.

        On November 14, 2008 we acquired the Effingham and Vandalia, Illinois branch locations, related assets and liabilities and customer base of People's National Bank. The assets acquired and liabilities assumed were recorded at fair value. Cash used in the acquisition was approximately $7.5 million. The acquisition resulted in a $39,000 core-deposit intangible asset which is being amortized over 3 years. The excess of the total acquisition cost over the fair value of the net assets acquired of $2.2 million was recorded as goodwill.

F-23

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(3) Cash and Due From Banks

        The Bank is required to maintain cash reserves based on the level of certain of its deposits. This reserve requirement may be met by funds on deposit with the Federal Reserve Bank and cash on hand. The required balance at December 31, 2010 and 2009 was $25,000.

        The Bank maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Bank has not experienced any losses in such accounts. The Bank believes it is not exposed to any significant credit risk from cash and cash equivalents.

(4) Investment Securities

        Investment securities classified as available for sale as of December 31, 2010 and 2009 are as follows (in thousands):

		2010
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
US Treasury securities		$	52,498	$	33	$	625	$	51,906
Government sponsored entity debt securities			26,497		19		34		26,482
Agency mortgage-backed securities			62,090		814		155		62,749
Covered nonagency mortgage-backed securities			133,058		2,790		1,819		134,029
State and municipal securities			117,925		1,565		2,914		116,576
	Total	$	392,068	$	5,221	$	5,547	$	391,742

		2009
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Government sponsored entity debt securities		$	6,533	$	27	$	15	$	6,545
Agency mortgage-backed securities			25,297		720		42		25,975
Covered nonagency mortgage-backed securities			158,031		461		6,873		151,619
State and municipal securities			112,571		2,631		679		114,523
	Total	$	302,432	$	3,839	$	7,609	$	298,662

        In connection with the May 22, 2009 Strategic acquisition, we acquired $263.1 million of investment securities. Such acquired securities included $178.0 million of nonagency mortgage-backed securities which are covered by a loss-sharing agreement with the FDIC, and $85.1 million of state and municipal obligations.

        Market valuations for our investment securities are provided by independent third parties. The fair values are determined using several sources for valuing fixed income securities. Their techniques include pricing models that vary based on the type of asset being valued and incorporate available, trade, bid and other market information. The market valuation sources include observable market inputs for the majority of our securities and are therefore considered Level 2 inputs for the purpose of determining fair values. The valuation techniques for the covered nonagency mortgage-backed securities are considered Level 3.

F-24

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(4) Investment Securities (Continued)

        Unrealized losses and fair value are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are summarized as follows (in thousands):

			2010
			Less than 12 Months				12 Months or more				Total
			Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Securities available-for-sale:
	US Treasury securities		$	37,321	$	625	$	—	$	—	$	37,321	$	625
	Government sponsored entity debt securities			3,060		34		—		—		3,060		34
	Agency mortgage-backed securities			12,402		140		688		15		13,090		155
	Covered nonagency mortgage-backed securities			9,912		113		45,006		1,706		54,918		1,819
	State and municipal			60,580		2,576		2,168		338		62,748		2,914
		Total	$	123,275	$	3,488	$	47,862	$	2,059	$	171,137	$	5,547

			2009
			Less than 12 Months				12 Months or more				Total
			Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Securities available-for-sale:
	Government sponsored entity debt securities		$	4,000	$	8	$	517	$	7	$	4,517	$	15
	Agency mortgage-backed securities			3,253		42		—		—		3,253		42
	Covered nonagency mortgage-backed securities			121,249		6,873		—		—		121,249		6,873
	State and municipal			18,227		657		691		22		18,918		679
		Total	$	146,729	$	7,580	$	1,208	$	29	$	147,937	$	7,609

        For all of the above investment securities, the unrealized losses are generally due to changes in interest rates and continued financial market stress and unrealized losses are considered to be temporary.

        We evaluate securities for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. In estimating other-than-temporary impairment losses, we consider the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; projected cash flows on nonagency mortgage backed securities; and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value.

        At December 31, 2010 and 2009, 162 and 72 debt securities, respectively, have unrealized losses with aggregate depreciation of 3.14% and 4.89%, respectively, from our amortized cost basis. These unrealized losses relate principally to the fluctuations in the current interest rate environment. In analyzing an issuer's financial condition, we consider whether the securities are issued by the federal

F-25

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(4) Investment Securities (Continued)

government or its agencies and whether downgrades by bond rating agencies have occurred. As we have the ability to hold debt securities for the foreseeable future, no declines are deemed to be other than temporary.

        During 2010, we determined that three investment securities were other than temporarily impaired. Due to a recent downgrade in credit rating and deteriorating cash flows, a municipal security was deemed to be other than temporarily impaired and we recorded a loss of $63,000. In addition, we determined that two nonagency mortgage backed securities were other than temporarily impaired due to deteriorating cash flows and recorded a loss of $946,000 in the consolidated statement of income. This loss was offset by FDIC loss-sharing of 80%, or $757,000.

        Securities with a carrying amount of $207.1 million and $90.2 million at December 31, 2010 and 2009, respectively, were pledged for public deposits and securities sold under agreements to repurchase. In addition, securities with a carrying amount of $37.6 million at December 31, 2010 and $60.6 million at December 31, 2009 were pledged to secure advances from the Federal Home Loan Bank.

        Expected maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary. The amortized cost and fair value of available for sale securities as of December 31, 2010, by contractual maturity, are as follows (in thousands):

	Amortized cost		Fair value
Within one year	$	25,522	$	25,533
One to five years		68,721		68,346
Five to ten years		18,087		18,052
After ten years		84,590		83,033
		196,920		194,964
Agency mortgage-backed securities		62,090		62,749
Covered nonagency mortgage-backed securities		133,058		134,029
	$	392,068	$	391,742

        Gross realized gains from the sale of securities available for sale for the years ended December 31, 2010, 2009 and 2008 were $2,000, $399,000 and $751,000, respectively. There were no gross losses for the years ended December 31, 2010, 2009 and 2008.

F-26

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans

        The following table presents total loans outstanding by portfolio, which includes PCI loans. A summary of loans as of December 31, 2010 and December 31, 2009 follows (in thousands):

		2010		2009
Commercial loan portfolio:
	Commercial	$	199,186	$	123,537
	Commercial real estate		562,812		310,868
	Construction and land development		98,408		93,043
Subtotal			860,406		527,448
Consumer loan portfolio:
	Residential real estate		139,886		89,899
	Consumer		46,852		7,109
Subtotal			186,738		97,008
Total loans		$	1,047,144	$	624,456

        Deferred loan fees of $4.7 million and $2.5 million at December 31, 2010 and 2009 respectively, are included in total loans.

        Loans held for sale, comprised of fixed-rate residential real estate loans, were $866,000 at December 31, 2010 and $803,000 at December 31, 2009. The Company sold residential real estate loans totaling $79.9 million in 2010, $78.0 million in 2009 and $21.7 million in 2008.

        Loans purchased by the Company during 2010 were those acquired in the AMCORE and WestBridge acquisitions, as discussed in Note 2. Loans purchased by the Company in 2009 were those acquired in the Waterloo and Strategic acquisitions, as discussed in Note 2.

        The Company monitors and assesses the credit risk of its loan portfolio using the classes set forth below. These classes also represent the segments by which the Company monitors the performance of its loan portfolio and estimates its allowance for loan losses.

        Commercial—Loans to varying types of businesses, including municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital, operational needs and term financing of equipment. Repayment of such loans is generally provided through operating cash flows of the business. Commercial loans are predominately secured by equipment, inventory, accounts receivable, personal guarantees of the owner and other sources of repayment, although the Company may also secure commercial loans with real estate.

        Commercial real estate—Loans secured by real estate occupied by the borrower for ongoing operations, non-owner occupied real estate leased to one or more tenants and vacant land that has been acquired for investment or future land development.

        Construction and land development—Secured loans for the construction of business properties. Real estate construction loans often convert to a real estate commercial loan at the completion of the construction period. Secured development loans are made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial

F-27

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date.

        Residential real estate—Loans secured by residential properties generally with fixed interest rates of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Residential real estate loans with a loan-to-value ratio of more than 80% generally require private mortgage insurance. Loans whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan.

        Consumer—Loans to consumers primarily for the purpose of home improvements and acquiring automobiles, recreational vehicles and boats. These loans consist of relatively small amounts that are spread across many individual borrowers.

        Commercial, commercial real estate, construction and land development loans are referred to as the Company's commercial loan portfolio, while residential real estate and consumer loans are referred to as the Company's consumer loan portfolio.

        The Bank has extended loans to certain of its directors, executive officers and their affiliates. These loans were made in the ordinary course of business upon normal terms, including collateralization and interest rates prevailing at the time and did not involve more than the normal risk of repayment by the borrower. The aggregate loans outstanding to the directors, executive officers and their affiliates totaled approximately $13.9 million at December 31, 2010 and $11.1 million at December 31, 2009. During 2010 and 2009, there were $5.6 million and $8.3 million, respectively, of new loans and other additions, while repayments and other reductions totaled $2.8 million and $3.2 million, respectively.

Credit Quality Monitoring

        The Company maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally only within the Company's market areas. The Company's lending markets generally consist of communities within Illinois and metro St. Louis.

        The Company has a loan approval process involving underwriting and individual and group loan approval authorities to consider credit quality and loss exposure at loan origination. The loans in the Company's commercial loan portfolio are risk rated at origination based on the grading system set forth below. All loan authority is based on the aggregate credit to a borrower and its' related entities. There is limited loan authority in the field. The Regional Market Presidents have loan authority ranging from $200,000 to $500,000. Three Relationship Managers also have loan authority within this range. Most approvals are handled by Credit Officers with approval authority ranging from $1-2 million. All consumer loans and business loans with exposure less than $300,000 are approved within an underwriting group with designated approval authority to the underwriters. The Company has a Directors Loan Committee, consisting of the CEO, the Chief Credit Officer and three outside directors. The committee meets weekly to consider loans in amounts greater than $2 million for new requests and greater than $3 million for renewals of credits rated 1-4 or renewals of $2 million or greater if the risk rating is greater than 4.

F-28

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The majority of the Company's consumer loan portfolio is comprised of secured loans that are relatively small and are evaluated at origination on a centralized basis against standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Company's collection department for resolution, which generally occurs fairly rapidly and often through repossession and foreclosure. Credit quality for the entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred.

        Loans in the commercial loan portfolio tend to be larger and more complex than those in the consumer loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various individuals within the Company at least quarterly.

        The Company maintains a centralized independent loan review function that monitors the approval process and on-going asset quality of the loan portfolio, including the accuracy of loan grades. The Company also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Company.

Credit Quality Indicators

        The Company uses a seven grade risk rating system to monitor the ongoing credit quality of its commercial loan portfolio. These loan grades rank the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The loan grades also measure the quality of the borrower's management and the repayment support offered by any guarantors. A summary of the Company's loan grades (or, characteristics of the loans within each grade) follows:

        Risk Grades 1-4 (Acceptable Credit Quality)—All loans in risk grades 1-4 are considered to be acceptable credit risks by the Company and are grouped for purposes of allowance for loan loss considerations and financial reporting. The four grades essentially represent a ranking of loans that are all viewed to be of acceptable credit quality, taking into consideration the various factors mentioned above, but with varying degrees of financial strength, debt coverage, management and factors that could impact credit quality. Business credits within risk grades 1-4 range from Risk Grade 1: Prime Quality (factors include: excellent business credit; excellent debt capacity and coverage; outstanding management; strong guarantors; superior liquidity and net worth; favorable loan-to-value ratios; debt secured by cash or equivalents, or backed by the full faith and credit of the U.S. Government) to Risk Grade 4: Acceptable Quality With Care (factors include: acceptable business credit, but with added risk due to specific industry or internal situations).

        Risk Grade 5 (Watch)—A business credit that is not acceptable within the Company's loan origination criteria; cash flow may not be adequate or is continually inconsistent to service current debt; financial condition has deteriorated as company trends/management have become inconsistent; the

F-29

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

company is slow in furnishing quality financial information; working capital needs of the company are reliant on short-term borrowings; personal guarantees are weak and/or with little or no liquidity; the net worth of the company has deteriorated after recent or continued losses; the loan requires constant monitoring and attention from the Company; payment delinquencies becoming more serious; if left uncorrected, these potential weaknesses may, at some future date, result in deterioration of repayment prospects.

        Risk Grade 6 (Substandard)—A business credit that is inadequately protected by the current financial net worth and paying capacity of the obligor or of the collateral pledged, if any; management has deteriorated or has become non-existent; quality financial information is unattainable; a high level of maintenance is required by the Company; cash flow can no longer support debt requirements; loan payments are continually and/or severely delinquent; negative net worth; personal guaranty has become insignificant; a credit that has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The Company still expects a full recovery of all contractual principal and interest payments; however, a possibility exists that the Company will sustain some loss if deficiencies are not corrected.

        Risk Grade 6 also includes business credit accounted for on a nonaccrual basis that has all the weaknesses inherent in a loan classified as risk grade 7 with the added characteristic that the weaknesses are so pronounced that, on the basis of current financial information, conditions, and values, collection in full is highly questionable; a partial loss is possible and interest is no longer being accrued. This loan meets the definition of an impaired loan. The risk of loss requires analysis to determine whether a valuation allowance needs to be established.

        Risk Grade 7 (Doubtful)—A business credit that has all the weaknesses inherent in a loan classified as risk grade 6 and interest is no longer being accrued, but additional deficiencies make it highly probable that liquidation will not satisfy the majority of the obligation; the primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayment; the possibility of loss is likely, but current pending factors could strengthen the credit. This loan meets the definition of an impaired loan. A loan charge-off is recorded when management deems an amount uncollectible; however, the Company will establish a valuation allowance for probable losses, if required.

        The Company considers all loans graded 1-4 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans with risk grades of 5 are considered "watch credits" and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans with risk grades of 6 and 7 are considered problematic and require special care. Further, loans with risk grades of 5-7 are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Company, which includes highly structured reporting of financial and operating data, intensive loan officer intervention and strategies to exit, as well as potential management by the Company's special assets group. Loans not graded are small commercial loans that are monitored by aging status and payment activity.

F-30

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The following table presents the recorded investment of commercial loans (excluding PCI loans) by risk category as of December 31, 2010 (in thousands):

	Commercial		Commercial Real Estate		Construction and Land Development		Total
Risk Grades 1-4	$	167,128	$	454,045	$	49,191	$	670,364
Risk Grade 5		12,463		32,948		5,457		50,868
Risk Grade 6		10,728		29,488		5,340		45,556
Risk Grade 7		—		—		—		—
Not Graded		2,305		11,240		6,452		19,997
Total (excluding PCI)	$	192,624	$	527,721	$	66,440	$	786,785

        The Company evaluates the credit quality of loans in the consumer loan portfolio, based primarily on the aging status of the loan and payment activity. Accordingly, nonaccrual loans, loans past due as to principal or interest 90 days or more and loans modified under troubled debt restructurings of loans past due in accordance with the loans' original contractual terms are considered to be impaired for purposes of credit quality evaluation. The following table presents the recorded investment of consumer loans (excluding PCI loans) based on the credit risk profile of loans that are performing and loans that are impaired as of December 31, 2010 (in thousands):

	Residential Real Estate		Consumer		Total
Performing	$	129,049	$	45,286	$	174,335
Impaired		1,835		1,051		2,886
Total (excluding PCI)	$	130,884	$	46,337	$	177,221

Impaired Loans

        Impaired loans include nonaccrual loans, accruing loans past due 90 days or more as to interest or principal payments and loans modified under troubled debt restructurings. Impaired loans at December 31, 2010 and 2009 do not include $83.1 million and $81.5 million, respectively, of PCI loans as a market yield adjustment was recognized on these loans in interest income. The risk of credit loss on acquired loans was recognized as part of the fair value adjustment at the acquisition date.

F-31

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        A summary of impaired loans, excluding PCI loans, as of December 31, 2010 and 2009 is as follows (in thousands):

		2010		2009
Nonaccrual loans:
	Commercial	$	2,926	$	1,984
	Commercial real estate		18,006		6,451
	Construction and land development		741		681
	Residential real estate		1,835		1,690
	Consumer		1,050		93
Total nonaccrual loans			24,558		10,899
Accruing loans contractually past due 90 days or more as to interest or principal payments:
	Commercial		—		99
	Commercial real estate		—		—
	Construction and land development		—		200
	Residential real estate		—		—
	Consumer		—		5
Total accruing loans contractually past due 90 days or more as to interest or principal payments			—		304
Loans modified under troubled debt restructurings:
	Commercial and commercial real estate		1,711		336
	Consumer		1		—
Total loans modified under troubled debt restructurings			1,712		336
Total impaired loans (excluding PCI)		$	26,270	$	11,539

        There was no interest income recognized on nonaccrual loans during 2010, 2009 and 2008 while the loans were in nonaccrual status. Additional interest income that would have been recorded on these loans had they been current in accordance with their original terms was $1.3 million in 2010, $664,000 in 2009 and $307,000 in 2008. The Company recognized interest income on loans modified under troubled debt restructurings-commercial and commercial real estate of $121,000 in 2010, $18,000 in 2009, and $6,000 in 2008.

        The Company's loans modified under troubled debt restructurings-commercial and commercial real estate generally consist of allowing commercial borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms. These loans are individually evaluated for impairment quarterly and transferred to nonaccrual status when it is probable that any remaining principal and interest payments due on the loan will not be collected in accordance with the contractual terms of the loan. As of December 31, 2010, the Company had no unfunded commitments in connection with troubled debt restructurings.

F-32

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        As of December 31, 2010, there were $172,000 of commercial loans included in loans modified under troubled debt restructurings that were past due 31 to 89 days and none past due 90 days or more.

        The following table presents impaired loans, excluding PCI loans, by portfolio as of December 31, 2010 (in thousands):

		Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While on Impaired Status
Impaired loans with a valuation allowance:
	Commercial	$	1,332	$	1,483	$	560	$	1,945	$	—
	Commercial real estate		9,154		9,435		898		9,603		—
	Construction and land development		—		—		—		—		—
	Residential real estate		53		67		25		56		—
	Consumer		230		245		229		40		—
Subtotal			10,769		11,230		1,712		11,644		—
Impaired loans with no related valuation allowance:
	Commercial		3,265		3,843		—		2,382		118
	Commercial real estate		8,892		11,697		—		9,799		3
	Construction and land development		741		2,246		—		2,070		—
	Residential real estate		1,782		1,847		—		1,880		—
	Consumer		821		842		—		674		—
Subtotal			15,501		20,475		—		16,805		121
Total impaired loans:
	Commercial		4,597		5,326		560		4,327		118
	Commercial real estate		18,046		21,132		898		19,402		3
	Construction and land development		741		2,246		—		2,070		—
	Residential real estate		1,835		1,914		25		1,936		—
	Consumer		1,051		1,087		229		714		—
Total (excludes PCI)		$	26,270	$	31,705	$	1,712	$	28,449	$	121

        The difference between a loan's recorded investment and the unpaid principal balance represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that the full collection of the loan balance is not likely. The difference between the recorded investment and the unpaid principal balance of $5.4 million at December 31, 2010 represents confirmed losses (partial charge-offs).

F-33

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The following table presents a summary of impaired loans between those with and without a valuation allowance as of December 31, 2010 and 2009 (in thousands):

		2010		2009
Impaired loans with a valuation allowance:
	Commercial	$	1,332	$	874
	Commercial real estate		9,154		419
	Construction and land development		—		—
	Residential real estate		53		308
	Consumer		230		—
Subtotal			10,769		1,601
Impaired loans with no related valuation allowance:
	Commercial		3,265		1,546
	Commercial real estate		8,892		6,031
	Construction and land development		741		881
	Residential real estate		1,782		1,382
	Consumer		821		98
Subtotal			15,501		9,938
Total (excludes PCI)		$	26,270	$	11,539
Average recorded investment in impaired loans during the year		$	28,449	$	10,979

        A summary of the valuation allowance on impaired loans as of December 31, 2010 and 2009 is as follows (in thousands):

	2010		2009
Commercial and commercial real estate loans	$	1,458	$	896
Real estate residential loans		25		151
Consumer loans		229		—
Total	$	1,712	$	1,047

F-34

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The following table presents the aging status of the recorded investment in loans by portfolio (excluding PCI loans) as of December 31, 2010 (in thousands):

	31-59 Days Past Due		60-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Nonaccrual Loans		Total Past Due		Current		Total Loans
Commercial	$	243	$	1,634	$	—	$	2,926	$	4,803	$	187,821	$	192,624
Commercial real estate		1,276		870		—		18,006		20,152		507,569		527,721
Construction and land development		2,199		250		—		741		3,190		63,250		66,440
Residential real estate		1,995		644		—		1,835		4,474		126,409		130,883
Consumer		579		236		—		1,050		1,865		44,473		46,338
Total (excluding PCI)	$	6,292	$	3,634	$	—	$	24,558	$	34,484	$	929,522	$	964,006

Allowance for Loan Losses

        Changes in the allowance for the years ended December 31, 2010, 2009 and 2008 are as follows (in thousands):

	2010			2009			2008
Balance at beginning of year:	$	19,766		$	3,718		$	3,232
Provision for loan losses		13,580			20,728			1,051
Branch acquisitions		—			—			255
Loan charge-offs		(5,340	)		(5,039	)		(955	)
Loan recoveries		482			359			135
Net loan charge-offs		(4,858	)		(4,680	)		(820	)
Balance at end of year	$	28,488		$	19,766		$	3,718

F-35

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The following table presents, by loan portfolio, the changes in the allowance for the year ended December 31, 2010 and details regarding the balance in the allowance and the recorded investment in loans as of December 31, 2010 by impairment evaluation method (in thousands):

	Commercial Loan Portfolio									Consumer Loan Portfolio
	Commercial			Commercial Real Estate			Construction and Land Development			Residential Real Estate			Consumer			Total
Changes in allowance for loan losses in 2010:
Beginning balance	$	2,449		$	4,669		$	11,606		$	970		$	72		$	19,766
Provision for loan losses		470			10,276			1,092			369			1,373			13,580
Charge-offs		(474	)		(2,535	)		(1,619	)		(280	)		(432	)		(5,340	)
Recoveries		402			16			—			15			49			482
Ending balance	$	2,847		$	12,426		$	11,079		$	1,074		$	1,062		$	28,488
Allowance for loan losses balance at December 31, 2010 attributable to:
Loans individually evaluated for impairment		560			898			—			25			229			1,712
Loans collectively evaluated for impairment		1,767			8,067			752			829			816			12,231
Loans acquired with deteriorated credit quality(1)		520			3,461			10,327			220			17			14,545
Total	$	2,847		$	12,426		$	11,079		$	1,074		$	1,062		$	28,488
Recorded investment (loan balance) at December 31, 2010:
Loans individually evaluated for impairment		2,415			17,212			—			53			36			19,716
Loans collectively evaluated for impairment		190,209			510,509			66,440			130,831			46,301			944,290
Loans acquired with deteriorated credit quality(1)		6,562			35,091			31,968			9,002			515			83,138
Total	$	199,186		$	562,812		$	98,408		$	139,886		$	46,852		$	1,047,144

(1)

Loans acquired with deteriorated credit quality were originally recorded at fair value at the acquisition date and the risk of credit loss was recognized at that date based on estimates of expected cash flows.

F-36

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

Purchased Credit Impaired (PCI) Loans

        Purchased loans acquired in a business combination, including loans purchased in our FDIC-assisted transactions, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. PCI loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include factors such as past due and nonaccrual status. The difference between contractually required principal and interest at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in impairment, which is recorded as provision for loan losses in the consolidated statements of income. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income. Further, any excess cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

        Changes in the accretable yield for purchased loans were as follows for the years ended December 31, 2010 and 2009 (in thousands):

		2010			2009
Balance at beginning of period		$	21,100		$	—
Additions due to acquisitions:
	Waterloo		—			6,697
	Strategic		—			5,637
	WestBridge		4,538			—
Accretion			(5,878	)		(2,941	)
Cash flow net additions			727			8,154
Reclassification from non-accretable to accretable			2,658			3,553
Balance at end of period		$	23,145		$	21,100

        The fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral. Due to the loss-share agreements with the FDIC, the Bank recorded a receivable from the FDIC equal to the present value of the corresponding reimbursement percentages on the estimated losses embedded in the loan portfolio.

F-37

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The carrying amount of covered loans and other purchased non-covered loans as of December 31, 2010 and 2009 consisted of purchased credit-impaired loans and non-credit-impaired loans as shown in the following table (in thousands):

	December 31, 2010						December 31, 2009
	Non- Purchased Credit- Impaired Loans		Purchased Credit- Impaired Loans		Total		Non- Purchased Credit- Impaired Loans		Purchased Credit- Impaired Loans		Total
Covered loans:(1)
Commercial	$	19,373	$	6,208	$	25,581	$	21,175	$	2,338	$	23,513
Commercial real estate		32,161		33,485		65,646		32,549		25,237		57,786
Construction and land development		4,448		30,747		35,195		5,714		39,603		45,317
Residential		5,302		4,385		9,687		4,436		69		4,505
Consumer		579		353		932		619		—		619
Total covered loans		61,863		75,178		137,041		64,493		67,247		131,740
Non-covered loans:(2)
Commercial		173,251		354		173,605		98,167		1,857		100,024
Commercial real estate		495,560		1,606		497,166		250,572		2,510		253,082
Construction and land development		61,992		1,221		63,213		45,502		2,224		47,726
Residential		125,581		4,617		130,198		78,088		7,306		85,394
Consumer		45,759		162		45,921		6,164		326		6,490
Total non-covered loans		902,143		7,960		910,103		478,493		14,223		492,716
Total loans	$	964,006	$	83,138	$	1,047,144	$	542,986	$	81,470	$	624,456

⁽¹⁾

Covered loans include loans from Strategic and WestBridge.

⁽²⁾

Non-covered loans include loans from Waterloo and AMCORE.

        Changes in the FDIC indemnification asset were as follows for the years ended December 31, 2010 and 2009 (in thousands):

		2010			2009
Balance at beginning of period		$	72,699		$	—
Addition due to acquisitions
	Strategic		—			78,541
	WestBridge		13,887			—
(Amortization) accretion			(1,232	)		1,912
Claims received			(21,662	)		(18,350	)
Additions due to changes in expected cash flows			3,846			10,596
Balance at end of period(1)		$	67,538		$	72,699

⁽¹⁾

Included in the FDIC indemnification asset is $40.5 million of claims submitted for the fourth quarter 2010 and $4.6 million of claims submitted for the fourth quarter 2009.

F-38

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(5) Loans (Continued)

        The following table presents information regarding the contractually required payments receivable, the cash flows expected to be collected, and the estimated fair value of the loans acquired in the Waterloo, Strategic and WestBridge transactions, as of the closing date of the transaction (in thousands):

		Waterloo February 12, 2009				Strategic May 22, 2009				Westbridge October 15, 2010
		Purchased Credit- Impaired Loans		Purchased Non-Credit- Impaired Loans		Purchased Credit- Impaired Loans		Purchased Non-Credit- Impaired Loans		Purchased Credit- Impaired Loans		Purchased Non-Credit- Impaired Loans
Contractually required payments (principal and interest):
	Commercial	$	3,481	$	12,206	$	14,778	$	30,308	$	7,043	$	6,969
	Commercial real estate		1,828		5,041		45,375		38,147		24,317		2,540
	Construction and land development		6,563		5,492		60,551		7,317		16,649		2,757
	Residential real estate		26,349		49,284		7,487		10,302		7,177		4,079
	Consumer		802		1,439		—		1,202		531		806
Total			39,023		73,462		128,191		87,276		55,717		17,151
Cash flows expected to collected (principal and interest):
	Commercial		2,654		11,825		3,002		28,656		5,155		6,425
	Commercial real estate		1,470		4,938		32,440		34,032		16,485		2,372
	Construction and land development		4,731		4,794		38,566		6,535		11,717		2,266
	Residential real estate		18,075		48,700		2,541		9,945		5,083		3,811
	Consumer		663		1,378		—		1,146		402		787
Total			27,593		71,635		76,549		80,314		38,842		15,661
Fair value of loans acquired:
	Commercial		2,050		8,791		2,784		25,485		4,898		6,230
	Commercial real estate		1,064		4,132		29,749		30,480		14,045		2,286
	Construction and land development		4,210		4,170		36,037		6,046		10,515		2,068
	Residential real estate		12,970		32,255		2,342		9,072		4,490		2,413
	Consumer		602		1,251		—		1,117		356		771
Total		$	20,896	$	50,599	$	70,912	$	72,200	$	34,304	$	13,768

        These amounts were determined based upon the estimated remaining life of the underlying loans, which include the effects of estimated prepayments. Both PCI and non-PCI loans were valued based on estimated cash flows. No loans purchased in the AMCORE transaction were purchased credit impaired as we only acquired loans that were performing.

F-39

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(6) Premises and Equipment

        A summary of premises and equipment as of December 31, 2010 and 2009 is as follows (in thousands):

		2010			2009
Land		$	4,481		$	1,434
Buildings and improvements			27,380			9,615
Furniture and equipment			9,946			7,849
	Total cost		41,807			18,898
Accumulated depreciation			(9,286	)		(7,994	)
	Net premises and equipment	$	32,521		$	10,904

        Depreciation expense for the years ended December 31, 2010, 2009 and 2008 was $1.6 million, $1.0 million and $605,000, respectively.

(7) Goodwill and Intangible Assets

        The following table shows the change in the carrying amount of goodwill for the years ended December 31, 2010 and 2009 (in thousands):

	2010		2009
Balance at beginning of period	$	7,582	$	3,812
Additions from business combinations		—		3,770
Balance at end of period	$	7,582	$	7,582

        We completed our most recent annual goodwill impairment test as of September 30, 2010 and determined that no impairment existed as of this date. In 2009, we recorded $3.8 million of goodwill associated with the acquisition of Waterloo Bancshares, Inc.

        The Company has other intangible assets consisting of core deposit and trust relationship intangibles. The following table presents changes in the carrying amount of other intangible assets as of December 31, 2010, 2009 and 2008 (in thousands):

		Customer Relationship Intangible			Core Deposit Intangible			Net Intangible
Balance at December 31, 2007		$	—		$	190		$	190
	Other intangibles from business combinations		—			39			39
	Amortization expense		—			(120	)		(120	)
Balance at December 31, 2008			—			109			109
	Other intangibles from business combinations		1,031			1,215			2,246
	Amortization expense		(28	)		(251	)		(279	)
	Impairment		(1,003	)		—			(1,003	)
Balance at December 31, 2009			—			1,073			1,073
	Other intangibles from business combinations		2,476			11,768			14,244
	Amortization expense		(248	)		(1,834	)		(2,082	)
Balance at December 31, 2010		$	2,228		$	11,007		$	13,235

F-40

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(7) Goodwill and Intangible Assets (Continued)

        In the first quarter of 2010, we recorded $14.2 million of core deposits and trust relationship intangibles associated with the acquisition of AMCORE. The weighted average amortization period of these assets is 9.5 years. In 2009, we recorded core deposit intangibles of $942,000 associated with the acquisition of Waterloo and $273,000 with the acquisition of Strategic. In addition, we recorded $1.0 million of trust relationship intangibles associated with the acquisition of Strategic. In 2009, as a result of the departure of two key principals, we assessed the trust relationship intangible asset for impairment and recorded a $1.0 million impairment charge.

        Estimated amortization expense for the future years is as follows (in thousands):

			Amount
Year ending December 31,
	2011		$	2,497
	2012			2,254
	2013			2,019
	2014			1,783
	2015			1,546
	Thereafter			3,136
		Total	$	13,235

(8) Deposits

        Deposits are classified as of December 31, 2010 and 2009 as follows (in thousands):

			2010		2009
Non interest bearing demand			$	173,875	$	64,356
Interest bearing:
	NOW			210,937		66,750
	Money market			313,741		211,095
	Savings			74,805		23,883
	Time			591,159		552,008
		Total deposits	$	1,364,517	$	918,092

        Included in time deposits are time certificates of $100,000 or more and brokered certificates of deposits of $146.6 million and $159.5 million as of December 31, 2010, respectively and $108.0 million and $286.7 million as of December 31, 2009, respectively.

F-41

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(8) Deposits (Continued)

        As of December 31, 2010, the scheduled maturities of time deposits are as follows (in thousands):

		Amount
Year ending December 31,
	2011	$	397,573
	2012		97,411
	2013		43,350
	2014		12,668
	2015		14,094
	2016 and thereafter		26,063
		$	591,159

(9) Short-Term borrowings

        The following table presents the distribution of our short-term borrowings and related weighted average interest rates for each of the years ended December 31, 2010 and 2009 (in thousands):

		2010
		Federal funds purchased			Repurchase agreements			Other short-term borrowings			Total
Outstanding at year-end		$	—		$	56,718		$	—		$	56,718
Average amount outstanding			33			38,322			225			38,580
Maximum amount outstanding at any month end			—			65,221			—			65,221
Weighted average interest rate:
	During year		1.00	%		1.14	%		0.82	%		1.14	%
	End of year		—			0.88			—			0.88

		2009
		Federal funds purchased			Repurchase agreements			Other short-term borrowings			Total
Outstanding at year-end		$	—		$	13,191		$	—		$	13,191
Average amount outstanding			83			18,088			26			18,197
Maximum amount outstanding at any month end			—			21,586			—			21,586
Weighted average interest rate:
	During year		0.78	%		1.47	%		0.50	%		1.46	%
	End of year		—			1.54			—			1.54

        The Bank has no unsecured federal funds lines of credit as of December 31, 2010.

        Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities.

        Other short-term borrowings consist of advances from the Federal Reserve Discount Window. The Bank established lines of credit of $22.3 million and $17.9 million at December 31, 2010 and 2009, respectively, from the Federal Reserve Discount Window. The lines are collateralized by a collateral

F-42

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(9) Short-Term borrowings (Continued)

agreement with respect to a pool of commercial real estate loans totaling $41.4 million and $38.0 million, respectively. There were no outstanding advances at December 31, 2010 and 2009.

(10) Other Borrowings

        The following table summarizes the Company's and its subsidiaries' other borrowings as of December 31, 2010 and 2009 (in thousands):

		2010		2009
Midland States Bancorp
	Subordinated debt (fixed interest rate 15%) maturing April 1, 2020	$	11,300	$	11,300
	Subordinated debt (fixed interest rate 12%) maturing April 1, 2020		5,000		—
	Trust preferred debentures (variable interest rate equal to LIBOR plus 2.75%, which was 3.05% and 3.01% at December 31, 2010 and 2009, respectively) maturing April 23, 2034		10,000		10,000
Midland States Bank
	Federal Home Loan Bank advances (fixed rate, fixed term, at rates from 2.07% to 3.92%, averaging 2.66% and 2.73% in 2010 and 2009, respectively) maturing through July 2014		55,000		60,450
	Federal Home Loan Bank advances (putable fixed rate, at rates from 4.02% to 4.09%, averaging 4.07%) maturing January 2016 through November 2016		16,193		16,405
	Federal Home Loan Bank structured repayment, fixed rate maturing January 2013, at 4.68%		86		115
Total other borrowings		$	97,579	$	98,270

        The fixed rate, fixed term Federal Home Loan Bank advances are payable at maturity, with a prepayment penalty. The putable fixed rate advances may be called by the Federal Home Loan Bank at its option at certain dates each quarter.

        The Company's advances from the Federal Home Loan Bank are collateralized by a blanket collateral agreement of qualifying mortgage and home equity line of credit loans and certain commercial loans and securities totaling approximately $107.9 million and $112.2 million at December 31, 2010 and 2009, respectively.

        Payments over the next five years are as follows:

	Amount
2011	$	5,000
2012		25,000
2013		86
2014		25,000
2015		—
Thereafter		16,193
	$	71,279

        On May 29, 2009, the Company issued $11.3 million of subordinated debt. A portion of this debt may be converted to Series C Preferred Stock at the option of the holder at any time prior to April 1, 2016. Any non converted portion may be redeemed at par by the Company on or after July 1, 2013. The interest rate is fixed at 15% for the term of the note, which matures on April 1, 2020.

F-43

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(10) Other Borrowings (Continued)

        On March 31, 2010, the Company issued $5.0 million of convertible subordinated debt. This debt may be converted to Series D Preferred Stock at the option of the holder at any time prior to April 1, 2016. Any non-converted portion may be redeemed at par by the Company on or after April 1, 2016. The interest rate is fixed at 12% for the term of the note, which matures on April 1, 2020.

        On December 31, 2010, we agreed to amend and restate the credit agreement pursuant to which the subordinated debt was issued to modify certain provisions to ensure that the subordinated debt satisfied the criteria for Tier 2 capital treatment under Federal Reserve regulations. The principal amount of and interest rate on the subordinated debt remained unchanged. The maturity date of both subordinated notes is April 1, 2020. The 2009 subordinated debt may be redeemed by us, in whole or in part, at any time on or after July 1, 2013. The 2010 subordinated debt may be redeemed by us, in whole or in part, at any time on or after April 1, 2016. As part of the amendment process, we also enhanced our right to require the investor to exercise the warrants in certain circumstances, as discussed below.

        In connection with the subordinated debt, we issued a warrant to acquire up to 630 shares of our Series C Preferred Stock at an exercise price of $10,000 per share and a warrant to acquire up to 500 shares of our Series D Preferred Stock at an exercise price of $10,000 per share. Prior to July 1, 2013, payment of the exercise price pursuant to the Series C warrant may only be made by exchanging the principal amount of the 2009 subordinated debt. Between July 1, 2013 and expiration, payment of the exercise price pursuant to the Series C Warrant may be made either in cash or by exchanging the principal amount of the 2009 subordinated debt. With respect to the Series D warrant, payment of the exercise price may only be made by exchanging the principal amount of the 2010 subordinated note. Both warrants have an expiration date of April 1, 2016.

        On December 31, 2010, we also entered into agreements with the investor, which requires the exercise of the warrants to acquire shares of our Series C Preferred Stock and Series D Preferred Stock upon the investor's receipt of a notice of non-objection from the Federal Reserve with respect to a Change in Bank Control Act (CBCA) application, which would enable the investor to beneficially own 10% or more (but not more than 24.9%) of the outstanding shares of our common stock. Under these agreements, we also have the right to require the investor to exercise the warrants up to the maximum extent possible without causing the investor or any affiliates to be deemed, for purposes of the BHCA or the CBCA, to own 10% or more of our outstanding shares of common stock.

        On March 26, 2004, Midland States Preferred Securities Trust, a statutory trust under the Delaware Statutory Trust Act, was formed by the Company. The Trust issued a pool of $10.0 million of floating rate Cumulative Trust Preferred Debentures with a liquidation amount of $1,000 per security. The Company issued $10.0 million of subordinated debentures to the Trust in exchange for ownership of all the common securities of the Trust. The Company is not considered the primary beneficiary of this Trust, therefore the trust is not consolidated in the Company's financial statements, but rather the subordinated debentures are shown as a liability. The Company's investment in the common stock of the trust was $310,000 and is included in other assets.

        The debentures will mature on April 23, 2034. The debentures, net assets of the Trust, and the common securities issued by the Trust are redeemable in whole or in part on dates each quarter at the redemption price plus interest accrued to the redemption date, as specified in the trust indenture

F-44

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(10) Other Borrowings (Continued)

document. The debentures are also redeemable in whole or in part from time to time upon the occurrence of "special events" defined within the indenture document. Subject to certain exceptions and limitations, the Company may, from time to time, defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the related Debentures, and with certain exceptions, prevent the Company from declaring or paying cash distributions on common stock or debt securities that rank pari passu or junior to the subordinated debenture.

        The subordinated debentures have a variable rate of interest equal to the London Interbank Offering Rate (LIBOR) plus 2.75%, which was 3.05% at year end 2010. Interest is payable quarterly.

(11) Income Taxes

        The components of income taxes for the years ended December 31, 2010, 2009 and 2008 are as follows (in thousands):

			2010			2009		2008
Federal:
	Current		$	4,269		$	7,083	$	420
	Deferred			(721	)		533		50
State:
	Current			1,332			1,542		135
	Deferred			(303	)		114		(2	)
		Total income tax expense	$	4,577		$	9,272	$	603

        Our income tax expense differed from the statutory federal rate of 35% for the years ended December 31, 2010, 2009 and 2008 as follows (in thousands):

			2010			2009			2008
Expected income taxes			$	5,827		$	9,663		$	960
Less income tax effect of:
	Tax exempt interest			(2,176	)		(1,586	)		(516	)
	Interest expense disallowance			143			118			66
	State tax, net of federal benefit			669			1,076			87
	Other			114			1			6
		Actual tax expense	$	4,577		$	9,272		$	603

F-45

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(11) Income Taxes (Continued)

        The net deferred tax assets in the accompanying consolidated balance sheets as of December 31, 2010 and 2009 include the following amounts of deferred tax assets and liabilities (in thousands):

			2010		2009
Assets:
	Allowance for loan losses		$	10,966	$	7,435
	Unrealized loss on securities			161		1,435
	Nonaccrual interest			—		78
	Accrued bonus			330		234
	Intangibles			2,497		6
	Loans acquired in FDIC assisted transactions			16,431		15,413
	Investments acquired in FDIC assisted transactions			9,085		9,085
	OREO acquired in FDIC assisted transactions			3,670		3,034
	Loans			517		1,525
		Deferred tax assets		43,657		38,245
Liabilities:
	Premises and equipment			1,008		210
	Federal Home Loan Bank stock dividends			165		165
	Deferred gain on FDIC assisted transactions			4,068		5,085
	Indemnification asset due from FDIC			36,003		30,593
	Deferred loan fees, net of costs			434		120
	Other, net			368		211
		Deferred tax liabilities		42,046		36,384
		Net deferred tax assets	$	1,611	$	1,861

        At December 31, 2010 and 2009, the accumulation of prior year's earnings representing tax bad debt deductions was approximately $867,000. If these tax bad debt reserves were charged for losses other than bad debt losses, the Company would be required to recognize taxable income in the amount of the charge. It is not expected that such tax-restricted retained earnings will be used in a manner that would create federal income tax liabilities.

        The Company had available at December 31, 2010 approximately $107,000 of unused Federal net operating loss carryforwards that may be applied against future taxable income through 2028 which were acquired in the Waterloo acquisition. Utilization of the net operating loss and carryforwards are subject to annual limitations set forth in Section 382 of the Internal Revenue Code.

        We had no unrecognized tax benefits as of December 31, 2010 and 2009, and did not recognize any increase of unrecognized benefits during 2010 relative to any tax positions taken during the year.

        Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in other income or expense; no such accruals existed as of December 31, 2010, 2009 and 2008.

F-46

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(11) Income Taxes (Continued)

        Based on our taxpaying history and estimates of taxable income over the years in which the items giving rise to the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences.

(12) Retirement Plans

        We have a 401k and profit sharing defined contribution plan covering substantially all of our employees. The contribution to the plan for the profit sharing contribution is determined by the Board of Directors. We contributed approximately $485,000, $469,000 and $115,000 to the plan for the profit sharing contribution for the years ended December 31, 2010, 2009 and 2008, respectively. Amounts contributed in 2010, 2009 and 2008 were accrued at their respective year ends and paid in the subsequent year. The 401k component of the plan allows participants to defer a portion of their compensation ranging from 1% to 15%. Such deferral accumulates on a tax deferred basis until the employee withdraws the funds. We match 50% of employee contributions up to 6% of compensation. Total expense recorded for our match was $397,000, $170,000 and $140,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

        Certain directors and executive officers participate in a deferred compensation agreement. We match 25% of the amount deferred by the directors. The directors vest in the match 25% a year. We have accrued the liability for these agreements which totaled approximately $779,000 and $601,000 at December 31, 2010 and 2009, respectively. We recognized expense of approximately $191,000, $146,000 and $135,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

(13) Stock Based Compensation

        We have a stock option plan which may grant options to purchase common stock at a price that shall equal, but may exceed, fair market value on the date of the grant. The options are granted by the compensation committee comprising members of the Board.

        Options for up to 400,000 shares have been granted to key employees under the 1999 Stock Option Plan approved by the Board of Directors March 9, 1999. The options under the Stock Option Plan become exercisable at a rate of 25% per year after the grant date. The options expire 10 years from the date of grant.

        On April 7, 2008 the Board of Directors approved the Midland States Bancorp, Inc. Omnibus Stock Ownership and Long Term Incentive Plan, which made available an additional 400,000 shares to be issued to key employees. The granting of awards can be in the form of options to purchase common shares of stock, restricted stock or stock appreciation rights. The other terms of the Omnibus Plan match the 1991 Stock Option Plan.

        On October 18, 2010, the Board of Directors approved the Midland States Bancorp, Inc. 2010 Long-Term Incentive Plan (2010 Incentive Plan), which made available an additional 1,500,000 shares to be issued to selected employees and directors of, and service providers to, the Company or its subsidiaries. The granting of awards can be in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other awards. The 2010 Incentive Plan replaced the prior plans.

F-47

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(13) Stock Based Compensation (Continued)

        The fair value of each grant is estimated at the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2010			2009			2008
Dividend yield		2.32	%		2.36	%		2.02	%
Expected volatility		13.80			15.64			14.06
Risk free interest rate		2.73			3.26			3.28
Expected life		6.25 years			7 years			7 years

        The summary of our stock option plan and changes during the years ending December 31, 2010 and 2009 is as follows:

		2010							2009
		Shares			Weighted average exercise price		Weighted average remaining contractual life		Shares			Weighted average exercise price		Weighted average remaining contractual life
Options outstanding, beginning of year			428,920		$	13.65				341,220		$	12.48
	Options granted		195,010			17.00				247,040			13.20
	Options exercised		—			—				(90,720	)		8.01
	Options forfeited		(78,060	)		14.25				(68,620	)		13.78
Options outstanding, end of year			545,870		$	13.81		8.3 yrs		428,920		$	13.65		8.7 yrs.
Options exercisable			180,610		$	13.82				90,390		$	13.89
Weighted average fair value of options granted during the year					$	2.17						$	2.15

        The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2010 was $809,000 and $665,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was zero, $616,000 and $57,000, respectively. As of December 31, 2010 and 2009, there was $629,000 and $502,000, respectively, of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under our stock option plans. That cost is expected to be recognized over a period of 2.9 years.

        Cash received from the options exercised under all share-based payment arrangements for the years ended December 31, 2010, 2009 and 2008, was zero, $726,000 and $166,000, respectively.

        The following table summarizes information about the Company's nonvested stock option activity for 2010:

Stock Options	Shares			Weighted average grant date fair value
Nonvested at December 31, 2009		338,530		$	2.28
Granted		195,010			2.17
Vested		(92,720	)		2.41
Forfeited		(75,560	)		2.07
Nonvested at December 31, 2010		365,260		$	2.23

F-48

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(13) Stock Based Compensation (Continued)

        In 2010, the Company granted 16,680 shares of restricted stock awards. These awards have a vesting period of 4 years. Compensation expense is recognized over the vesting period of the award based on the fair value of the stock at the date of issue. A summary of the activity for the year follows:

	Number outstanding			Weighted average grant date exercise price
Nonvested balance at January 1, 2010		66,220		$	9.10
Granted during the year		16,680			18.16
Vested during the year		(16,060	)		9.10
Forfeited during the year		(3,120	)		9.10
Nonvested balance at December 31, 2010		63,720		$	11.47

        As of December 31, 2010 and 2009, there was approximately $629,000 and $502,000 respectively of total unrecognized compensation cost related to the nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted average period of 2.9 years.

        Compensation cost that has been charged against income for these plans was $390,000, $232,000 and $131,000 for 2010, 2009 and 2008, respectively.

(14) Preferred Stock

        On January 23, 2009, the Company entered into a Letter Agreement with the U.S. Treasury Department to sell preferred, nonvoting shares as part of the Capital Purchase Program (CPP) for healthy financial institutions. Pursuant to the agreement, we issued and sold to the Treasury for an aggregate purchase price of $10.2 million in cash: (i) 10,189 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having an initial dividend rate of 5% and a liquidation preference of $1,000 per share (the Series A Shares), and (ii) a ten-year warrant to purchase up to 510.02004 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, $2.00 par value per share, at an initial exercise price of $2.00 per share (the Series B Shares). The Treasury engaged in a cashless exercise of the warrant immediately upon its issuance, resulting in the issuance of 509 Series B Shares. On December 23, 2009, the Company redeemed all of the Series A and Series B Shares by repaying the CPP Funds, together with accrued dividends, for an aggregate of $10.8 million. As such, the Company is no longer subject to the limitations imposed by that program and the Company has no Series A or Series B Preferred Shares outstanding.

        During the second quarter of 2009, the Company issued $23.6 million of Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (the Series C Preferred Stock) through a private placement to qualified accredited investors. The stock pays noncumulative dividends semiannually at a rate of 9% per year. The Company may not pay or declare dividends on its Common Stock or any preferred stock ranking junior to the Series C Preferred Stock, unless the Company has paid or declared and set aside full payment for dividends on the Series C Preferred Stock.

        Each share of the Series C Preferred Stock may be converted at any time at the option of the holder into shares of the Company's Common Stock, initially at the rate of 851 shares of Common

F-49

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(14) Preferred Stock (Continued)

Stock for each share of Series C Preferred Stock. The conversion price is subject to adjustment from time to time to reflect changes to the underlying Common Stock, such as in the event of stock dividends, stock splits or recapitalizations. The Company may, at its option, redeem the Series C Preferred Stock at any time after May 30, 2014. Any redemption will be in exchange for cash in the amount of $10,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends. The Company also has the right at any time after May 30, 2014 to call and convert all (but not less than all) of the outstanding shares of Series C Preferred Stock into shares of Common Stock, but only if the book value per share of our common stock equals or exceeds $10.629.

        During the second quarter of 2010, the Company issued $23.8 million of Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (the Series D Preferred Stock) through a private placement to qualified accredited investors. The stock pays noncumulative dividends semiannually at a rate of 9% per year. The Company may not pay or declare dividends on its Common Stock or any preferred stock ranking junior to the Series D Preferred Stock, unless the Company has paid or declared and set aside full payment for dividends on the Series D Preferred Stock.

        Each share of the Series D Preferred Stock may be converted at any time at the option of the holder into shares of the Company's Common Stock, initially at the rate of 435 shares of Common Stock for each share of Series D Preferred Stock. The conversion price is subject to adjustment from time to time to reflect changes to the underlying Common Stock, such as in the event of stock dividends, stock splits or recapitalizations. The Company may, at its option, redeem the Series D Preferred Stock at any time after March 31, 2015. Any redemption will be in exchange for cash in the amount of $10,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends. The Company also has the right at any time after March 31, 2015 to call and convert all (but not less than all) of the outstanding share of Series D Preferred Stock into shares of common stock, but only if the book value per share of our common stock equals or exceeds $18.487.

F-50

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(15) Earnings Per Share

        Earnings per share are calculated utilizing the two-class method. Basic earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards using the treasury stock method (outstanding stock options and unvested restricted stock), convertible preferred stock and convertible subordinated debt. Presented below are the calculations for basic and diluted earnings per common share for the years ended December 31, 2010, 2009 and 2008 (in thousands, except for share and per share data):

			2010			2009			2008
Net income			$	12,070		$	18,337		$	2,139
Preferred stock dividends and discount accretion				(3,668	)		(2,291	)		—
Net income available to common equity				8,402			16,046			2,139
Common shareholder dividends				(1,631	)		(1,342	)		(1,194	)
Unvested share based payments				(21	)		(18	)		—
Undistributed earnings			$	6,750		$	14,686		$	945
Basic
Distributed earnings to common shareholders			$	1,631		$	1,342		$	1,194
Undistributed earnings to common shareholders				6,750			14,686			945
	Total common shareholders earnings, basic		$	8,381		$	16,028		$	2,139
Diluted
Distributed earnings to common shareholders			$	1,631		$	1,342		$	1,194
Undistributed earnings to common shareholders				6,750			14,686			945
	Total common shareholders earnings			8,381			16,028			2,139
Add back:
	Convertible preferred stock dividends			2,124			1,218			—
	Interest on convertible debentures, net of tax			579			374			—
		Total common shareholders earnings, diluted	$	11,084		$	17,620		$	2,139
Weighted average common shares outstanding, basic				4,214,820			4,180,620			4,134,710
Add back:
	Convertible preferred stock			2,008,510			1,142,800			—
	Convertible debentures			536,170			317,300			—
Options				42,680			8,550			70
Restricted stock				22,130			16,580			—
Weighted average common shares outstanding, diluted				6,824,310			5,665,850			4,134,780
Basic earnings per common share			$	1.99		$	3.83		$	0.52
Diluted earnings per common share			$	1.62		$	3.11		$	0.52

F-51

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(16) Capital Requirements

        Our primary source of cash is dividends received from the Bank. The Bank is restricted by Illinois law and regulations of the Illinois Department of Financial and Professional Regulations and the Federal Deposit Insurance Corporation as to the maximum amount of dividends the Bank can pay to us. As a practical matter, the Bank restricts dividends to a lesser amount because of the need to maintain an adequate capital structure.

        We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

        Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). We believe, as of December 31, 2010, that we meet all capital adequacy requirements to which we are subject.

        As of December 31, 2010, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, we must maintain minimum Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that we believe have changed our category.

			2010
			Actual					Required for adequate capital					To be well capitalized
			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital
	(to risk-weighted assets):
		Midland States Bancorp, Inc.	$	126,469		11.13	%	$	90,863		8.00	%		N/A
		Midland States Bank		127,163		11.24			90,474		8.00			113,093		10.0	%
Tier 1 capital
	(to risk-weighted assets):
		Midland States Bancorp, Inc.		95,795		8.43	%		45,432		4.00	%		N/A
		Midland States Bank		112,849		9.98			45,237		4.00			67,856		6.0	%
Tier 1 leverage
	(to average assets):
		Midland States Bancorp, Inc.		95,795		5.86	%		65,344		4.00	%		N/A
		Midland States Bank		112,849		6.93			65,151		4.00			81,439		5.0	%

F-52

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(16) Capital Requirements (Continued)

			2009
			Actual					Required for adequate capital					To be well capitalized
			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital
	(to risk-weighted assets):
		Midland States Bancorp, Inc.	$	94,871		13.86	%	$	54,756		8.00	%		N/A
		Midland States Bank		94,572		13.83			54,707		8.00			68,384		10.0	%
Tier 1 capital
	(to risk-weighted assets):
		Midland States Bancorp, Inc.		77,137		11.27	%		27,378		4.00	%		N/A
		Midland States Bank		85,886		12.56			27,354		4.00			41,030		6.0	%
Tier 1 leverage
	(to average assets):
		Midland States Bancorp, Inc.		77,137		6.86	%		44,963		4.00	%		N/A
		Midland States Bank		85,886		7.67			44,764		4.00			55,955		5.0	%

(17) Fair Value of Financial Instruments

        ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

•

Level 1: Unadjusted quoted prices for identical assets or liabilities traded in active markets.

•

Level 2: Observable inputs other than Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data, either directly or indirectly, for substantially the full term of the financial instrument. This category generally includes U.S. government and agency securities.

•

Level 3: Inputs to a valuation methodology that are unobservable, supported by little or no market activity, and significant to the fair value measurement. These valuation methodologies generally include pricing models, discounted cash flow models, or a determination of fair value that requires significant management judgment or estimation. This category also includes observable inputs from a pricing service not corroborated by observable market data, such as pricing nonagency mortgage backed securities.

        Fair value is used on a recurring basis to account for securities available for sale and derivative liabilities. For assets and liabilities measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered "nonrecurring" for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for impaired loans and other real estate owned

F-53

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

and also to record impairment on certain assets, such as goodwill, core deposit intangibles and other long-lived assets.

        The following tables present information on the assets measured and recorded at fair value on a recurring and nonrecurring basis at and for the years ended December 31, 2010 and 2009 (in thousands):

		2010
		Total			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value on a recurring basis:
Assets
Securities available-for-sale:
	U.S. Treasury securities	$	51,906		$	51,906	$	—		$	—
	Government sponsored entity debt securities		26,482			—		26,482			—
	Agency mortgage-backed securities		62,749			—		62,749			—
	Covered nonagency mortgage-backed securities		134,029			—		—			134,029
	State and municipal		116,576			—		116,576			—
			391,742			51,906		205,807			134,029
Liabilities
Interest rate swap agreement		$	(135	)	$	—	$	(135	)	$	—
Assets measured at fair value on a non-recurring basis:
Impaired loans		$	17,348		$	—	$	—		$	17,348
Other real estate owned			6,113			—		—			6,113

F-54

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

		2009
		Total			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value on a recurring basis:
Assets
Securities available-for-sale:
	Government sponsored entity debt securities	$	6,545		$	—	$	6,545		$	—
	Agency mortgage-backed securities		25,975			—		25,975			—
	Covered nonagency mortgage-backed securities		151,619			—		—			151,619
	State and municipal		114,523			—		114,523			—
			298,662			—		147,043			151,619
Liabilities
Interest rate swap agreement		$	(332	)	$	—	$	(332	)	$	—
Assets measured at fair value on a non-recurring basis:
Impaired loans		$	4,939		$	—	$	—		$	4,939
Other real estate owned			400			—		—			400

        The following table presents gains and (losses) recognized on assets measured on a non-recurring basis for the years ended December 31, 2010 and 2009:

	2010			2009
Impaired loans	$	(14,455	)	$	(4,453	)
Other real estate owned		(1,001	)		(210	)
Total loss on assets measured on a nonrecurring basis	$	(15,456	)	$	(4,663	)

F-55

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

        The following table presents activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2010 and 2009:

		2010			2009
Covered nonagency mortgage-backed securities, beginning of year		$	151,619		$	—
	Addition from the Strategic acquisition		—			177,998
	Total realized in earnings(1)		14,800			8,929
	Other-than-temporary impairment loss(2)		(946	)		—
	Total unrealized in comprehensive income		7,383			(6,412	)
	Net settlements subsequent to acquisition		(38,827	)		(28,896	)
Covered nonagency mortgage-backed securities, end of year		$	134,029		$	151,619

⁽¹⁾

Amounts included in interest income from investment securities taxable in the consolidated statements of income.

⁽²⁾

Amount included in other than temporary impairment on investment securities in the 2010 consolidated statement of income.

        ASC Topic 825, Financial Instruments, requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate such fair values. Additionally, certain financial instruments and all nonfinancial instruments are excluded from the applicable disclosure requirements.

F-56

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

        The following table is a summary of the carrying values and fair value estimates of certain financial instruments as of December 31, 2010 and 2009:

		2010				2009
		Carrying amount		Fair value		Carrying amount		Fair value
Assets:
	Cash and due from banks	$	57,068	$	57,068	$	83,846	$	83,846
	Federal funds sold		88		88		91		91
	Investment securities available-for-sale		391,742		391,742		298,662		298,662
	Nonmarketable equity securities		9,630		9,630		8,880		8,880
	Loans		1,018,656		1,030,986		604,690		608,005
	Loans held for sale		866		866		803		803
	Accrued interest receivable		8,495		8,495		5,811		5,811
Liabilities:
	Deposits		1,364,517		1,376,067		918,092		930,245
	Short term borrowings		56,718		56,718		13,191		13,191
	FHLB borrowings		71,279		71,992		76,970		76,652
	Subordinated debt		16,300		18,006		11,300		13,191
	Trust preferred debentures		10,000		5,500		10,000		3,500
	Accrued interest payable		2,755		2,755		2,077		2,077
	Interest rate swap agreement		135		135		332		332

        The following is a description of the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820) and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825):

        Cash and due from banks and Federal funds sold.    The carrying amounts are assumed to be the fair value because of the liquidity of these instruments.

        Investment securities available-for-sale.    Securities available-for-sale are measured and carried at fair value on a recurring basis. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated other comprehensive income in the consolidated balance sheets.

        In determining the fair value of the securities categorized as Level 2, we obtain a report from a nationally recognized broker-dealer detailing the fair value of each investment security we hold as of each reporting date. The broker-dealer uses observable market information to value our fixed income securities, with the primary source being a nationally recognized pricing service. The fair value of the municipal securities is based on a proprietary model maintained by the broker-dealer. We review all of the broker-dealer supplied quotes on the securities we own as of the reporting date for reasonableness based on our understanding of the marketplace and we consider any credit issues related to the bonds. As we have not made any adjustments to the market quotes provided to us and they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy.

        Our covered nonagency mortgage-backed securities are categorized as Level 3 due in part to the inactive market for such securities. There is a wide range of prices quoted for nonagency mortgage-

F-57

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

backed securities among independent third party pricing services and this range reflects the significant judgment being exercised over the assumptions and variables that determine the pricing of such securities. We consider this subjectivity to be a significant unobservable input and have concluded that the nonagency mortgage-backed securities should be categorized as a Level 3 measured asset. While the securities may be based on significant unobservable inputs, our fair value estimates were based on prices provided to us by a nationally recognized pricing service. We determined the reasonableness of the fair values by reviewing assumptions at the individual security level about prepayment, default expectations, estimated severity loss factors, projected cash flows and estimated collateral performance, all of which are not directly observable in the market. During 2010, we recorded $189,000 in losses, net of loss-share reimbursement, on two covered impaired securities.

        Nonmarketable equity securities.    The carrying amounts approximate their fair values.

        Loans (including covered loans).    Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type and further segmented into fixed and adjustable rate interest terms and by credit risk categories. The fair value estimates do not take into consideration the value of the loan portfolio in the event the loans have to be sold outside the parameters of normal operating activities. The fair value of performing fixed rate loans is estimated by discounting scheduled cash flows through the estimated maturity using estimated market prepayment speeds and estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. The estimated market discount rates used for performing fixed rate loans are the Company's current offering rates for comparable instruments with similar terms. The fair value of performing adjustable rate loans is estimated by discounting scheduled cash flows through the next repricing date. As these loans reprice frequently at market rates and the credit risk is not considered to be greater than normal, the market value is typically close to the carrying amount of these loans. The method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC Topic 820.

        Non-covered impaired loans.    Non-covered impaired loans are measured and recorded at fair value on a non-recurring basis. All of our non-covered nonaccrual loans and restructured loans are considered impaired and are reviewed individually for the amount of impairment, if any. Most of our loans are collateral dependent and, accordingly, we measure impaired loans based on the estimated fair value of such collateral. The fair value of each loan's collateral is generally based on estimated market prices from an independently prepared appraisal, which is then adjusted for the cost related to liquidating such collateral; such valuation inputs result in a nonrecurring fair value measurement that is categorized as a Level 2 measurement. When adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable and the fair value measurement is categorized as a Level 3 measurement. The impaired loans categorized as Level 3 also include unsecured loans and other secured loans whose fair values are based significantly on unobservable inputs such as the strength of a guarantor, cash flows discounted at the effective loan rate, and management's judgment. The loan balances shown in the above tables represent those nonaccrual and restructured loans for which impairment was recognized during 2010. The amounts shown as losses represent, for the loan balances shown, the impairment recognized during 2010.

F-58

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(17) Fair Value of Financial Instruments (Continued)

        Covered loans.    Covered loans were measured at estimated fair value on the date of acquisition. Thereafter, the fair value of covered loans is measured using the same methology as that for non-covered loans. The above discussion for non-covered loans and non-covered impaired loans is applicable to covered loans following their acquisition date.

        Other real estate owned.    The fair value of foreclosed real estate, both non-covered and covered, is generally based on estimated market prices from independently prepared current appraisals or negotiated sales prices with potential buyers; such valuation inputs result in a fair value measurement that is categorized as a Level 2 measurement on a nonrecurring basis. When a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a fair value measurement that is categorized as a Level 3 measurement. To the extent a negotiated sales price or reduced listing price represents a significant discount to an observable market price, such valuation input would result in a fair value measurement that is also considered a Level 3 measurement.

        Accrued interest receivable.    The carrying amounts approximate their fair values.

        Deposits.    Deposits are carried at historical cost. The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market, savings and checking accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

        Short term borrowings.    Short term borrowings consist of federal funds purchased and repurchase agreements. These borrowings typically have terms of less than 30 days and therefore, their carrying amounts are a reasonable estimate of fair value.

        FHLB Borrowings, Subordinated debt and Trust preferred debentures.    Borrowings are carried at amortized cost. The fair value of fixed rate borrowings is calculated by discounting scheduled cash flows through the estimated maturity or call dates using estimated market discount rates that reflect current rates offered for borrowings with similar remaining maturities and characteristics.

        Accrued interest payable.    The carrying amounts approximate their fair values.

        Derivative financial instruments.    The interest rate swap is carried at fair value on a recurring basis based upon the amounts required to settle the contracts.

        Commitments to extend credit and standby letters of credit.    The majority of our commitments to extend credit carry current market interest rates if converted to loans. Because these commitments are generally unassignable by either the borrower or us, they only have value to the borrower and us. The estimated fair value approximates the recorded deferred fee amounts and is excluded from the table above because it is not material.

F-59

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(18) Commitments, Contingencies and Credit Risk

        In the normal course of business, there are outstanding various contingent liabilities such as claims and legal actions, which are not reflected in the consolidated financial statements. No material losses are anticipated as a result of these actions or claims.

        We have committed to various agreements related to the construction of new corporate office space in Effingham, Illinois. The project is scheduled for completion during the third quarter of 2011. The amount of capitalizable expenses incurred in 2010 related to this project was $5.6 million. At this time we expect the amount necessary to complete the scope of the project to be approximately $16.0 million.

        We are obligated under noncancelable operating leases for office space and other commitments. Certain leases contain escalation clauses providing for increased rental payments based primarily on increases in real estate taxes or in the average consumer price index. Net rent expense under operating leases included in occupancy and equipment expense was approximately $660,000, $447,000 and $222,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

        The projected minimum rental payments under the terms of the leases as of December 31, 2010 as follows (in thousands):

			Amount
Year ending December 31:
	2011		$	759
	2012			423
	2013			247
	2014			186
	2015			169
	Thereafter			137
		Total estimated least payments	$	1,921

        We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

        Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank used the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The commitments

F-60

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(18) Commitments, Contingencies and Credit Risk (Continued)

are principally tied to variable rates. Loan commitments as of December 31, 2010 and 2009 are as follows (in thousands):

		2010		2009
Commitments to extend credit		$	177,803	$	64,199
Financial guarantees:
	Standby letters of credit		12,996		14,914
	Performance letters of credit		19,258		19,258

        We do not engage in the use of futures, forwards or options contracts. We do engage in interest rate swaps, see note 19.

(19) Interest Rate Swaps

        We maintain an interest rate risk-management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility. Our specific goal is to manage, where possible, our interest rate risk.

        As of December 31, 2010 and 2009, we had one outstanding interest rate swap agreement to convert our variable rate trust preferred to a fixed rate. The interest rate swap agreement has a notional amount of $10.0 million and matures on April 15, 2011. Under the swap agreement, we receive interest at a variable rate equal to 2.75% over the three-month LIBOR (3.05% at December 31, 2010) and pay interest at a fixed rate of 5.73%. As of December 31, 2010 and 2009 the fair value of the agreement was a loss of approximately $135,000 and $332,000, respectively, and is included in the other liabilities section in our consolidated balance sheets.

(20) Segment Information

        Our financial information is primarily reported and evaluated in two principal lines of business: Banking and Wealth Management. Banking services include various type of deposit accounts; safe deposit boxes; automated teller machines; consumer, mortgage and commercial loans; mortgage loan sales and servicing; letters of credit; and corporate treasury management services. Wealth Management includes trust and fiduciary services, brokerage and retirement planning services. Other includes the operating results of the parent company, as well as eliminations.

F-61

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(20) Segment Information (Continued)

        The following table presents selected segment information for Banking, Wealth Management, and Other for the years ended December 31, 2010, 2009 and 2008 (in thousands):

	Banking		Wealth Management			Other			Total
December 31, 2010
Net interest income	$	60,830	$	160		$	(2,795	)	$	58,195
Provision for loan losses		13,580		—			—			13,580
Noninterest income		15,409		3,468			—			18,877
Noninterest expense		43,197		3,108			540			46,845
Income before taxes		19,462		520			(3,335	)		16,647
Income taxes (benefit)		5,351		143			(917	)		4,577
Net income	$	14,111	$	377		$	(2,418	)	$	12,070
Total assets	$	1,629,581	$	3,578		$	1,163		$	1,634,322
December 31, 2009
Net interest income	$	30,278	$	111		$	(1,567	)	$	28,822
Provision for loan losses		20,728		—			—			20,728
Noninterest income		41,813		1,260			52			43,125
Noninterest expense		21,971		1,172			467			23,610
Income before taxes		29,392		199			(1,982	)		27,609
Income taxes (benefit)		9,871		67			(666	)		9,272
Net income	$	19,521	$	132		$	(1,316	)	$	18,337
Total assets	$	1,109,141	$	3,558		$	1,053		$	1,113,752
December 31, 2008
Net interest income	$	12,934	$	—		$	(385	)	$	12,549
Provision for loan losses		1,051		—			—			1,051
Noninterest income		2,315		575			547			3,437
Noninterest expense		10,820		702			671			12,193
Income before taxes		3,378		(127	)		(509	)		2,742
Income taxes (benefit)		742		(28	)		(111	)		603
Net income	$	2,636	$	(99	)	$	(398	)	$	2,139
Total assets	$	438,678	$	—		$	2,349		$	441,027

F-62

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(21) Related Party Transactions

        On February 26, 2010, we purchased a parcel of land, on which our new corporate headquarters facility is being constructed, from an entity controlled by a real estate management and development company at a cost of approximately $443,000. We also purchased an additional parcel of land at the same site from the same entity for $312,000 on January 28, 2011. Our Chairman is a substantial shareholder of the real estate management and development company from which we bought these parcels, and currently serves as its Chief Executive Officer.

        On April 16, 2010, we entered into a contract with a construction company to act as general construction manager for the construction of our new corporate headquarters facility. The total cost of the facility is expected to be $21.6 million. We estimate the general contractor fee to be approximately $1.2 million. A member of our board of directors is a substantial shareholder of the construction company and currently serves as its Chairman.

(22) Subsequent Events

        On May 11, 2011, the Company exchanged warrants to purchase up to 630 shares of the Company's Series C Preferred Stock for warrants to purchase up to the same number of the Company's Series E Preferred Stock, and exchanged warrants to purchase up to 500 shares of the Company's Series D Preferred Stock for warrants to purchase the same number of shares of the Company's Series F Preferred Stock. The warrants to purchase the Series C and Series D Preferred Stock were issued in connection with an amendment and restatement to the Company's outstanding subordinated debt, effected on December 31, 2010. The Company's Series E Preferred Stock and Series F Preferred Stock have the same designations, rights and preferences as the Company's Series C Preferred Stock and Series D Preferred Stock, respectively.

        On March 7, 2011, the Company's board of directors authorized the Company to file a Registration Statement on Form S-1 (the "Registration Statement") with the Securities and Exchange Commission and to offer and sell up to $105 million of the Company's common stock in an initial public offering pursuant to the Registration Statement if and when the Registration Statement is declared effective by the SEC.

        The Company has evaluated subsequent events through May 13, 2011, the date on which the financial statements were available to be issued.

F-63

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(23) Parent Company Only Financial Information

        Presented below is condensed financial information for Midland States Bancorp, Inc.:

Condensed Balance Sheets
December 31, 2010 and 2009
(In thousands)

			2010		2009
Assets:
	Cash and cash equivalents		$	155	$	2,797
	Investment in common stock of subsidiary			133,677		92,258
	Investment securities, available-for-sale			504		501
	Other assets			1,192		476
		Total assets	$	135,528	$	96,032
Liabilities:
	Trust preferred debentures		$	10,000	$	10,000
	Subordinated debt			16,300		11,300
	Other liabilities			2,693		1,440
		Total liabilities		28,993		22,740
Shareholders' equity				106,535		73,292
		Total liabilities and shareholders' equity	$	135,528	$	96,032

Condensed Statements of income
Years ended December 31, 2010, 2009 and 2008
(In thousands)

		2010			2009			2008
Dividends from subsidiary		$	—		$	10,500		$	—
Other income			69			114			802
Interest expense			(2,864	)		(1,628	)		(639	)
Other expenses			(540	)		(468	)		(671	)
			(3,335	)		8,518			(508	)
Equity in undistributed income of subsidiary			14,170			9,077			2,443
	Income before income taxes		10,835			17,595			1,935
Income tax benefit			1,235			742			204
	Net income	$	12,070		$	18,337		$	2,139

F-64

Midland States Bancorp, Inc.

Notes to Consolidated Financial Statements (Continued)

December 31, 2010, 2009 and 2008

(23) Parent Company Only Financial Information (Continued)

Condensed Statements of Cash Flows
Years ended December 31, 2010, 2009 and 2008
(In thousands)

					2010			2009			2008
Cash flows from operating activities:
	Net income				$	12,070		$	18,337		$	2,139
	Adjustments to reconcile net income to net cash (used in) provided by operating activities:
	Equity in undistributed income of subsidiary					(14,170	)		(9,077	)		(2,443	)
	Depreciation and amortization					104			53			—
	Investment securities amortization, net					3			8			(3	)
	Gain on sale of investments					—			(53	)		(547	)
	Compensation expense for stock option awards					243			131			131
	Amortization of restricted stock awards					147			101			—
	Excess tax benefit related to disqualified dispositions					—			—			2
	Change in other assets					(820	)		214			(212	)
	Change in other liabilities					1,293			(203	)		210
			Net cash (used in) provided by operating activities			(1,130	)		9,511			(723	)
Cash flows from investing activities:
	Investment securities available-for-sale:
		Purchases				(505	)		(1,011	)		(1,002	)
		Sales and maturities				500			2,222			1,549
		Paydowns				—			182			268
	Purchase of premiums and equipment					—			—			(5	)
	Capital injection to the bank					(25,000	)		(42,929	)		(6,500	)
		Net cash used in investing activities				(25,005	)		(41,536	)		(5,690	)
Cash flows from financing activities:
	Proceeds from issuance of subordinated debt					5,000			11,300			—
	Proceeds from issuance of Series A preferred stock and warrants					—			10,107			—
	Proceeds from issuance of Series C preferred stock					—			23,500			—
	Proceeds from issuance of Series D preferred stock					23,677			—			—
	Payments for retirement of Series A and Series B preferred stock					—			(10,698	)		—
	Cash dividends paid on common stock					(1,652	)		(1,360	)		(1,194	)
	Cash dividends paid on preferred stock					(3,579	)		(1,455	)		—
	Proceeds from exercise of stock options					—			726			166
	Purchase of treasury stock					(88	)		(20	)		(342	)
	Proceeds from issuance of treasury stock under employer benefit plans					135			275			50
				Net cash provided by financing activities		23,493			32,375			(1,320	)
				Net (decrease) increase in cash and cash equivalents		(2,642	)		350			(7,733	)
Cash and cash equivalents:
	Beginning of year					2,797			2,447			10,180
	End of year				$	155		$	2,797		$	2,447

F-65

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Midland States Bancorp, Inc.:

We have audited the accompanying statement of assets acquired and liabilities assumed as of March 26, 2010 by Midland States Bank (the Bank) (a wholly owned subsidiary of Midland States Bancorp, Inc.) pursuant to the Branch Sale Agreement, dated December 31, 2009, executed by the Bank with AMCORE Bank, N.A. and AMCORE Investment Services, Inc. This financial statement is the responsibility of the Bank's management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying statement of assets acquired and liabilities assumed as of March 26, 2010 by Midland States Bank pursuant to the Branch Sale Agreement, dated December 31, 2009, is fairly presented, in all material respects, on the basis of accounting described in Note 1.

/s/ KPMG LLP

St. Louis, Missouri
May 13, 2011

F-66

MIDLAND STATES BANCORP, INC. AND SUBSIDIARIES

STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED BY MIDLAND STATES BANK
(A WHOLLY OWNED SUBSIDIARY OF MIDLAND STATES BANCORP, INC.)

AS OF MARCH 26, 2010

			March 26, 2010
			(In thousands)
Assets
	Cash and cash equivalents		$	48,231
	Investment securities			15,453
	Loans			407,245
	Premises and equipment			12,569
	Core deposit intangible			11,768
	Trust customer relationship intangible			2,476
	Accrued interest receivable			1,734
	Other assets			50
		Total assets acquired		499,526
Liabilities
	Deposits			493,360
	Accrued interest payable			1,166
	Deferred tax liability			1,674
	Other liabilities			789
		Total liabilities		496,989
Net Assets Acquired			$	2,537

The accompanying notes are an integral part of this financial statement.

F-67

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed

NOTE 1—BASIS OF PRESENTATION

        Midland States Bancorp, Inc. (the Company) is a bank holding company headquartered in Effingham, Illinois. Through our wholly-owned bank subsidiary, Midland States Bank (the Bank), we provide a full range of banking services to individual and corporate customers in the Effingham, Champaign, Fayette, Monroe, St. Clair, Marion, Bond and surrounding Illinois counties and Chesterfield, Missouri.

        The accounting and reporting policies of the Company are in conformity with U.S. generally accepted accounting principles.

        As described in Note 2, the Bank acquired certain assets and assumed certain liabilities of the former AMCORE Bank, N.A. and AMCORE Investment Services, Inc. ("AMCORE") in a purchase transaction on March 26, 2010. The acquisition of twelve branch facilities and their related assets of AMCORE constitute a business acquisition as defined by the Business Combinations topic (ASC 805). The Business Combinations topic establishes principles and requirements for how the acquirer of a business recognizes and measures in its financials statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Accordingly, the estimated fair values of the acquired assets and identifiable intangible assets, and the assumed liabilities in the AMCORE acquisition were measured and recorded at the March 26, 2010 acquisition date.

Fair Value of Assets Acquired and Liabilities Assumed

        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. In some cases, the estimation of fair values requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. We describe below the methods used to determine the fair values of the significant assets acquired and liabilities assumed.

Cash and cash equivalents

        The carrying amounts approximate fair values due to the short-term nature of these instruments.

Investment securities

        The fair value for investment securities is based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market, or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Loans

        At the March 26, 2010 acquisition date, we estimated the fair value of the acquired AMCORE loan portfolio using the discounted expected cash flows from the portfolio with the assistance of a third party valuation vendor. In estimating such fair value, we (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the "undiscounted contractual cash flows") and (b) estimated the amount and timing of undiscounted expected principal and interest payments (the

F-68

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 1—BASIS OF PRESENTATION (Continued)

"undiscounted expected cash flows"). The amount by which the undiscounted expected cash flows exceed the estimated fair value (the "accretable yield") is accreted into interest income over the life of the loans.

        In calculating expected cash flows, management made several assumptions regarding prepayments, collateral cash flows, and the timing of defaults. Other factors included in determining the fair value of acquired loans were type of loan and related collateral, risk classification status, term of loan and whether or not the loan was amortizing, and current discount rates.

Premises and Equipment

        The fair value for the branch facilities is based upon appraisals obtained from licensed real estate appraisers valued at the March 26, 2010 acquisition date. The purpose of the appraisal is to obtain the appraiser's opinion of the market value of the subject property as of the valuation date. Market Value is defined by the federal financial institutions regulatory agencies as the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Intangible Assets

        We estimated the fair value of the core deposit and trust customer relationship intangible separately with the assistance of a third party vendor. In determining the estimated life and valuation of the core deposit premium, the deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates, and age of the deposit relationships. The core deposit asset will be amortized over the projected useful life of the related deposits on an accelerated basis over 10 years.

        In determining the estimated life and valuation of the trust customer relationship intangible the financial data and revenue streams of the trust business and established customer relationships were analyzed using a discounted cash flow methodology which incorporated an estimated growth and attrition rate. Based on this valuation, the trust customer relationship intangible asset will be amortized over the projected useful life of the related trust customer relationships on a straight line basis of 7.5 years.

Deposits

        The fair values used for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate money market accounts, savings accounts and NOW accounts approximate their fair values at the reporting date. The fair values for time deposits are estimated using a discounted cash flow method that applies interest rates currently being offered on time deposits to a schedule of aggregated contractual maturities of such time deposits.

Deferred tax liability

        Deferred income taxes relate to the differences between the financial statement and tax basis of assets acquired and liabilities assumed in this transaction. Deferred taxes are reported based upon the principles in FASB Topic 740: Income Taxes, and are calculated based on the estimated federal and

F-69

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 1—BASIS OF PRESENTATION (Continued)

state income tax rates currently in effect for the Company, which is consistent with market participant expectations.

Use of Estimates

        Management of the Bank made a number of significant estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the statement of assets acquired and liabilities assumed. Management exercised significant judgment regarding assumptions about market participant expectations regarding discount rates, future expected cash flows including prepayments, default rates, market conditions and other future events that are highly subjective in nature, and subject to change, and all of which affected the estimation of the fair values of the net assets acquired in the AMCORE acquisition. Actual results could differ from those estimates; others provided with the same information could draw different reasonable conclusions and calculate different fair values. Changes that may vary significantly from our assumptions include loan prepayments, the rate of default, the severity of defaults, the estimated market values of collateral at disposition, the timing of such disposition, and deposit attrition.

NOTE 2—ACQUISITION OF CERTAIN AMCORE BRANCHES AND TRUST BUSINESS

        On March 26, 2010 the Bank acquired twelve branches and two stand-alone drive-ups of AMCORE Bank, N.A. and certain trust, brokerage and wealth management assets from AMCORE Investment Services, Inc. in a purchase transaction. As part of the Branch Sale Agreement, the Bank and AMCORE agreed to transfer certain assets and liabilities of the branch offices and the annuities, investment advisory and brokerage accounts attributable to the branches. The Bank purchased assets with fair value of approximately $407.2 million of loans, $48.2 million of cash, $15.5 million of investment securities, $12.6 million of premises and equipment, and $1.7 million of accrued interest receivable from AMCORE. The Bank also assumed liabilities with fair values of $493.4 million of deposits and $1.2 million of accrued interest payable from AMCORE. In connection with the acquisition, the Bank paid a 1.5% deposit premium of $7.4 million and a $1.5 million trust premium. AMCORE was a full service commercial bank headquartered in Northern Illinois that operated 52 branch locations in Illinois and Wisconsin. The branches that Midland States Bank purchased were located in Dixon, Freeport, Mendota, Peru, Princeton, Rock Falls, and Sterling, Illinois. We made this acquisition to expand our presence in the State of Illinois.

        The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting (formerly the purchase method). The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the March 26, 2010 acquisition date. The application of the acquisition method of accounting resulted in a net, after tax, gain of $2.5 million. A summary of

F-70

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 2—ACQUISITION OF CERTAIN AMCORE BRANCHES AND TRUST BUSINESS (Continued)

the net assets purchased from AMCORE and the estimated fair value adjustments resulting in the net gain are as follows:

		March 26, 2010
		(In thousands)
AMCORE's cost basis net assets on March 26, 2010		$	(54,922	)
Cash payment received from AMCORE			45,812
Fair value adjustments
	Loans		(3,536	)
	Investment securities		197
	Premises and equipment		5,974
	Core deposit intangible		11,768
	Trust asset intangible		2,476
	Time deposits		(3,558	)
	Deferred tax liability		(1,674	)
Net after tax gain		$	2,537

        The net gain represents the excess of the estimated fair value of the assets acquired over the estimated fair value of the liabilities assumed. In the AMCORE acquisition, AMCORE's cost basis assets of $436.9 million were transferred to us, we assumed liabilities of $491.8 million and a cash payment was received from AMCORE of $45.8 million.

NOTE 3—INVESTMENT SECURITIES

        The Bank acquired $15.5 million of investment securities at estimated fair market value in the AMCORE acquisition. The acquired securities were obligations of states and political subdivisions.

        Investment securities have contractual terms to maturity. In addition, expected maturities may differ from contractual maturities because issuers may have the right to call obligations with or without call penalties. The estimated fair value of securities at March 26, 2010 is shown below by contractual maturity.

		Fair Value
		(In thousands)
Due within one year		$	468
Due after one through five years			1,944
Due after five through ten years			1,445
Due after ten years			11,596
	Total investment securities	$	15,453

F-71

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 4—LOANS PURCHASED

        The composition of loans purchased at March 26, 2010 is as follows:

			Amount			% of Loans
			(Dollars in thousands)
Real estate loans:
	Residential single family		$	12,172			2.99	%
	Commercial and agriculture real estate			249,342			61.24
	Home equity			31,982			7.85
		Total real estate loans		293,496			72.08
Other loans:
	Commercial agriculture			13,995			3.44
	Commercial business			49,585			12.17
	Other consumer			53,705			13.19
		Total other loans		117,285			28.80
Fair value adjustment				(3,536	)		(0.88	)
Total Loans			$	407,245			100	%

        The loans we acquired as a part of the AMCORE purchase had been performing in accordance with contractual terms at the date of acquisition. The Bank did not acquire the AMCORE loans that were delinquent by more than thirty (30) days with respect to a required payment of principal or interest, were in nonaccrual status, had been made to consumers in bankruptcy or to consumers that have reaffirmed their debts in bankruptcy, were designated as Special Mention, Substandard, Doubtful or Loss in the books and records of AMCORE, were subject to further due diligence by Midland States Bank to assess the risks related to the purchase of the loans by the Bank, or were originated under Small Business Administration or the United States Department of Agriculture programs. At the March 26, 2010 acquisition date, we estimated the fair value of AMCORE's loan portfolio using the discounted expected cash flows from the portfolio. In estimating such fair value, we (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the "undiscounted contractual cash flows") and (b) estimated the amount and timing of undiscounted expected principal and interest payments (the "undiscounted expected cash flows"). The amount by which the undiscounted expected cash flows exceed the estimated fair value (the "accretable yield") is accreted into interest income over the life of the loans.

        Due to the seasoned, currently performing, low risk profile of the AMCORE loan portfolio acquired, the Bank accounted for the loans acquired in the AMCORE purchase based on the contractual cash flows method of accounting promulgated by FASB ASC 310-20 (originally issued as FASB Statement No. 91, Accounting for Nonrefundable fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.)

        The loans acquired in the AMCORE acquisition are and will continue to be subject to the Bank's internal and external credit review. As a result, if credit deterioration is noted subsequent to the March 26, 2010 acquisition date, such deterioration will be measured through our loss reserving methodology and a provision for credit losses will be charged to earnings.

F-72

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 5—PREMISES AND EQUIPMENT

        A summary of premises and equipment acquired at March 26, 2010 is as follows (in thousands):

		March 26, 2010
Land		$	2,227
Buildings and improvements			9,728
Furniture and equipment			614
	Total	$	12,569

        Depreciation expense is computed principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the life of the asset or the lease term. Estimated useful lives of premises and equipment range from 10 to 40 years and from 3 to 10 years, respectively.

NOTE 6—INTANGIBLES

        We recorded $11.8 million core deposit intangible with an estimated 10 year life and a $2.5 million trust customer relationship intangible with an estimated 7.5 year life. The estimated amortization expense for the remainder of 2010 and for the subsequent five years is as follows:

Year	Core Deposit Intangible Estimated Amortization Expense		Trust Customer Relationship Intangible Estimated Amortization Expense
	(In thousands)		(In thousands)
2010	$	1,605	$	248
2011		1,979		330
2012		1,765		330
2013		1,551		330
2015		1,337		330
2015 & thereafter		3,530		908
Total	$	11,767	$	2,476

NOTE 7—DEPOSITS

        Deposit liabilities assumed are composed of the following at March 26, 2010:

	March 26, 2010
	Amount		Rate
	(In thousands)
Non-interest bearing	$	100,273
Interest checking		83,604		0.21	%
Money market		39,504		0.61	%
Savings		49,899		0.41	%
Time deposits		220,080		2.61	%
Total deposits	$	493,360

F-73

Midland States Bancorp, Inc.

Notes to Statement of Assets Acquired and Liabilities Assumed (Continued)

NOTE 7—DEPOSITS (Continued)

        At March 26, 2010, scheduled maturities of time deposits were as follows:

Year	March 26, 2010
	(In thousands)
2010	$	70,345
2011		106,406
2012		34,598
2013		8,368
2014 & thereafter		363
Total	$	220,080

NOTE 8—DEFERRED INCOME TAXES

        The deferred tax liability of $1.7 million as of March 26, 2010 is related to the differences between the financial statement and tax basis of assets acquired and liabilities assumed in this transaction. For income tax purposes, the AMCORE acquisition will be accounted for as an asset purchase and the tax basis of assets acquired will be allocated based on fair values in accordance with the Internal Revenue Code and related regulations.

NOTE 9—SUBSEQUENT EVENTS

        The Company has evaluated events for recognition and disclosure through May 13, 2011, which is the date the financial statements were available to be issued.

F-74

                Shares

Common Stock

PROSPECTUS

SANDLER   O'NEILL + PARTNERS,  L. P. STIFEL  NICOLAUS  WEISEL

The date of this prospectus is                        , 2011

Until                        , 2011, all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

        The following table sets forth all costs and expenses, other than underwriting discounts and commissions, in connection with the sale of shares of our common stock being registered, all of which will be paid by us. All amounts shown are estimates, except for the SEC registration fee, the FINRA filing fee and the NASDAQ Stock Market listing fee.

Expense Category	Amount
SEC registration fee	$
FINRA filing fee
NASDAQ Stock Market listing fee
Legal fees and expenses
Accounting fees and expenses
Printing fees and expenses
Transfer agent and registrar fees and expenses
Blue sky qualification fees and expenses
Miscellaneous
Total	$

ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

        Under Section 8.75 of the IBCA, an Illinois corporation may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

        In addition, an Illinois corporation may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such person has been adjudged to have been liable to the corporation, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

        Section 8.75 of the IBCA also provides that, to the extent that a present or former director, officer or employee of a corporation has been successful, on the merits or otherwise, in the defense of any

II-1

action, suit or proceeding referred to in either of the foregoing paragraphs, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, if the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation.

        Our articles and bylaws provide that, subject to the limits of applicable federal and state banking laws and regulations, we must indemnify each person who is or was a director or officer of the Company and each person who serves or served at the request of the Company as a director, officer or partner of another enterprise in accordance with, and to the fullest extent authorized by, the IBCA, as the same now exists or may be amended in the future.

        We have also obtained officers' and directors' liability insurance which insures against liabilities that officers and directors may, in such capacities, incur. Section 8.75 of the IBCA provides that an Illinois corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the IBCA.

        Reference is made to the form of underwriting agreement to be filed as Exhibit 1.1 hereto for provisions providing that the underwriters are obligated under certain circumstances to indemnify our directors, officers and controlling persons against certain liabilities under the Securities Act.

ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES.

        The following sets forth information regarding unregistered securities that were sold by the Registrant within the past three years.

Midland States Bancorp, Inc., a Delaware corporation

On January 23, 2009, the Registrant entered into a Letter Agreement, which incorporates the Securities Purchase Agreement—Standard Terms, pursuant to which the Registrant sold and issued 10,189 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share, for approximately $10.2 million, and 509 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series B, liquidation preference $1,000 per share, to the U.S. Treasury pursuant to the TARP Capital Purchase Program. The shares of Series B Preferred Stock were issued to the U.S. Treasury for nominal consideration upon the exercise of a warrant issued in conjunction with the sale of the Series A Preferred Stock. We granted the U.S. Treasury certain "piggyback" registration rights. On December 15, 2009, we redeemed all 10,189 shares of Series A Preferred Stock and all 509 shares of Series B Preferred Stock from the U.S. Treasury.

On May 30, 2009, the Registrant sold and issued 2,360 shares of its Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, for aggregate gross proceeds of $23.6 million to accredited investors, including six of the Registrant's directors and officers. Each share of Series C Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of the Registrant's common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series C Preferred Stock is $11.75, provided that if, as of the date of conversion, the Registrant has not declared and paid dividends on the Series C Preferred Stock with respect to two or more dividend periods, then the conversion price per share will be adjusted downward to $9.243.

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On May 29, 2009, the Registrant entered into a credit agreement, which was subsequently amended and restated on December 31, 2010, with the Richard E. Workman 2001 Trust pursuant to which the Registrant sold and issued a subordinated note with a principal amount of $11.3 million at 100% of its face amount. The note bears interest at a per annum rate of 15.0%. The holder of the 2009 subordinated note was issued a warrant to acquire up to 630 shares of our Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, at a price of $10,000 per share. The warrant was later amended to make it exercisable for up to 630 shares of our Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, at a price of $10,000 per share.

On March 31, 2010, the Registrant entered into an amendment to the credit agreement with the Richard E. Workman 2001 Trust pursuant to which the Registrant sold and issued an additional subordinated note, due 2020, with a principal amount of $5.0 million at 100% of its face amount. The note bears interest at a per annum rate of 12.0%. The holder of the 2010 subordinated note was issued a warrant to acquire up to 500 shares of our Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, at a price of $10,000 per share. The warrant was later amended to make it exercisable for up to 500 shares of our Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, at a price of $10,000 per share.

On March 31, 2010, the Registrant sold and issued 2,377 shares of its Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, for aggregate gross proceeds of $23.8 million to accredited investors, including six of the Registrant's directors and officers. Each share of Series D Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of the Registrant's common stock that results from dividing the liquidation preference per share of $10,000 by the conversion price per share in effect at the time of conversion for each share of preferred stock. The conversion price per share of Series D Preferred Stock is $23.00.

No underwriters or placement agents were used in any of the above transactions. Each of the Series A Preferred Stock and Series B Preferred Stock sold to the U.S. Treasury, the 2,360 shares of Series C Preferred Stock, the 2,377 shares of Series D Preferred Stock and the two subordinated notes sold to the Richard E. Workman 2001 Trust were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving any public offering. Each recipient of securities in each such transaction represented its intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. Each transaction was made without general solicitation or advertising.

Midland States Bancorp, Inc., an Illinois corporation

On December 31, 2010, New Midland States, Inc., an Illinois corporation, issued 4,227,740 shares of its common stock in exchange for shares of Midland States Bancorp, Inc., a Delaware corporation, on a ten-for-one basis in connection with the merger of Midland States Bancorp, Inc. with and into New Midland States, Inc. to effect the reincorporation of the Registrant from Delaware to Illinois. In connection with the reincorporation merger, New Midland States, Inc. changed its name to Midland States Bancorp, Inc. Outstanding options and warrants to acquire approximately 54,887 shares of common stock of the predecessor Delaware corporation were converted into the right to acquire shares of the surviving Illinois corporation on a ten-for-one basis. In addition, the Illinois corporation issued 2,360 shares of its Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, and 2,377 shares

II-3

of its Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share, to former holders of the Series C Preferred Stock and Series D Preferred Stock, respectively, of the Delaware corporation on a one-for-one basis.

The Illinois corporation relied upon SEC Rule 145(a)(2). The transaction was a statutory merger in which the securities of the Delaware corporation were exchanged for the securities of the Illinois corporation and the transaction's sole purpose was to change the issuer's domicile from Delaware to Illinois.

ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)

Exhibits

Exhibit Number			Description
	1.1	**	Form of Underwriting Agreement.
	2.1	*	Agreement and Plan of Merger, dated as of November 13, 2008, among Midland States Bancorp, Inc., Midland States Acquisition, Inc. and Waterloo Bancshares, Inc.†
	2.2	*	Agreement and Plan of Merger, dated as of October 22, 2010, by and between Midland States Bancorp, Inc., a Delaware corporation, and New Midland States, Inc., an Illinois corporation and a wholly owned subsidiary of Midland States Bancorp, Inc.†
	2.3	*	Purchase and Assumption Agreement, dated as of May 22, 2009, among Federal Deposit Insurance Corporation, as receiver of Strategic Capital Bank, Federal Deposit Insurance Corporation and Midland States Bank (Single Family Shared-Loss Agreement and the Non-Single Family Shared-Loss Agreement included as Exhibits 4.15A and 4.15B, thereto, respectively).†
	2.4	*	Branch Sale Agreement, dated as of December 31, 2009, by and among AMCORE Bank, N.A., AMCORE Investment Services, Inc. and Midland States Bank.†
	2.5	*	Purchase and Assumption Agreement, dated as of October 15, 2010, among Federal Deposit Insurance Corporation, as receiver of WestBridge Bank & Trust Company, Federal Deposit Insurance Corporation and Midland States Bank (Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement included as Exhibits 4.15A and 4.15B, thereto, respectively).†
	3.1	*	Articles of Incorporation of Midland States Bancorp, Inc., dated October 25, 2010, including the: (i) Statement of Resolution Establishing Series of Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated October 22, 2010; (ii) the Statement of Resolution Establishing Series of Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated October 25, 2010; (iii) the Statement of Resolution Establishing Series of Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated May 9, 2011; and (iv) the Statement of Resolution Establishing Series of Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated May 9, 2011.
	3.2	*	Bylaws of Midland States Bancorp, Inc.
	4.1	*	Specimen common stock certificate of Midland States Bancorp, Inc.
	4.2	*	Specimen Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
	4.3	*	Specimen Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.

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Exhibit Number			Description
	4.4	*	Specimen Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
	4.5	*	Specimen Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
			The other instruments defining the rights of holders of the long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.
	5.1	**	Opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP.
	10.1	*	Amended and Restated Credit Agreement, dated December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, and the accompanying 2009 Tranche A Term Note, 2009 Tranche B Term Note and Amended 2010 Term Note, each dated December 31, 2010 (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.2	*	Assumption Agreement, dated as of January 1, 2011, between Midland States Bancorp, Inc., an Illinois corporation (as successor to Midland States Bancorp, Inc., a Delaware corporation), and Richard E. Workman 2001 Trust.
	10.3	*	Amended and Restated 2009 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.4	*	Amended and Restated 2010 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.5	*	Series E Preferred Stock Purchase Warrant, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.†
	10.6	*	Series F Preferred Stock Purchase Warrant, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.†
	10.7	*	Registration Rights Agreement, dated January 18, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.8	*	Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.
	10.9	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Leon J. Holschbach.
	10.10	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Jeffrey Ludwig.
	10.11	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Douglas J. Tucker.

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Exhibit Number			Description
	10.12	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Jeffrey Mefford.
	10.13	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Jeff Brunoehler.
	10.14	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Sharon Schaubert.
	10.15	*	Midland States Bancorp, Inc. Omnibus Stock Ownership and Long-Term Incentive Plan.
	10.16	*	Third Amendment and Restatement Midland States Bancorp, Inc. 1999 Stock Option Plan.
	10.17	*	Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.18	*	Second Amended and Restated Deferred Compensation Plan for Directors and Executives of Midland States Bancorp, Inc.
	10.19	*	Form of Incentive Stock Option Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.20	*	Form of Non-Qualified Stock Option Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.21	*	Form of Restricted Stock Unit Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.22	*	Form of Restricted Stock Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.23	*	Midland States Bancorp, Inc. Management Incentive Program.
	16.1	*	Letter from McGladrey & Pullen, LLP, dated May 11, 2011, regarding change in certifying accountant
	21.1	*	Subsidiaries of Midland States Bancorp, Inc.
	23.1	*	Consent of KPMG LLP with respect to the consolidated balance sheets of Midland States Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010.
	23.2	*	Consent of KPMG LLP with respect to the statement of assets acquired and liabilities assumed as of March 26, 2010 by Midland States Bank (a wholly owned subsidiary of Midland States Bancorp,  Inc.).
	23.3	**	Consent of Barack Ferrazzano Kirschbaum & Nagelberg LLP (included as part of Exhibit 5.1).
	24.1		Power of Attorney (included in the signature page to the Registration Statement filed on May 13, 2011).

*

Filed herewith.

**

To be filed by amendment.

†

Schedules and/or exhibits to this Exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

II-6

ITEM 17.    UNDERTAKINGS.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the indemnification provisions described herein, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

        (1)   For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

        (2)   For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-7

SIGNATURES

        Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Effingham, Illinois, on May 13, 2011.

MIDLAND STATES BANCORP, INC.
By:	/s/ LEON J. HOLSCHBACH Leon J. Holschbach Chief Executive Officer and President

Power of Attorney

        Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in their respective capacities and on the respective dates indicated opposite their names. Each person whose signature appears below hereby authorizes each of Leon J. Holschbach, with full power of substitution, to execute in the name and on behalf of such person any post-effective amendment to this Registration Statement and to file the same, with exhibits thereto, and other documents in connection therewith, making such changes in this Registration Statement as the registrant deems appropriate, and appoints Leon J. Holschbach, with full power of substitution, attorney-in-fact to sign any and all amendments (including post-effective amendments and any related registration statement pursuant to Rule 462(b) under the Securities Act) hereto to this Registration Statement and to file the same, with exhibits thereto, and other documents in connection therewith and we do hereby ratify and confirm that said attorney and agent shall do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ LEON J. HOLSCHBACH Leon J. Holschbach	Director (Vice Chairman); Chief Executive Officer and President (principal executive officer)	May 13, 2011
/s/ JEFFREY G. LUDWIG Jeffrey G. Ludwig	Executive Vice President—Finance and Chief Financial Officer (principal financial officer and principal accounting officer)	May 13, 2011
/s/ KENNETH D. MASCHHOFF Kenneth D. Maschhoff	Director	May 13, 2011
/s/ JOHN M. SCHULTZ John M. Schultz	Director (Chairman)	May 13, 2011

II-8

Signature	Title	Date
/s/ ROBERT F. SCHULTZ Robert F. Schultz	Director	May 13, 2011
/s/ Q. ANTHONY SIEMER Q. Anthony Siemer	Director	May 13, 2011
/s/ JEFFREY C. SMITH Jeffrey C. Smith	Director	May 13, 2011
/s/ KAREN D. WOLTERS Karen D. Wolters	Director	May 13, 2011

II-9

EXHIBIT INDEX

Exhibit Number			Description
	1.1	**	Form of Underwriting Agreement.
	2.1	*	Agreement and Plan of Merger, dated as of November 13, 2008, among Midland States Bancorp, Inc., Midland States Acquisition, Inc. and Waterloo Bancshares, Inc.†
	2.2	*	Agreement and Plan of Merger, dated as of October 22, 2010, by and between Midland States Bancorp, Inc., a Delaware corporation, and New Midland States, Inc., an Illinois corporation and a wholly owned subsidiary of Midland States Bancorp, Inc.†
	2.3	*	Purchase and Assumption Agreement, dated as of May 22, 2009, among Federal Deposit Insurance Corporation, as receiver of Strategic Capital Bank, Federal Deposit Insurance Corporation and Midland States Bank (Single Family Shared-Loss Agreement and the Non-Single Family Shared-Loss Agreement included as Exhibits 4.15A and 4.15B, thereto, respectively).†
	2.4	*	Branch Sale Agreement, dated as of December 31, 2009, by and among AMCORE Bank, N.A., AMCORE Investment Services, Inc. and Midland States Bank.†
	2.5	*	Purchase and Assumption Agreement, dated as of October 15, 2010, among Federal Deposit Insurance Corporation, as receiver of WestBridge Bank & Trust Company, Federal Deposit Insurance Corporation and Midland States Bank (Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement included as Exhibits 4.15A and 4.15B, thereto, respectively).†
	3.1	*	Articles of Incorporation of Midland States Bancorp, Inc., dated October 25, 2010, including the: (i) Statement of Resolution Establishing Series of Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated October 22, 2010; (ii) the Statement of Resolution Establishing Series of Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated October 25, 2010; (iii) the Statement of Resolution Establishing Series of Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated May 9, 2011; and (iv) the Statement of Resolution Establishing Series of Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, dated May 9, 2011.
	3.2	*	Bylaws of Midland States Bancorp, Inc.
	4.1	*	Specimen common stock certificate of Midland States Bancorp, Inc.
	4.2	*	Specimen Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
	4.3	*	Specimen Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
	4.4	*	Specimen Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
	4.5	*	Specimen Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock certificate of Midland States Bancorp, Inc.
			The other instruments defining the rights of holders of the long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request.

II-10

Exhibit Number			Description
	5.1	**	Opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP.
	10.1	*	Amended and Restated Credit Agreement, dated December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, and the accompanying 2009 Tranche A Term Note, 2009 Tranche B Term Note and Amended 2010 Term Note, each dated December 31, 2010 (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.2	*	Assumption Agreement, dated as of January 1, 2011, between Midland States Bancorp, Inc., an Illinois corporation (as successor to Midland States Bancorp, Inc., a Delaware corporation), and Richard E. Workman 2001 Trust.
	10.3	*	Amended and Restated 2009 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.4	*	Amended and Restated 2010 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.5	*	Series E Preferred Stock Purchase Warrant, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.†
	10.6	*	Series F Preferred Stock Purchase Warrant, dated as of December 31, 2010, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.†
	10.7	*	Registration Rights Agreement, dated January 18, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust (as amended by the Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust, included as Exhibit 10.8).†
	10.8	*	Amendment Agreement, dated May 11, 2011, between Midland States Bancorp, Inc. and Richard E. Workman 2001 Trust.
	10.9	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Leon J. Holschbach.
	10.10	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Jeffrey Ludwig.
	10.11	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bancorp, Inc., Midland States Bank and Douglas J. Tucker.
	10.12	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Jeffrey Mefford.
	10.13	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Jeff Brunoehler.
	10.14	*	Employment Agreement, made and entered into as of December 1, 2010, by and between Midland States Bank and Sharon Schaubert.
	10.15	*	Midland States Bancorp, Inc. Omnibus Stock Ownership and Long-Term Incentive Plan.

II-11

Exhibit Number			Description
	10.16	*	Third Amendment and Restatement Midland States Bancorp, Inc. 1999 Stock Option Plan.
	10.17	*	Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.18	*	Second Amended and Restated Deferred Compensation Plan for Directors and Executives of Midland States Bancorp, Inc.
	10.19	*	Form of Incentive Stock Option Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.20	*	Form of Non-Qualified Stock Option Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.21	*	Form of Restricted Stock Unit Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.22	*	Form of Restricted Stock Award Terms under the Midland States Bancorp, Inc. Amended and Restated 2010 Long-Term Incentive Plan.
	10.23	*	Midland States Bancorp, Inc. Management Incentive Program.
	16.1	*	Letter from McGladrey & Pullen, LLP, dated May 11, 2011, regarding change in certifying accountant
	21.1	*	Subsidiaries of Midland States Bancorp, Inc.
	23.1	*	Consent of KPMG LLP with respect to the consolidated balance sheets of Midland States Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010.
	23.2	*	Consent of KPMG LLP with respect to the statement of assets acquired and liabilities assumed as of March 26, 2010 by Midland States Bank (a wholly owned subsidiary of Midland States Bancorp,  Inc.).
	23.3	**	Consent of Barack Ferrazzano Kirschbaum & Nagelberg LLP (included as part of Exhibit 5.1).
	24.1		Power of Attorney (included in the signature page to the Registration Statement filed on May 13, 2011).

*

Filed herewith.

**

To be filed by amendment.

†

Schedules and/or exhibits to this Exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

II-12

EX-2.1

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

AMONG

MIDLAND STATES BANCORP, INC.

MIDLAND STATES ACQUISITION, INC.

AND

WATERLOO BANCSHARES, INC.

NOVEMBER 13, 2008

Table of Contents

		Page
ARTICLE 1	DEFINITIONS	1
Section 1.1	Definitions	1
Section 1.2	Principles of Construction	6
ARTICLE 2	THE MERGER	7
Section 2.1	The Merger	7
Section 2.2	Effective Time; Closing	7
Section 2.3	Effects of Merger	8
Section 2.4	Articles of Incorporation	8
Section 2.5	By-laws	8
Section 2.6	Directors and Officers	8
Section 2.7	Midland States Deliveries at Closing	8
Section 2.8	Waterloo’s Deliveries at Closing	9
Section 2.9	Bank Merger	11
Section 2.10	Absence of Control	11
ARTICLE 3	CONVERSION OF SECURITIES IN THE MERGER	12
Section 3.1	Additional Definitions	12
Section 3.2	Manner of Merger	12
Section 3.3	Exchange Procedures	13
Section 3.4	INTENTIONALLY OMITTED	13
Section 3.5	Shareholder Representative	13
ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF WATERLOO	15
Section 4.1	Waterloo Organization	15
Section 4.2	Waterloo Subsidiary Organization	15
Section 4.3	Authorization; Enforceability	15
Section 4.4	No Conflict	16
Section 4.5	Waterloo Capitalization	16
Section 4.6	Waterloo Subsidiary Capitalization	17
Section 4.7	Waterloo Financial Statements and Reports; Regulatory Filings	17
Section 4.8	Books and Records	18
Section 4.9	Title to Properties	18
Section 4.10	Condition and Sufficiency of Assets	19
Section 4.11	Loans; Loan Loss Reserve	19
Section 4.12	Undisclosed Liabilities; Adverse Changes	19
Section 4.13	Taxes	20
Section 4.14	[Reserved]	21
Section 4.15	Employee Benefits	21
Section 4.16	Compliance with Legal Requirements	22
Section 4.17	Legal Proceedings; Orders	23
Section 4.18	Absence of Certain Changes and Events	23
Section 4.19	Properties and Contracts	25

i

Section 4.20	No Defaults	27
Section 4.21	Insurance	28
Section 4.22	Compliance with Environmental Laws	28
Section 4.23	Fiduciary Accounts	28
Section 4.24	Indemnification Claims	29
Section 4.25	Insider Interests	29
Section 4.26	Brokerage Commissions	29
Section 4.27	Change of Control and other Payments	29
Section 4.28	Disclosure	29
ARTICLE 5	REPRESENTATIONS AND WARRANTIES OF MIDLAND STATES	29
Section 5.1	Midland States Organization	29
Section 5.2	Midland States Subsidiary Organization	30
Section 5.3	Authorization; Enforceability	30
Section 5.4	No Conflict	31
Section 5.5	Disclosure	31
ARTICLE 6	WATERLOO’S COVENANTS	31
Section 6.1	Access and Investigation	31
Section 6.2	Operation of Waterloo	32
Section 6.3	Negative Covenant	33
Section 6.4	Subsequent Waterloo Financial Statements	33
Section 6.5	Advice of Changes	34
Section 6.6	Other Offers	34
Section 6.7	Shareholders’ Meeting	36
Section 6.8	Information Provided to Midland States	36
Section 6.9	Accounting and Other Adjustments	36
Section 6.10	Capital Stock	37
Section 6.11	Dividends	37
Section 6.12	Consents; and Third Party Approvals	37
Section 6.13	Bonus and Directors’ Fee Payments	37
Section 6.14	Voting Agreements	37
Section 6.15	Minimum Equity Requirement	37
Section 6.16	Environmental Reports	38
ARTICLE 7	MIDLAND STATES’ COVENANTS	38
Section 7.1	Access and Investigation	38
Section 7.2	Information Provided to Waterloo	38
Section 7.3	Indemnification; Insurance	38
ARTICLE 8	COVENANTS OF ALL PARTIES	39
Section 8.1	Regulatory Approvals	39
Section 8.2	Customer and Employee Relationships	39
Section 8.3	Publicity	39
Section 8.4	Best Efforts; Cooperation	39
Section 8.5	Tax Treatment and Filings	40
Section 8.6	Employee Benefits	40

ii

ARTICLE 9	CONDITIONS PRECEDENT TO OBLIGATIONS OF MIDLAND STATES	40
Section 9.1	Accuracy of Representations and Warranties	40
Section 9.2	Waterloo’s Performance	40
Section 9.3	Documents Satisfactory	41
Section 9.4	Corporate Approval	41
Section 9.5	No Proceedings	41
Section 9.6	Absence of Material Adverse Changes	41
Section 9.7	Consents and Approvals	41
Section 9.8	No Prohibition	41
Section 9.9	Dissenting Shares	41
Section 9.10	Change of Control Payments by Waterloo	41
Section 9.11	Loan Payoff	42
ARTICLE 10	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WATERLOO	42
Section 10.1	Accuracy of Representations and Warranties	42
Section 10.2	Midland States’ Performance	42
Section 10.3	Documents Satisfactory	42
Section 10.4	Corporate Approval	42
Section 10.5	No Proceedings	42
Section 10.6	Consents and Approvals	43
Section 10.7	No Prohibitions	43
ARTICLE 11	TERMINATION	43
Section 11.1	Termination of Agreement	43
Section 11.2	Effect of Termination or Abandonment	45
Section 11.3	Payments to Waterloo	45
Section 11.4	Payments to Midland States	45
Section 11.5	Special Termination Fees	46
ARTICLE 12	MISCELLANEOUS	46
Section 12.1	Governing Law	46
Section 12.2	Assignments, Successors and No Third Party Rights	46
Section 12.3	Waiver	47
Section 12.4	Confidentiality	47
Section 12.5	Notices	47
Section 12.6	Entire Agreement	48
Section 12.7	Modification	48
Section 12.8	Severability	49
Section 12.9	Further Assurances	49
Section 12.10	Survival	49
Section 12.11	Counterparts	49

iii

Exhibits*

Exhibit A Form of Voting Agreement

Schedules*

Schedule 4.1	Waterloo Organization
Schedule 4.2	Waterloo Subsidiary Organization
Schedule 4.4	No Conflict
Schedule 4.5	Waterloo Capitalization
Schedule 4.6	Waterloo Subsidiary Capitalization
Schedule 4.6(i)	Investment Securities
Schedule 4.7	Waterloo Financial Statements and Call Reports; Regulatory Filings
Schedule 4.9	Title to Properties
Schedule 4.10	Condition and Sufficiency of Assets
Schedule 4.11	Loans; Loan Loss Reserve
Schedule 4.12	Undisclosed Liabilities; Adverse Changes
Schedule 4.13	Taxes
Schedule 4.15	Employee Benefits
Schedule 4.16	Compliance with Legal Requirements
Schedule 4.17	Legal Proceedings; Orders
Schedule 4.18	Absence of Certain Changes and Events
Schedule 4.19	Properties and Contracts
Schedule 4.20	No Defaults
Schedule 4.21	Insurance
Schedule 4.22	Compliance with Environmental Laws
Schedule 4.25	Insider interests
Schedule 4.26	Brokerage Commissions
Schedule 4.27	Change of Control and other Payments

*  Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities and Exchange Act of 1934, as amended. The Company agrees to furnish a supplemental copy of any omitted exhibit or schedule to the SEC upon request.

iv

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (together with all exhibits and schedules, this “Agreement”) is entered into as of November 2008, among Midland States Bancorp, Inc., a Delaware corporation (“Midland States”), Midland States Acquisition, Inc., an Illinois corporation (“Acquisition Co.”) and Waterloo Bancshares, Inc., an Illinois corporation (“Waterloo”).

RECITALS

A             The Boards of Directors of Waterloo, Midland States and Acquisition Co. have approved, and deem it advisable and in the best interests of their respective shareholders to consummate the business combination transaction provided for herein in which Waterloo and Acquisition Co. will affiliate in a merger transaction (the “Merger”) whereby Acquisition Co., a newly formed and wholly owned subsidiary of Midland States shall merge with and into Waterloo under applicable law and Waterloo shall be the surviving corporation (the “Surviving Corporation”).

B             The Boards of Directors of Waterloo, Midland States and Acquisition Co. have each determined that the Merger and the other transactions contemplated hereby are consistent with, and will further, their respective business strategies and goals.

C.            Pursuant to the terms of this Agreement, each outstanding share of the common stock of Waterloo, $25.00 par value per share (“Waterloo Common Stock”), shall be converted at the Effective Time (as hereinafter defined) of the Merger into the right to receive cash in an amount equal to $8,550,000 subject to any adjustment provided for in ARTICLE 3 hereof divided by the total number of issued and outstanding shares of Waterloo Common Stock on the Closing Date, in the manner set forth in this Agreement.

D.            Concurrently with, or at a time after the Closing Date determined by Midland States in its sole discretion, Commercial State Bank of Waterloo, an Illinois state bank and the 100% owned subsidiary of Waterloo (“Waterloo Bank”), shall be merged with and into Midland States Bank, an Illinois state bank and the 100% owned subsidiary of Midland States (“Midland States Bank”).

E.             The parties desire to make certain representations, warranties and agreements in connection with the Merger and also agree to certain prescribed conditions to the Merger.

AGREEMENTS

In consideration of the foregoing, premises and the following mutual promises, covenants and agreements, the parties hereby agree as follows:

ARTICLE 1
DEFINITIONS

Section 1.1            Definitions. In addition to those terms defined throughout this Agreement, the following terms, when used herein, shall have the following meanings.

(a)           “Acquisition Transaction” means, with respect to Waterloo any of the following:  (i) a merger or consolidation, or any similar transaction (other than the Merger) of any Person with either Waterloo or any Waterloo Subsidiary (ii) a purchase, lease or other acquisition of all or substantially all the assets of Waterloo of such Person; (iii) a purchase or other acquisition of “beneficial ownership” by any Person that would cause such person or group to become the beneficial owner of securities representing a majority or more, of the voting power of Waterloo; (iv) a tender or exchange offer to acquire securities representing a majority or more of the voting power of Waterloo; (v) a proxy or consent solicitation made to shareholders of Waterloo seeking proxies in opposition to any proposal relating to any aspect of the Contemplated Transactions that has been recommended by the board of directors of Waterloo; (vi) the filing of an application or notice with any Regulatory Authority (which application has been accepted for processing) seeking approval to engage in one or more of the transactions referenced in clauses (i) through (iv) above; or (vii) the making of a bona fide proposal to Waterloo or its shareholders, by public announcement or written communication, that is or becomes the subject of public disclosure, to engage in one or more of the transactions referenced in clauses (i) through (v) above.

(b)           “Affiliate” means with respect to:

(i)            a particular individual:  (A) each other member of such individual’s Family; (B) any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family; (C) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and (D) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity); and

(ii)           a specified Person other than an individual:  (A) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (B) any Person that holds a Material Interest in such specified Person; (C) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity); (D) any Person in which such specified Person holds a Material Interest; (E) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (F) any Affiliate of any individual described in clause (B) or (C) of this subsection (ii).

(c)           “Bank Merger” means the merger of Waterloo Bank with and into, and under the charter of, Midland States Bank.

(d)           “Business Day” means any day on which Midland States Bank is open for business other than a Saturday, Sunday or a legal holiday.

(e)           “Call Reports” means the quarterly reports of income and condition required to be filed with the FDIC.

(f)            “Certificates” means the stock certificates representing shares of Waterloo Common Stock (as defined herein).

(g)           “Code” means the Internal Revenue Code of 1986, as amended.

2

(h)           “Contemplated Transactions” means all of the transactions contemplated by this Agreement, including:  (i) the Merger; (ii) the Bank Merger; (iii) the performance by Midland States, Acquisition Co. and Waterloo of their respective covenants and obligations under this Agreement; and (iv) Midland States’ payment of cash in exchange for shares of Waterloo Common Stock.

(i)            “Contract” means any agreement, contract, obligation, promise or understanding (whether written or oral and whether express or implied) that is legally binding:  (i) under which a Person has or may acquire any rights; (ii) under which such Person has or may become subject to any obligation or liability; or (iii) by which such Person or any of the assets owned or used by such Person is or may become bound.

(j)            “CRA” means the Community Reinvestment Act, as amended.

(k)           “Division” means the Illinois Division of Banking.

(l)            “DGCL” means the Delaware General Corporate Law, as amended.

(m)          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(n)           “Family” means with respect to an individual:  (i) the individual; (ii) the individual’s spouse and any former spouse; (iii) any other natural person who is related to the individual or the individual’s spouse within the second degree; and (iv) any other individual who resides with such individual.

(o)           “FDIC” means the Federal Deposit Insurance Corporation.

(p)           “Federal Reserve” means the Board of Governors of the Federal Reserve System.

(q)           “GAAP” means generally accepted accounting principles in the United States, consistently applied.

(r)            “Illinois BCA” means the Illinois Business Corporation Act, as amended.

(s)           “Knowledge” means, assuming due inquiry under the facts or circumstances, the actual knowledge of the executive officers of Midland States, or Waterloo, or their respective subsidiaries, as the context requires.

(t)            “Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational or other Order, constitution, law, ordinance, regulation, rule, policy statement, directive, statute or treaty.

(u)           “Material Adverse Effect” as used with respect to a party, means an event, change, effect or occurrence which, individually or together with any other event, change, effect or occurrence, (i) is materially adverse to the business, properties, financial condition or results of operations of such party or any of its Subsidiaries, or (ii) materially impairs the ability of such

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party to perform its obligations under this Agreement or to consummate the Contemplated Transactions on a timely basis; provided that, in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect to the extent attributable to or resulting from (A) changes in Legal Requirements generally affecting the banking and bank holding company businesses and the interpretation of such Legal Requirements by courts or governmental authorities, (B) changes in GAAP or regulatory accounting requirements generally affecting the banking and bank holding company businesses, (C) changes or events generally affecting the banking and bank holding company businesses, including changes in prevailing interest rates, not specifically related to Waterloo or Midland States or their respective Subsidiaries, (D) the effects of the actions expressly permitted or required by this Agreement or that are taken with the prior informed consent of the other party in contemplation of the Contemplated Transactions, (E) the announcement of this Agreement and the Contemplated Transactions, and (F) any outbreak of major hostilities in which the United States is involved or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories or diplomatic or consular offices or upon any military installation or personnel of the United States.

(v)           “Material Interest” means the direct or indirect beneficial ownership (as currently defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person.

(w)          “Midland States Subsidiary” means any Subsidiary of Midland States, including Acquisition Co. and Midland States Bank.

(x)            “Midland States Transactional Expenses” means all transaction costs of Midland States necessary to consummate the Contemplated Transactions, including the aggregate expenses of attorneys, accountants, consultants, financial advisors and other professional advisors incurred by Midland States in connection with this Agreement and the Contemplated Transactions, Midland States’ costs of obtaining financing and all other nonpayroll related costs and expenses in each case incurred or to be incurred by Midland States through the Effective Time in connection with this Agreement and the Contemplated Transactions, excluding, however, all payments and expenses associated with the acceleration of payment of compensation (including severance benefits, allocation and vesting under any employee stock ownership plan, stock option plans, retention plans, deferred compensation agreements or any other similar benefit plans of Midland States).

(y)           “Order” means any award, decision, injunction, judgment, order, ruling, extraordinary supervisory letter, policy statement, memorandum of understanding, resolution, agreement, directive, subpoena or verdict entered, issued, made, rendered or required by any court, administrative or other governmental agency, including any Regulatory Authority, or by any arbitrator.

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(z)            “Ordinary Course of Business” means any action taken by a Person only if such action:

(i)            is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person;

(ii)           is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority), other than loan approvals for customers of a financial institution; and

(iii)          is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), other than loan approvals for customers of a financial institution, in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.

(aa)         “Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, foundation, joint venture, estate, trust, association, organization, labor union or other entity or Regulatory Authority.

(bb)         “Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any judicial or governmental authority, including a Regulatory Authority, or arbitrator.

(cc)         “Purchase Price” means $8,550,000.

(dd)         “Regulatory Authority” means any foreign, federal, state or local governmental body, agency, court or authority that, under applicable Legal Requirements:  (i) has supervisory, judicial, administrative, police, enforcement, taxing or other power or authority over Waterloo, Midland States, or any of their respective Subsidiaries; (ii) is required to approve, or give its consent to, the Contemplated Transactions; or (iii) with which a filing must be made in connection therewith, including, in any case, the Federal Reserve, the FDIC, and the Division.

(ee)         “Representative” means with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.

(ff)           “Subsidiary” means with respect to any Person (the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries.

(gg)         “Tax” means any tax (including any income tax, franchise tax, capital gains tax, value-added tax, sales tax, property tax, gift tax or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency or other fee, and any related charge or amount

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(including any fine, penalty, interest or addition to tax), imposed, assessed or collected by or under the authority of any Regulatory Authority or payable pursuant to any tax-sharing agreement or any other Contract relating to the sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.

(hh)         “Tax Return” means any return (including any information return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Regulatory Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

(ii)           “Threatened” means a claim, Proceeding, dispute, action or other matter for which any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing).

(jj)           “Treasury Regulations” means the regulations promulgated under the Code from time to time.

(kk)         “Waterloo Subsidiary” means any Subsidiary of Waterloo, including but not limited to Waterloo Bank.

(ll)           “Waterloo Transactional Expenses” means all transaction costs of Waterloo necessary to consummate the Contemplated Transactions, including the aggregate expenses of attorneys, accountants, consultants, financial advisors and other professional advisors incurred by Waterloo in connection with this Agreement and the Contemplated Transactions, and all other non-payroll related costs and expenses in each case incurred or to be incurred by Waterloo through the Effective Time in connection with this Agreement and the Contemplated Transactions.

Section 1.2            Principles of Construction.

(a)           In this Agreement, unless otherwise stated or the context otherwise requires, the following uses apply:  (i) actions permitted under this Agreement may be taken at any time and from time to time in the actor’s sole discretion; (ii) references to a statute shall refer to the statute and any successor statute, and to all regulations promulgated under or implementing the statute or its successor, as in effect at the relevant time; (iii) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”; (iv) references to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality; (v) indications of time of day mean Central Standard Time; (vi) “including” means “including, but not limited to”; (vii) all references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified; (viii) all words used in this Agreement will be construed to be of such gender or number as the circumstances and context require; (ix) the captions and headings of articles, sections, schedules and exhibits appearing in or attached to this Agreement have been

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inserted solely for convenience of reference and shall not be considered a part of this Agreement nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions; and (x) any reference to a document or set of documents in this Agreement, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof.

(b)           The schedules of Waterloo referred to in this Agreement (the “Schedules”) shall consist of the agreements and other documentation described and referred to in this Agreement. Any item or matter disclosed on any Schedule shall be deemed to be disclosed for all purposes on call other Schedules, to the extent that it should have been disclosed on such other Schedule, to the extent that sufficient details are set forth so that the purpose for which disclosure is made is reasonably clear. In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules), the statements in the body of this Agreement will control.

(c)           All accounting terms not specifically defined herein shall be construed in accordance with GAAP, provided that the parties acknowledge that the financial statements of Waterloo and Waterloo Bank are not prepared in accordance with GAAP.

(d)           With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties hereto understand and agree that the same have been mutually negotiated, prepared and drafted, and that if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto.

ARTICLE 2
THE MERGER

Section 2.1            The Merger. At the Effective Time (as defined below), provided that this Agreement shall not prior thereto have been terminated in accordance with its express terms, upon the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the DGCL and the Illinois BCA, Acquisition Co. shall be merged with and into Waterloo pursuant to the provisions of, and with the effects provided in, the Illinois BCA, the separate corporate existence of Acquisition Co. shall cease and Waterloo will be the Surviving Corporation (the “Surviving Corporation”) and a wholly owned Subsidiary of Midland States. As a result of the Merger, at the Effective Time, each share of Waterloo Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount of cash as provided in Section 3.2.

Section 2.2            Effective Time; Closing.

(a)           Provided that this Agreement shall not prior thereto have been terminated in accordance with its express terms, the closing of the Merger (the “Closing”) shall occur at a place and in a manner (including by mail) that is mutually acceptable to Midland States and

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Waterloo, or if they fail to agree, at the offices of Polsinelli Shalton Flanigan Suelthaus PC, located at 100 S. Fourth Street, Suite 1100, St Louis, MO, 63102, at 10:00 a.m. on the date that is two (2) Business Days after the latest to occur of (i) either the receipt of all required approvals or consents of the Regulatory Authorities for the Contemplated Transactions or the expiration of all statutory waiting periods relating to such regulatory approvals; and (ii) the receipt of all required shareholder approvals, or at such other time and place as Waterloo and Midland States may agree (the “Closing Date”). Subject to the provisions of ARTICLE 11, failure to consummate the Merger on the date and time and at the place determined pursuant to this Section 2.2 will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement.

(b)           The parties hereto agree to file on the Closing Date appropriate articles of merger with the Secretary of State of the State of Illinois, as contemplated by Section 805 ILCS 5/11.25 of the Illinois BCA. The Merger shall be effective upon the close of business on the day that such articles of merger have been duly filed with and accepted by the Secretary of State of the State of Illinois (the “Effective Time”).

Section 2.3            Effects of Merger. At the Effective Time, the effect of the Merger shall be as provided in Section 805 ILCS 5/11.50 of the Illinois BCA. Without limiting the generality of the foregoing, at the Effective Time, all the property, rights, privileges, powers and franchises of Waterloo and Acquisition Co. shall be vested in the Surviving Corporation, and all debts, liabilities and duties of Waterloo and Acquisition Co. shall become the debts, liabilities and duties of the Surviving Corporation.

Section 2.4            Articles of Incorporation. At the Effective Time, the articles of incorporation of the Surviving Corporation shall be the Articles of Incorporation of Acquisition Co. immediately prior to the Merger.

Section 2.5            By-laws. At the Effective Time, the By-laws of the Surviving Corporation shall be the Bylaws of Acquisition Co. immediately prior to the Merger.

Section 2.6            Directors and Officers. At the Effective Time, the directors and executive officers of the Surviving Corporation, including committees of the board of directors, shall be the directors and executive officers of Acquisition Co. immediately prior to the Merger.

Section 2.7            Midland States Deliveries at Closing. At the Closing, Midland States shall deliver or cause to be delivered the following items to Waterloo:

(a)           evidence of the delivery by Midland States or its agents to the Exchange Agent (as defined below) of an amount of cash equal to the Adjusted Purchase Price, as defined in ARTICLE 3;

(b)           a certificate of good standing for Midland States issued by the Secretary of State of the State of Delaware and dated not more than ten (10) Business Days prior to the Closing Date;

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(c)           copies of resolutions of the board of directors of Midland States authorizing and approving this Agreement and the consummation of the Contemplated Transactions, certified as of the Closing Date by the Secretary or any Assistant Secretary of Midland States;

(d)           a certificate of good standing for Acquisition Co. issued by the Secretary of State of the State of Illinois and dated not more than ten (10) Business Days prior to the Closing Date;

(e)           a copy of the articles of incorporation of Acquisition Co., certified not more than ten (10) Business Days prior to the Closing Date by the Secretary of State of the State of Illinois;

(f)            copies of resolutions of the board of directors and sole shareholder of Acquisition Co. authorizing and approving this Agreement and the consummation of the Contemplated Transactions, certified as of the Closing Date by the Secretary or any Assistant Secretary of Acquisition Co.;

(g)           a certificate executed by Midland States dated the Closing Date stating that:  all of the representations and warranties of Midland States set forth in this Agreement are true and correct in all material respects and with the same force and effect as if all of such representations and warranties were made at the Closing Date; provided, however, that to the extent such representations and warranties expressly relate to an earlier date, such representations shall be true and correct in all material respects on and as of such earlier date, and provided further, that to the extent that representations and warranties are made in this Agreement subject to a standard of Knowledge, such representations and warranties shall be true and correct in all material respects; and (ii) Midland States has performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date; provided, however, that to the extent performance and compliance with such covenants and obligations are subject in this Agreement to a standard of materiality, Midland States shall have performed and complied in all respects with such covenants and obligations; and in no event shall a breach of any representation or warranty be deemed to make any such representation or warranty untrue unless such breach would affect Midland States’ ability to consummate the Contemplated Transactions (excluding the Bank Merger) and pay the Merger Consideration to Waterloo’s shareholders substantially in the manner set forth herein.

(h)           such other documents as Waterloo may reasonably request.

All of such items shall be reasonably satisfactory in form and substance to Waterloo and its counsel. The parties agree that the failure of Midland States to deliver the closing deliveries listed above shall be a breach hereunder and that Waterloo’s sole remedy in the event of such failure to deliver (so long as such failure to deliver is not based upon the willful misconduct of Midland States) shall be to terminate this Agreement in accordance with the provisions of Section 11.1.

Section 2.8            Waterloo’s Deliveries at Closing. At the Closing, Waterloo shall deliver the following items to Midland States:

(a)           a certificate of good standing for Waterloo issued by the Secretary of State of the State Illinois and dated not more than ten (10) Business Days prior to the Closing Date;

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(b)           a copy of the articles of incorporation of Waterloo certified not more than ten (10) Business Days prior to the Closing Date by the Secretary of State of the State of Illinois;

(c)           a certificate of the Secretary or any Assistant Secretary of Waterloo dated the Closing Date certifying a copy of the by-laws of Waterloo and stating that there have been no further amendments to the articles of incorporation of Waterloo delivered pursuant to the immediately preceding paragraph of this Section 2.8;

(d)           copies of resolutions of the board of directors and shareholders of Waterloo authorizing and approving this Agreement and the consummation of the Contemplated Transactions, certified as of the Closing Date by the Secretary or any Assistant Secretary of Waterloo;

(e)           a certificate of good standing for Waterloo Bank issued by the Division and dated not more than ten (10) Business Days prior to the Closing Date;

(f)            a copy of the charter of Waterloo Bank, certified by the Division and dated not more than ten (10) Business Days prior to the Closing Date;

(g)           a certificate of the Secretary or any Assistant Secretary of Waterloo Bank dated the Closing Date certifying a copy of the by-laws of Waterloo and stating that there have been no further amendments to the charter of Waterloo Bank delivered pursuant to the immediately preceding paragraph of this Section 2.8;

(h)           a certificate executed by Waterloo dated the Closing Date stating that:  (i) all of the representations and warranties of Waterloo and any Waterloo Subsidiary set forth in this Agreement are true and correct in all material respects with the same force and effect as if all of such representations and warranties were made at the Closing Date; provided, however, that to the extent such representations and warranties expressly relate to an earlier date, such representations shall be true and correct in all material respects on and as of such earlier date, and provided further, that to the extent that representations and warranties are made in this Agreement subject to a standard of materiality or Knowledge, such representations and warranties shall be true and correct in all material respects; and (ii) Waterloo has performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date; provided, however, that to the extent performance and compliance with such covenants and obligations are subject in this Agreement to a standard of materiality, Waterloo shall have performed and complied in all respects with such covenants and obligations;

(i)            a list of all record holders of Waterloo Common Stock as of the Closing Date, setting forth the number of shares held by such shareholder, the certificate number(s) of the stock certificates issued to such shareholder and a list of all Persons as of the Closing Date who, to the Knowledge of Waterloo, have the right at any time to acquire shares of Waterloo Common Stock, certified in each case by the Secretary or any Assistant Secretary of Waterloo;

(j)            a list of Waterloo shareholders that have notified Waterloo in writing (and have not withdrawn such notice) of their intent to exercise their right to dissent to the Merger as of the Business Day immediately preceding the Closing Date, setting forth the name of such

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shareholders, the number of shares held by such shareholders (“Dissenting Shares”) and the certificate number(s) representing the shares of Waterloo Common Stock held by such shareholders;

(k)           such other documents as Midland States may reasonably request; including documentation evidencing the proper termination of the Waterloo Benefit Plans as required herein prior to the Closing Date;

(l)            resignations in a form reasonably acceptable to Midland States, of each director and officer of Waterloo and each Waterloo Subsidiary from each position held at such entities and from any fiduciary position with respect to such entities or any employee benefit thereof.

All of such items shall be reasonably satisfactory in form and substance to Midland States and its counsel. The parties agree that the failure of Waterloo to deliver the closing deliveries listed above shall be a breach hereunder and that Midland States’ sole remedy in the event of such failure to deliver (so long as such failure to deliver is not based upon the willful misconduct of Waterloo) shall be to terminate this Agreement in accordance with the provisions of Section 11.1.

Section 2.9            Bank Merger. The parties understand that it is the present intention of Midland States at or after the Effective Time to affect the Bank Merger. Midland States and Waterloo agree to cooperate and to take such steps as may be necessary to obtain all requisite regulatory, corporate and other approvals to effect the Bank Merger, subject to the consummation of, and to be effective concurrently with, the Merger or as soon as practicable thereafter. The name of the resulting bank will be “Midland States Bank.” In furtherance of such agreement, each of Midland States and Waterloo agrees:

(a)           respectively, to call a meeting of the board of directors of Midland States Bank and Waterloo Bank and to use good faith best efforts to obtain approval of the Bank Merger and to submit the same to its respective sole shareholder for approval;

(b)           respectively, to vote the shares of stock of Midland States Bank and Waterloo Bank owned by them in favor of the Bank Merger; and

(c)           to take, or cause to be taken, all steps necessary to consummate the Bank Merger at the Effective Time or as soon thereafter as reasonably practicable.

The Bank Merger shall be accomplished pursuant to a merger agreement containing such terms and conditions as are ordinary and customary for similar types of affiliated bank merger transactions. Notwithstanding anything contained in this Agreement to the contrary:  (x) the Bank Merger will be effective no earlier than the Effective Time (and in any event after the Merger); and (y) none of Midland States’ or Waterloo’s actions in connection with the Bank Merger will unreasonably interfere with any of the operations of Waterloo, Waterloo Bank, Midland States or Midland States Bank prior to the Effective Time.

Section 2.10         Absence of Control.  Subject to any specific provisions of this Agreement, it is the intent of the parties to this Agreement that neither Midland States nor Waterloo by reason of this Agreement shall be deemed (until consummation of the Contemplated

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Transactions) to control, directly or indirectly, the other party or any of its respective Subsidiaries and shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of such other party or any of its respective Subsidiaries.

ARTICLE 3
CONVERSION OF SECURITIES IN THE MERGER

Section 3.1            Additional Definitions. In addition to those terms defined throughout this Agreement, for purposes of this ARTICLE 3, the following terms shall have the following meanings:

(a)           “Adjusted Purchase Price” shall mean the Purchase Price (i) plus the Corporate Securities Adjustment (as defined below); (ii) minus any payment listed on, or required to be listed on, Schedule 4.26; (iii) minus any payment listed on, or required to be listed on, Schedule 4.27 multiplied by .613; minus any adjustment required by Section 6.15.

(i)            “Corporate Securities Adjustment” shall mean an amount equal to the product of (1) the difference between (x) the net proceeds received from any sales of any securities listed on Schedule 4.6(i) effected by Waterloo or any Waterloo Subsidiary between September 30, 2008 and the Closing Date and (y) the value of such securities as carried on the Books of Waterloo or any Waterloo Subsidiary as of September 30, 2008; multiplied by (2) .613; provided, however, that Waterloo and Waterloo Bank are expressly permitted to make such reasonable arrangements as they desire to cause all or part of the investment securities listed on the books of Waterloo Bank as of September 30, 2008 to be distributed out of Waterloo Bank and Waterloo for the benefit of the shareholders of Waterloo, in which case the calculation of the Corporate Securities Adjustment shall be adjusted to reflect such distributions with any distributed securities valued at the September 30, 2008 carrying value and shall not exceed $2.6 million.

Section 3.2            Manner of Merger. Subject to the provisions of this Article, by virtue of the Merger and without any action on the part of Acquisition Co. or Waterloo or the holder of any Waterloo Common Stock or any other Person:

(a)           Each share of Acquisition Co. stock shall remain a (1) validly issued, fully paid and non assessable, share of stock of the Surviving Corporation.

(b)           Each share of Waterloo Common Stock issued and outstanding immediately prior to the Effective Time, shall be cancelled and automatically converted into the right to receive cash, without interest (the “Merger Consideration”), in an amount equal to the quotient of (A) the Adjusted Purchase Price, divided by (B) the total number of shares of Waterloo Common Stock which are deemed to be issued and outstanding as of the Effective Date (the “Outstanding Shares”).

(c)           After the Effective Time, no holder of Waterloo Common Stock that is issued and outstanding immediately prior to the Effective Time will have any rights in respect of such Waterloo Common Stock except to receive cash.

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Section 3.3            Exchange Procedures.

(a)           The parties shall mutually select a Person to serve as exchange agent (the “Exchange Agent”) for the parties to effect the surrender of Certificates in exchange for the Merger Consideration and, as applicable, cash in redemption of fractional shares. The Exchange Agent shall serve under the terms of an exchange agent agreement reasonably acceptable to Waterloo and Midland States (the “Exchange Agent Agreement”).

(b)           On a date within two (2) Business Days after the Closing (the “Mailing Date”), the Exchange Agent shall mail to each holder of Waterloo Common Stock a form of transmittal letter (the “Transmittal Letter”), providing instructions for use in effecting the surrender of Certificates in exchange for the Merger Consideration and specifying that delivery shall be effected, and risk of loss and title to Certificates shall pass, only after the Closing, only upon delivery of Certificates (or a lost certificate affidavit and a bond in a form reasonably acceptable to Midland States). Upon proper surrender to the Exchange Agent of a Certificate for exchange and cancellation, together with such properly completed and duly executed Transmittal Letter, the holder of such Certificates shall be entitled to receive after the Closing and in exchange therefor, a check representing the amount of Merger Consideration that such holder is entitled to receive pursuant to this ARTICLE 3.

(c)           Midland States shall deposit with the Exchange Agent for the benefit of holders of Certificates an amount equal to the Merger Consideration (the “Exchange Fund”). The Exchange Fund shall be held by the Exchange Agent for the benefit of holders of Waterloo Common Stock pursuant to the terms of the Exchange Agent Agreement.  All fees, costs and expenses of the Exchange Agent shall be borne solely by Midland States.

(d)           Within forty-five (45) days after the Effective Time, Midland States shall cause the Exchange Agent to send to each holder of record of Waterloo Common Stock immediately prior to the Effective Time who has not previously submitted his, her or its Certificates an additional Letter of Transmittal for use in surrendering Certificates to the Exchange Agent and instructions for use in effecting such surrender in exchange for the Merger Consideration.

(e)           Prior to the Mailing Date, Waterloo shall deliver to the Exchange Agent a certified copy of a list of its shareholders including the name and last known mailing address of the shareholder. Immediately prior to the Closing, there shall be no further registration or transfers on the stock transfer books of Waterloo of the outstanding shares of Waterloo Common Stock. If, after the Closing, Certificates are presented to the Exchange Agent or Midland States, they shall be canceled and converted into the right to receive the Merger Consideration pursuant to this ARTICLE 3.

Section 3.4            INTENTIONALLY OMITTED.

Section 3.5            Shareholder Representative.

(a)           The parties agree that Mr. Todd Quernheim is hereby appointed as the joint representative for and on behalf of the shareholders of Waterloo (such Persons, and any other Person duly appointed pursuant to this Agreement, serving as such a representative, the “Shareholder Representative”) to take all actions necessary or appropriate in the judgment of

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the Shareholder Representative for the accomplishment of the terms of this Agreement upon and after the Closing Date. No bond shall be required of the Shareholder Representative, and the Shareholder Representative shall not be entitled to receive any compensation for his or her services except as otherwise set forth in this Section 3.5. Notices of communications to or from the Shareholder Representative shall constitute notice to or from each of the shareholders of Waterloo. If any Person serving as the Shareholder Representative is no longer able or willing to serve as the Shareholder Representative, a new Shareholder Representative may be chosen by the holders of a majority of the shares of Waterloo Common Stock.

(b)           Reasonable and necessary fees and expenses incurred by the Shareholder Representative, in its capacity as Shareholder Representative, after the Closing Date shall be reimbursed to the Shareholder Representative by Midland States promptly upon receipt of appropriate documentation of such fees and expenses.

(c)           The Shareholder Representative shall not be liable for any act done or omitted in such capacity while acting in good faith, and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith. The shareholders of Waterloo shall jointly and severally indemnify the Shareholder Representative and hold him or her harmless against any loss, liability or expense incurred without bad faith, gross negligence or willful misconduct and arising out of or in connection with the acceptance or administration of his or her duties. The Shareholder Representative may consult with legal counsel and other necessary experts to advise it with respect to its rights and obligations hereunder and shall be fully protected by any act taken, suffered, permitted or omitted in good faith in accordance with the advice of such counsel or experts. Notwithstanding anything set forth in this subparagraph (c) and in subparagraph (b) above, Midland States shall only be liable for fees and expenses of one legal counsel and one tax expert.

(d)           Any decision, act, consent or instruction of the Shareholder Representative after the Effective Time in the scope of the Shareholder Representative’s authority as provided in the first sentence of Section 3.5(a) shall constitute a decision of all shareholders of Waterloo and shall be final, binding and conclusive upon every shareholder of Waterloo, and Midland States and the Surviving Corporation may rely upon any decision, act, consent or instruction (in each case whether given orally or in writing) of the Shareholder Representative.

(e)           The adoption of this Agreement and the approval of the Merger and the Contemplated Transactions by the shareholders of Waterloo shall constitute approval and ratification by such Persons of:  (i) this Agreement and all of the arrangements relating thereto; (ii) the appointment of the Shareholder Representative pursuant to this Agreement; and (iii) the performance of all duties described in this Agreement by the Shareholder Representative on their behalf.

(f)            The provisions of this Section 3.5 are intended to be for the benefit of and shall be enforceable by the Shareholder Representative and Midland States.

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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WATERLOO

Waterloo hereby represents and warrants to Midland States and Acquisition Co. as follows:

Section 4.1            Waterloo Organization. Waterloo:  (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois and is also in good standing in each other jurisdiction set forth on Schedule 4.1 in which the nature of the business conducted or the properties or assets owned or leased by it makes such qualification necessary; (b) is registered with the Federal Reserve as a bank holding company under the federal Bank Holding Company Act of 1956, as amended (the “BHCA”); and (c) has full power and authority, corporate and otherwise, to operate as a bank holding company and to own, operate and lease its properties as presently owned, operated and leased, including the stock of Waterloo, and to carry on its business as it is now being conducted. The copies of the articles of incorporation and by-laws of Waterloo and all amendments thereto included in Schedule 4.1 are complete and correct.

Section 4.2            Waterloo Subsidiary Organization. Waterloo Bank is an Illinois state bank duly organized, validly existing and in good standing under the laws of the State of Illinois. Waterloo Bank has full power and authority, corporate and otherwise, to own, operate and lease its properties as presently owned, operated and leased, and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted or the properties or assets owned or leased by it makes such qualification necessary. The copies of the charter (or similar organizational documents) and by-laws of each Waterloo Bank’s Subsidiary and all amendments thereto included in Schedule 4.2 are complete and correct.

Section 4.3            Authorization; Enforceability.

(a)           Waterloo has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by Waterloo, and the consummation by it of its obligations under this Agreement, have been authorized by all necessary corporate action, subject to shareholder approval, and this Agreement constitutes a legal, valid and binding obligation of Waterloo enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity.

(b)           No “business combination,” “moratorium,” “control share” or other state anti-takeover statute or regulation or any provisions contained in the articles of incorporation or bylaws of Waterloo or any Waterloo Subsidiary:  (i) prohibits or restricts Waterloo’s ability (or the ability of Waterloo) to perform its obligations under this Agreement, or its ability to consummate the Contemplated Transactions; (ii) would have the effect of invalidating or voiding this Agreement, or any provision hereof; or (iii) would subject Waterloo to any material impediment or condition in connection with the exercise of any of its rights under this Agreement. The board of directors of Waterloo has unanimously approved the execution of, and

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performance by Waterloo of its obligations under, this Agreement and has resolved to recommend the approval of the Merger by its shareholders.

Section 4.4            No Conflict. Except as set forth on Schedule 4.4, neither the execution nor delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):  (a) contravene, conflict with or result in a violation of any provision of the articles of incorporation or charter (or similar organizational documents) or by-laws, each as in effect on the date of this Agreement, or any currently effective resolution adopted by the board of directors or shareholders of, Waterloo or any Waterloo Subsidiary; (b) contravene, conflict with or result in a violation of, or give any Regulatory Authority or other Person the valid and enforceable right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Waterloo or any Waterloo Subsidiary, or any of their respective assets that are owned or used by them, may be subject, except for any contravention, conflict or violation that is permissible by virtue of obtaining the regulatory approvals necessitated by the Contemplated Transactions, including any such approvals under the Federal Deposit Insurance Act, as amended (the “FDI Act”), the BHCA, and the laws of the State of Illinois (the “Illinois Statutes”), including the Illinois Banking Act (the “Illinois Banking Act”); (c) contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any material Contract to which Waterloo or any Waterloo Subsidiary is a party or by which any of their respective assets is bound; or (d) result in the creation of any material lien, charge or encumbrance upon or with respect to any of the assets owned or used by Waterloo or any Waterloo Subsidiary. Except for the approvals set forth on Schedule 4.4 or in Section 8.1 and the requisite approval of its shareholders, neither Waterloo nor any Waterloo Subsidiary is or will be required to give any notice to or obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

Section 4.5            Waterloo Capitalization.

(a)           The authorized capital stock of Waterloo currently consists of 50,000 authorized shares of Waterloo Common Stock, par value $25.00 per share, of which, on the date of this Agreement, (1) 17,730 shares are duly issued and outstanding, fully paid and non-assessable, (2) 270 shares are held in the treasury of Waterloo and (3) no shares have been issued as restricted stock pursuant to a restricted stock plan or similar plan. There are no other equity or capital securities of any kind whatsoever authorized, issued or outstanding.

(b)           None of the shares of Waterloo Common Stock were issued in violation of any federal or state securities laws or any other Legal Requirement. None of the shares of Waterloo Common Stock were issued in violation of any pre-emptive rights, contractual or otherwise. To the Knowledge of Waterloo and except as disclosed in this Agreement or as set forth on Schedule 4.5, none of the shares of authorized capital stock of Waterloo are, nor on the Closing Date will they be, subject to any claim of right inconsistent with this Agreement. Except as contemplated in this Agreement or as set forth on Schedule 4.5, (x) there are, as of the date of this Agreement, no outstanding subscriptions, contracts, conversion privileges, options, warrants, calls or other rights obligating Waterloo or any Waterloo Subsidiary to issue, sell or otherwise

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dispose of, or to purchase, redeem or otherwise acquire, any shares of capital stock of Waterloo or any Waterloo Subsidiary, and (y) Waterloo is not a party to any Contract relating to the issuance, sale or transfer of any equity securities or other securities of Waterloo. Since December 31, 2007, except as disclosed in or permitted by this Agreement, or as provided on Schedule 4.5, no shares of Waterloo Common Stock have been purchased, redeemed or otherwise acquired, directly or indirectly, by Waterloo or any Waterloo Subsidiary. No dividends or other distributions payable in any equity securities of Waterloo or any Waterloo. Subsidiary have been declared but not yet paid, set aside, made or paid to the shareholders of Waterloo.

(c)           Except as listed on Schedule 4.5, Waterloo does not own any shares of capital stock or other form of securities of any third party (excluding securities held by Waterloo Bank and covered by Section 4.6 below).

Section 4.6            Waterloo Subsidiary Capitalization. The authorized capital stock of Waterloo Bank consists, and immediately prior to the Effective Time will consist, exclusively of 18,000 shares of capital stock, $25.00 par value per share (the “Waterloo Bank Shares”), all of which shares are, and immediately prior to the Closing will be, duly authorized, validly issued and outstanding, fully paid and nonassessable. Except as set forth on Schedule 4.6 Waterloo is, and will be on the Closing Date, the record and beneficial owner of 100% of the Waterloo Bank Shares and all of the issued and outstanding shares of capital stock of each other Waterloo Subsidiary, free and clear of any lien or encumbrance whatsoever. Except as set forth on Schedule 4.6, the Waterloo Bank Shares are, and will be on the Closing Date, freely transferable and are, and will be on the Closing Date, subject to no claim of right inconsistent with this Agreement. There are no unexpired or pending preemptive rights with respect to any shares of capital stock of any Waterloo Subsidiary, except for such rights held exclusively by Waterloo or as set forth on Schedule 4.6. There are no outstanding securities of any Waterloo Subsidiary that are convertible into or exchangeable for any shares of such Waterloo Subsidiary’s capital stock, except for such rights held exclusively by Waterloo or as set forth on Schedule 4.6, and no Waterloo Subsidiary is a party to any Contract relating to the issuance, sale or transfer of any equity securities or other securities of such Waterloo Subsidiary. Neither Waterloo nor any Waterloo Subsidiary owns or has any Contract to acquire any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business, except for the capital stock of Waterloo or as set forth on Schedule 4.6. Schedule 4.6(i) contains a complete and accurate list of the investment securities owned by Waterloo and any Waterloo Subsidiary, together with the value of each such security listed on the Books of Waterloo Bank as of September 30, 2008. Other than in a fiduciary capacity for the account of third parties, neither Waterloo nor Waterloo Bank owns any shares of capital stock or other form of securities other than the securities listed on Schedule 4.6(i).

Section 4.7            Waterloo Financial Statements and Reports; Regulatory Filings.

(a)           True, correct and complete copies of the following financial statements and reports are included in Schedule 4.7:  (i) balance sheets and for Waterloo as of September 30, 2008, December 31, 2007 and 2006, and the related statement of income of Waterloo for the nine months ended September 30, 2008 and the years ended December 31, 2007 and 2006; (ii) balance sheets for Waterloo Bank as of September 30, 2008, December 31, 2007 and 2006, and the related consolidated statements of income of Waterloo Bank for the nine months ended

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September 30, 2008 and the years ended December 31, 2007 and 2006; and (iii) Call Reports for Waterloo Bank as of the close of business on December 31, 2007 and 2006, and September 30, 2008.

(b)           Except as set forth on Schedule 4.7, the financial statements and reports described in clause (a) above have been prepared in conformity with regulatory accounting standards, are consistent with past accounting practices, comply in all material respects with all applicable Legal Requirements and fairly present the financial condition and results of operations of Waterloo and Waterloo Bank at the dates and for the periods presented. Taken together, such financial statements and reports described in clause (a) above (collectively, the “Waterloo Financial Statements”) are complete and correct in all respects and fairly and accurately present the respective financial position, assets, liabilities and results of operations of Waterloo and Waterloo Bank at the respective dates of and for the periods referred to in the Waterloo Financial Statements, subject to normal year-end audit adjustments in the case of unaudited Waterloo Financial Statements.

(c)           Waterloo and each Waterloo Subsidiary have filed all forms, reports and documents required to be filed with the FDIC, the Federal Reserve Board, the Division and any other applicable federal or state securities or banking authorities. Such forms, reports and documents (x) complied as to form with the requirements of applicable Legal Requirements; and (y) did not at the time they were filed, after giving effect to any amendment thereto filed prior to the date of this Agreement, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that information as of a later date (but before the date of this Agreement) is deemed to modify information as of an earlier date.

Section 4.8            Books and Records. The books of account, minute books, stock record books and other records of Waterloo and each Waterloo Subsidiary are complete and correct in all respects and have been maintained in accordance with Waterloo’s business practices and all applicable Legal Requirements, including the maintenance of any adequate system of internal controls required by the Legal Requirements. The minute books of Waterloo and each Waterloo Subsidiary contain accurate and complete records in all respects of all meetings held of, and corporate action taken by, its respective shareholders, boards of directors and committees of the boards of directors. At the Closing, all of those books and records will be in the possession of Waterloo.

Section 4.9            Title to Properties. Waterloo and each Waterloo Subsidiary has good and marketable title to all assets and properties, whether real or personal, tangible or intangible, that it purports to own, subject to no liens, mortgages, security interests, encumbrances or charges of any kind except:  (a) as noted in the most recent Waterloo Financial Statement or on Schedule 4.9; (b) statutory liens for Taxes not yet delinquent or being contested in good faith by appropriate Proceedings and for which appropriate reserves have been established and reflected on the Waterloo Financial Statements; (c) pledges of liens required to be granted in connection with the acceptance of government deposits, granted in connection with repurchase or reverse repurchase agreements, pursuant to advances from the Federal Home Loan Bank of Chicago or otherwise incurred in the Ordinary Course of Business; and (d) minor defects and irregularities in

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title and encumbrances that do not materially impair the use thereof for the purposes for which they are held. Except as set forth on Schedule 4.9, Waterloo and each Waterloo Subsidiary as lessee has the right under valid and existing leases to occupy, use, possess and control any and all of the respective property leased by it. All buildings and structures owned by Waterloo and each Waterloo Subsidiary lie wholly within the boundaries of the real property owned or validly leased by it, and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person.

Section 4.10         Condition and Sufficiency of Assets. The buildings, structures and equipment owned or used by Waterloo and each Waterloo Subsidiary are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, structures or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in the aggregate in nature or in cost. Except as set forth on Schedule 4.10, to the Knowledge of Waterloo, the real property, buildings, structures and equipment owned or leased by Waterloo and each Waterloo Subsidiary are in compliance with all state and local building and development codes and other restrictions, including subdivision regulations, building and construction regulations, drainage codes, health, fire and safety laws and regulations, utility tariffs and regulations, conservation laws and zoning laws and ordinances. The assets and properties, whether real or personal, tangible or intangible, that Waterloo or any Waterloo Subsidiary purport to own or lease are sufficient for the continued conduct of the business of Waterloo and each Waterloo Subsidiary after the Closing in substantially the same manner as conducted prior to the Closing.

Section 4.11         Loans; Loan Loss Reserve. All loans and loan commitments extended by Waterloo Bank and any extensions, renewals or continuations of such loans and loan commitments (the “Waterloo Loans”) are evidenced by appropriate and sufficient documentation and constitute valid and binding obligations to Waterloo Bank enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity. Except as set forth on Schedule 4.11, all such Waterloo Loans are, and at the Closing will be, free and clear of any encumbrance or other charge and Waterloo has complied, and at the Closing will have complied, with all Legal Requirements relating to such Waterloo Loans. The allowance for loan and lease losses of Waterloo is, and will be on the Closing Date, adequate in all material respects to provide for probable or specific losses, net of recoveries relating to loans previously charged off. To the Knowledge of Waterloo, none of the Waterloo Loans is subject to any material offset or claim of offset. The aggregate loan balances in excess of Waterloo’s consolidated allowance for loan and lease losses are, based on past loan loss experience, collectible in accordance with their terms (except as limited above); and all uncollectible loans have been charged off.

Section 4.12         Undisclosed Liabilities; Adverse Changes.  Except as set forth on Schedule 4.12, neither Waterloo nor any Waterloo Subsidiary has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise), except for liabilities or obligations reflected or reserved against in the Waterloo Financial Statements and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. Since the date of the latest Waterloo Financial Statement, except as set forth on Schedule 4.12, there has not been any change in the business, operations, properties, assets or condition of Waterloo

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or any Waterloo Subsidiary, and, to the Knowledge of Waterloo, no event has occurred or circumstance exists, that has had or would reasonably be expected to have a Material Adverse Effect on Waterloo on a consolidated basis.

Section 4.13         Taxes.

(a)           Waterloo and each Waterloo Subsidiary has duly and timely filed all Tax Returns required to be filed by it, and each such Tax Return is complete and correct in all material respects and was prepared and filed in substantial compliance with all applicable Legal Requirements. Neither Waterloo nor any Waterloo Subsidiary is delinquent in the payment of any Tax. Except as otherwise provided on Schedule 4.13, Waterloo and each Waterloo Subsidiary has paid, or made adequate provision in a reserve for Tax liability set forth on the face of the balance sheet for Waterloo Bank as of September 30, 2008, for the payment in full of, all Taxes (whether or not reflected in Tax Returns as filed or to be filed) imposed or to be imposed upon, or accrued or to be accrued by, or claimed by any Regulatory Authority to be owed by, Waterloo or any Waterloo Subsidiary (or any successor to Waterloo or a Waterloo Subsidiary, in its capacity as successor) for all Tax periods ended on or prior to the Closing Date and the portion through the end of the Closing Date for any Tax period that includes but does not end on the Closing Date (collectively, the “Pre-Closing Tax Period”). In the case of any Tax period that includes but does not end on the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts that relates to the Pre-Closing Tax Period portion of such Straddle Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date, and the amount of any other Taxes that relates to the Pre-Closing Tax Period of such Straddle Period shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Pre-Closing Tax Period portion of the Straddle Period and the denominator of which is the number of days in the Straddle Period. There is no claim or assessment pending or, to the Knowledge of Waterloo, Threatened against Waterloo or any Waterloo Subsidiary for any Taxes owed by any of them. Except as set forth on Schedule 4.13, no audit, examination or investigation related to Taxes paid or payable by Waterloo or any Waterloo Subsidiary is presently being conducted or, to the Knowledge of Waterloo, Threatened by any Regulatory Authority. Waterloo has delivered to Midland States true, correct and complete copies of (i) all material Tax Returns previously filed with respect to the last seven (7) fiscal years by Waterloo or any Waterloo Subsidiary and (ii) any Tax examination reports and statements of deficiencies assessed against or agreed to by any of Waterloo or any Waterloo Subsidiary for any such time period. Neither Waterloo nor any Waterloo Subsidiary currently is a party to any agreement waiving any statute of limitations in respect of Taxes or extending any time period within which any Tax may be assessed or any Tax Return may be filed. No claim has ever been made by an authority in a jurisdiction where Waterloo or any Waterloo Subsidiary does not file Tax Returns that Waterloo or any Waterloo Subsidiary is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Waterloo or any Waterloo Subsidiary.

(b)           Each of Waterloo and each Waterloo Subsidiary have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

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(c)           Neither Waterloo nor any Waterloo Subsidiary has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). Except as set forth on Schedule 4.13, neither Waterloo nor any Waterloo Subsidiary is a party to or bound by any Tax allocation or sharing agreement. Neither Waterloo nor any Waterloo Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or (ii) has any liability for the Taxes of any Person (other than Waterloo or any Waterloo Subsidiary) under Reg. §1.15026 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract or otherwise.

(d)           Neither Waterloo nor any Waterloo Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Code §1502 (or any corresponding or similar provision of state, local or foreign income Tax law), (iv) installment sale or open transaction disposition made on or prior to the Closing Date or (v) prepaid amount received on or prior to the Closing Date.

(e)           To its Knowledge neither Waterloo nor any Waterloo Subsidiary has taken any position on any of its income Tax Returns that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Tax Code. Neither Waterloo nor any Waterloo Subsidiary has been a party to any “reportable transaction” as defined in Code section 6707A(c)(1) and Treasury Regulations Section 1.6011 4(b).  Except with respect to the employment contract with Mr. Keith Francis, neither Waterloo nor any Waterloo Subsidiary is a party to any Contract or arrangement that has resulted or could result in a payment that would not be fully deductible as a result of Section 280G of the Tax Code (without regard to Section 280G(b)(4) of the Tax Code) or any similar provision of foreign, state, or local law.

Section 4.14         [Reserved]

Section 4.15         Employee Benefits.

(a)           Schedule 4.15 contains a complete and accurate list, with respect to Waterloo and any Person which is treated as a single employer with Waterloo (a “Waterloo ERISA Affiliate”) within the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all “employee benefit plans” within the meaning of Section 3(3) of ERISA, (ii) all stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code), life insurance or accident insurance plans, programs or arrangements, (iii) all bonus, pension, profit sharing, savings, severance, retirement, deferred compensation or incentive plans, programs or arrangements, (iv) all other fringe or employee benefit plans, programs or arrangements, and (v) all employment or executive compensation or severance agreements, written or otherwise, for the benefit of, or relating to, any present or former employee, consultant or nonemployee director of Waterloo (all of the foregoing described in clauses (i) through (v), collectively, the “Waterloo Benefit Plans”).

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(b)           Except as set forth on Schedule 4.15(b), to Waterloo’s Knowledge, all Waterloo Benefit Plans, which are subject to ERISA and the Code, established or maintained by Waterloo or any Waterloo ERISA Affiliate or to which Waterloo or any Waterloo ERISA Affiliate contributes, are in material compliance with all applicable requirements of ERISA, and are in material compliance with all applicable requirements (including qualification and non discrimination requirements in effect as of the Closing) of the Code for obtaining the Tax benefits the Code thereupon permits with respect to such Waterloo Benefit Plans. No Waterloo Benefit Plan is or has been subject to Title IV of ERISA or Section 412 of the Code. All contributions and premium payments due prior to the date of this Agreement have been made, and all contributions and premium payments due prior to Closing will be made, by Waterloo or a Waterloo ERISA Affiliate, as applicable, on a timely basis. No payment that is owed or may become due as a result of the Merger to any director, officer, employee, or agent of Waterloo or a Waterloo Subsidiary will be nondeductible to Waterloo, or following the Merger to Midland States, under Section 280G of the Code or subject to tax under Section 4999 of the Code; nor will Waterloo or a Waterloo Subsidiary be required to “gross up” or otherwise compensate any such person because of the imposition of any excise tax on a payment to such person.

(c)           Except as set forth in Schedule 4.15(c), to Waterloo’s Knowledge, any Waterloo Benefit Plan sponsored or maintained by Waterloo or any Waterloo Subsidiary since January 1, 2005 which is a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code has been operated in all material respects in good faith compliance with Section 409A of the Code and any Internal Revenue Service guidance or U.S. Treasury Department regulations issued thereunder. Each such Waterloo Benefit Plan is in material compliance with all documentation requirements set forth in Section 409A of the Code and any Internal Revenue Service guidance or U.S. Treasury Department regulations issued thereunder. No additional Tax under Section 409A of the Code has been or is reasonably expected to be incurred by a participant in any such Waterloo Benefit Plan.

(d)           Except as set forth in Schedule 4.15(d), there are no outstanding awards under any type of phantom stock plan or similar economic award, and no current or former employee of Waterloo or any Waterloo Subsidiary is entitled to any such benefit.

Section 4.16         Compliance with Legal Requirements. Waterloo and each Waterloo Subsidiary holds all licenses, certificates, permits, franchises and rights from all appropriate Regulatory Authorities necessary for the conduct of its respective business. Except as set forth on Schedule 4.16 each of Waterloo and each Waterloo Subsidiary is, and at all times since January 1, 2006 has been, in compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its respective businesses or the ownership or use of any of its respective assets. Except as set forth on Schedule 4.16, to the Knowledge of Waterloo, no event has occurred or circumstance exists that (with or without notice or lapse of time):  (a) may constitute or result in a violation by Waterloo or any Waterloo Subsidiary of, or a failure on the part of Waterloo or any Waterloo Subsidiary to comply with, any Legal Requirement; or (b) may give rise to any obligation on the part of Waterloo or any Waterloo Subsidiary to undertake, or to bear all or any portion of the cost of, any remedial action of any nature in connection with a failure to comply with any Legal Requirement. Except as set forth on Schedule 4.16, neither Waterloo nor any Waterloo Subsidiary has received, at any time since January 1, 2006, any notice or other communication (whether oral or written) from any Regulatory Authority or any

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other Person regarding:  (x) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement; or (y) any actual, alleged, possible, or potential obligation on the part of Waterloo or any Waterloo Subsidiary to undertake, or to bear all or any portion of the cost of, any remedial action of any nature in connection with a failure to comply with any Legal Requirement.

Section 4.17         Legal Proceedings; Orders.

(a)           Except as set forth on Schedule 4.17, since January 1, 2006, there have been, and currently are, no Proceedings or Orders pending, entered into or, to the Knowledge of Waterloo, Threatened against or affecting Waterloo or any Waterloo Subsidiary or any of their respective assets or businesses, or the Contemplated Transactions, that have not been fully satisfied or terminated and there is no fact to Waterloo’s Knowledge that would provide a basis for any such Proceeding or Order. To the Knowledge of Waterloo, no officer, director, agent or employee of Waterloo or any Waterloo Subsidiary is subject to any Order that prohibits such officer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to the businesses of Waterloo or any Waterloo Subsidiary as currently conducted.

(b)           Except at set forth on Schedule 4.17, neither Waterloo nor any Waterloo Subsidiary:  (i) is subject to any cease and desist or other Order or enforcement action issued by, or (ii) is a party to any written agreement, consent agreement or memorandum of understanding with, or (iii) is a party to any commitment letter or similar undertaking to, or (iv) is subject to any order or directive by, or (v) is subject to any supervisory letter from, or (vi) has been ordered to pay any civil money penalty, which has not been paid, by, or (vii) has adopted any policies, procedures or board resolutions at the request of any Regulatory Authority that currently (w) restricts in any respect the conduct of its business, or (x) that in any manner relates to its capital adequacy, or (y) restricts its ability to pay dividends, or (z) limits in any manner its credit or risk management policies, its management or its business; nor has Waterloo or any Waterloo Subsidiary been advised by any Regulatory Authority that it is considering issuing, initiating, ordering or requesting any of the foregoing.

Section 4.18         Absence of Certain Changes and Events. Except as set forth on Schedule 4.18, since December 31, 2007, Waterloo and each Waterloo Subsidiary have conducted their respective businesses only in the Ordinary Course of Business. Without limiting the foregoing, with respect to each such entity, since December 31, 2007, except as set forth on Schedule 4.18, there has not been any:

(a)           change in its authorized or issued capital stock; grant of any stock option or right to purchase shares of its capital stock; issuance of any security convertible into such capital stock or evidences of indebtedness (except in connection with customer deposits); grant of any registration rights; purchase, redemption, retirement or other acquisition by it of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of its capital stock;

(b)           amendment to its articles of incorporation or charter (or similar organizational documents) or by-laws or adoption of any resolutions by its board of directors or shareholders with respect to the same;

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(c)           payment or increase of any bonus, salary or other compensation to any of its shareholders, directors, officers or employees, except, with respect to employees, for normal salary and bonus increases made in the Ordinary Course of Business, bonuses paid consistent with 2007 year end bonuses or made in accordance with any then existing Waterloo Benefit Plan, and payment of regular directors’ fees or entry by it into any employment, consulting, noncompetition, change in control, severance or similar Contract with any shareholder, director, officer or employee;

(d)           adoption, amendment (except for any amendment necessary to comply with any Legal Requirement) or termination of, or increase in the payments to or benefits under, any Waterloo Benefit Plan;

(e)           damage to or destruction or loss of any of its assets or property, whether or not covered by insurance, where the resulting diminution in value individually or in the aggregate was greater than $25,000;

(f)            entry into, termination or extension of, or receipt of notice of termination of, any joint venture or similar agreement pursuant to any Contract or any similar transaction;

(g)           except for this Agreement, entry into any new, or modification, amendment, renewal or extension (through action or inaction) of the terms of any existing lease, Contract or license that has a term of more than one year or that involves the payment by Waterloo or any Waterloo Subsidiary of more than $25,000 in the aggregate;

(h)           Waterloo Loan or commitment to make any Waterloo Loan other than in the Ordinary Course of Business;

(i)            commitment to make, renew, extend the term or increase the amount of any Waterloo Loan, to any Person if such Waterloo Loan or any other Waterloo Loans to such Person or an Affiliate of such Person is on the “watch list” or similar internal report of Waterloo or any Waterloo Subsidiary, or has been classified as “substandard,” “doubtful,” “loss,” or “other loans specially mentioned” or listed as a “potential problem loan”; provided, however, that nothing in this Section 4.18(i) shall prohibit Waterloo or any Waterloo Subsidiary from honoring any contractual obligation in existence on the date of this Agreement; provided, further, that nothing in this Section 4.18(i) shall prohibit Waterloo from conducting its loan pool participation business in the Ordinary Course of Business;

(j)            sale (other than any sale in the Ordinary Course of Business), lease or other disposition of any of its assets or properties or mortgage, pledge or imposition of any lien or other encumbrance upon any of its material assets or properties, except for Tax and other liens that arise by operation of law and with respect to which payment is not past due and except for pledges or liens:  (i) required to be granted in connection with the acceptance by Waterloo of government deposits; (ii) granted in connection with repurchase or reverse repurchase agreements; or (iii) otherwise incurred in the Ordinary Course of Business;

(k)           incurrence by it of any obligation or liability (fixed or contingent) other than advances from the Federal Home Loan Bank of Chicago or in the Ordinary Course of Business;

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(l)            cancellation or waiver by it of any claims or rights with a value in excess of $25,000;

(m)          except for the Contemplated Transactions, any (i) merger or consolidation with or into any other Person, or (ii) acquisition of any stock, equity interest or business of any other Person except (1) in connection with foreclosures or the exercise of security interests in the Ordinary Course of Business or (2) in a fiduciary capacity for third parties not in an individual amount in excess of $25,000 or an aggregate amount of $50,000;

(n)           transaction for the borrowing or loaning of monies, or any increase in any outstanding indebtedness, other than in the Ordinary Course of Business;

(o)           material change in any policies and practices with respect to liquidity management and cash flow planning, marketing, deposit origination, lending, budgeting, profit and Tax planning, accounting or any other material aspect of its business or operations, except for such changes as may be required in the opinion of the management of Waterloo to respond to then current market or economic conditions or as may be required by any Regulatory Authorities;

(p)           filing of any applications for additional branches, opening of any new office or branch, closing of any current office or branch or relocation of operations from existing locations;

(q)           discharge or satisfaction of any material lien or encumbrance on its assets or repayment of any material indebtedness for borrowed money, except for obligations incurred and repaid in the Ordinary Course of Business;

(r)            entry into any Contract or agreement to buy, sell, exchange or otherwise deal in any assets or series of assets in a single transaction in excess of $25,000 in aggregate value, except for sales of Waterloo “other real estate owned” and other repossessed properties or the acceptance of a deed, in lieu of foreclosure;

(s)           purchase or other acquisition of any investments, direct or indirect, in any derivative securities, financial futures or commodities or entry into any interest rate swap, floors and option agreements or other similar interest rate management agreements; or

(t)            agreement, whether oral or written, by it to do any of the foregoing in this Section 4.18.

Section 4.19         Properties and Contracts. Except for Contracts evidencing Loans made by Waterloo or any Waterloo Subsidiary in the Ordinary Course of Business, Schedule 4.19 lists or describes the following with respect to Waterloo and each Waterloo Subsidiary:

(a)           all real property owned by Waterloo and each Waterloo Subsidiary and the principal buildings and structures located thereon, together with the address of such real estate, and each lease of real property to which Waterloo and each Waterloo Subsidiary is a party, identifying the parties thereto, the annual rental payable, the expiration date thereof and a brief description of the property covered, and in each case of either owned or leased real property, the

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proper identification, if applicable, of each such property as a branch or main office or other office of Waterloo or such Waterloo Subsidiary;

(b)           all loan and credit agreements, conditional sales contracts or other title retention agreements or security agreements relating to money borrowed by Waterloo or any Waterloo Subsidiary, exclusive of deposit agreements with customers of Waterloo entered into in the Ordinary Course of Business, agreements for the purchase of federal funds and repurchase agreements;

(c)           each Contract that involves the performance of services or delivery of goods or materials by Waterloo or any Waterloo Subsidiary (i) of an amount or value in excess of $25,000 or (ii) that substantially restricts Waterloo’s actions or those of any Waterloo Subsidiary;

(d)           each Contract that was not entered into in the Ordinary Course of Business and that involves expenditures of or receipts by Waterloo or any Waterloo Subsidiary in excess of $25,000;

(e)           each Contract not, referred to elsewhere in this Section 4.19 that:

(i)            relates to the future purchase of goods or services that materially exceeds the requirements of Waterloo’s or any Waterloo Subsidiary’s respective business at current levels or for normal operating purposes; or

(ii)           materially affects the business or financial condition of Waterloo or any Waterloo Subsidiary;

(f)            each lease, rental, license, installment and conditional sale agreement and other Contract affecting the ownership of, leasing of, title to or use of any personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $25,000 or with terms of less than one year);

(g)           each licensing agreement or other Contract, registration or application with the United State Patent and Trademark Office, with respect to patents, trademarks, copyrights, or other intellectual property (collectively, “Intellectual Property Assets”), including agreements with current or former employees, consultants or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property Assets of Waterloo or any Waterloo Subsidiary;

(h)           each collective bargaining agreement and other Contract to or with any labor union or other Person representing one or more employees;

(i)            each joint venture, partnership and other Contract (however named) involving a sharing of profits, losses, costs or liabilities by Waterloo or any Waterloo Subsidiary with any other Person;

(j)            each Contract containing covenants that in any way purport to substantially restrict the business activity of Waterloo or any Waterloo Subsidiary or any Affiliate of any of

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the foregoing, or substantially limit the ability of Waterloo or any Waterloo Subsidiary or any Affiliate of the foregoing to engage in any line of business or to compete with any Person;

(k)           each Contract providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods;

(l)            in respect to any Waterloo Benefit Plan, the latest reports or forms, if any, filed with the Department of Labor and Pension Benefit Guaranty Corporation under ERISA, any current financial or actuarial reports and any currently effective Internal Revenue Service private rulings or determination letters obtained by or for the benefit of Waterloo or any Waterloo Subsidiary;

(m)          the name of each Person who is or would be entitled pursuant to any Contract or Waterloo Benefit Plan to receive any payment from Waterloo or any Waterloo Subsidiary as a result of the consummation of the Contemplated Transactions (including any payment that is or would be due as a result of any actual or constructive termination of a Person’s employment or position following such consummation) and the maximum amount of such payment;

(n)           each contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by Waterloo or any Waterloo Subsidiary to be responsible for consequential damages;

(o)           each Contract for capital expenditures in excess of $25,000;

(p)           each written warranty, guaranty or other similar undertaking with respect to contractual performance extended by Waterloo or any Waterloo Subsidiary other than in the Ordinary Course of Business; and

(q)           each amendment, supplement and modification (whether oral or written) in respect of any of the foregoing.

True, correct and complete copies of each document, plan or Contract listed and described on Schedule 4.19 previously have been provided to Midland States.

Section 4.20         No Defaults. Except as set forth on Schedule 4.20, to the Knowledge of Waterloo, each Contract identified or required to be identified on Schedule 4.19 is in full force and effect and is valid and enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors rights generally and subject to general principles of equity. Waterloo and each Waterloo Subsidiary is, and at all times since January 1, 2008, has been, in compliance with all applicable terms and requirements of each Contract under which either Waterloo or any Waterloo Subsidiary has or had any material obligation or liability or by which Waterloo or any Waterloo Subsidiary or any of their respective material assets owned or used by them is or was bound. To the Knowledge of Waterloo, each other Person that has or had any obligation or liability under any such Contract under which Waterloo or any Waterloo Subsidiary has or had any rights is, and at all times since January 1, 2008, has been, in compliance with all applicable terms and requirements of such Contract. To the Knowledge of Waterloo, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or breach

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of, or give Waterloo, any Waterloo Subsidiary or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract. Except in the Ordinary Course of Business with respect to any Waterloo Loan, neither Waterloo nor any Waterloo Subsidiary has given to or received from any other Person, at any time since January 1, 2008, any notice or other communication (whether oral or written) regarding any actual, alleged, possible or potential violation or breach of, or default under, any Contract, that has not been terminated or satisfied prior to the date of this Agreement. Other than in the Ordinary Course of Business in connection with workouts and restructured loans, there are no renegotiations of, attempts to renegotiate or outstanding rights to renegotiate, any amounts paid or payable to Waterloo or any Waterloo Subsidiary under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation.

Section 4.21         Insurance.  Schedule 4.21 lists the policies and material terms of insurance (including bankers’ blanket bond and insurance providing benefits for employees) owned or held by Waterloo or any Waterloo Subsidiary on the date of this Agreement. Each policy is in full force and effect (except for any expiring policy which is replaced by coverage at least as extensive). All premiums due on such policies have been paid in full or provision for such payment has been made.

Section 4.22         Compliance with Environmental Laws.  Except as set forth on Schedule 4.22:  (a) there are no Proceedings or Orders against Waterloo or any Waterloo Subsidiary, or, to the Knowledge of Waterloo, any predecessor thereof, with respect to alleged violation of, or liability under, Environmental Laws; (b) to the Knowledge of Waterloo, there is no Threatened Proceeding or Order against Waterloo or any Waterloo Subsidiary, or any predecessor thereof, with respect to the alleged violation of, or liability under, Environmental Laws; (c) to the Knowledge of Waterloo, there is no factual basis for the assertion or commencement of a Proceeding or Order against Waterloo or any Waterloo Subsidiary, or any predecessor thereof, with respect to the violation of, or liability under, Environmental Laws; and (d) to the Knowledge of Waterloo, there are no pending or Threatened Proceedings or orders against or involving the assets of Waterloo or any Waterloo Subsidiary. For purposes of this Section 4.22:  (x) “Environmental Laws” means any federal, state or local law, statute, ordinance, rule, regulation, code, order, permit or other legally binding requirement applicable to the business or assets of Waterloo or any Waterloo Subsidiary, that imposes liability or standards of conduct with respect to the Environment and/or Hazardous Materials; (y) “Environment” means surface or subsurface soil or strata, surface waters and sediments, navigable waters, groundwater, drinking water supply and ambient air; and (z) “Hazardous Materials” means any hazardous, toxic or dangerous substance, waste, contaminant, pollutant, gas or other material that is classified as such under Environmental Laws or is otherwise regulated under Environmental Laws.

Section 4.23         Fiduciary Accounts.  Waterloo Bank has properly administered all accounts for which it acts as fiduciary, including accounts for which it serves as trustee, agent, custodian or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law and regulations and common law. To the Knowledge of Waterloo, none of Waterloo, Waterloo Bank or any of its directors, officers or employees has committed any breach of trust with respect to any such fiduciary account, and the accountings for

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each such fiduciary account are true and correct in all respects and accurately reflect the assets of such fiduciary account.

Section 4.24         Indemnification Claims. To the Knowledge of Waterloo, no action or failure to take action by any director, officer, employee or agent of Waterloo or any Waterloo Subsidiary has occurred that may give rise to a claim or a potential claim by any such Person for indemnification by Waterloo or any Waterloo Subsidiary under any agreement with, or the corporate indemnification provisions of, Waterloo or any Waterloo Subsidiary, or under any Legal Requirements.

Section 4.25         Insider Interests. Except as set forth on Schedule 4.25 no officer or director of Waterloo or any Waterloo Subsidiary, any member of the Family of any such Person, and no entity that any such Person “controls” within the meaning of Regulation O of the Federal Reserve, has any loan, deposit account or any other agreement with Waterloo or any Waterloo Subsidiary, any interest in any material property, real, personal or mixed, tangible or intangible, used in or pertaining to the business of Waterloo or any Waterloo Subsidiary.

Section 4.26         Brokerage Commissions. Except as set forth on Schedule 4.26, none of Waterloo, any Waterloo Subsidiary or any of their respective Representatives has incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement. The calculation of the Adjusted Purchase Price pursuant to Section 3.1 shall be based only on the portion of any such payment due upon Closing (e.g., amounts previously payable with respect to such commissions upon execution of this Agreement shall be disregarded for purposes of Section 3.1).

Section 4.27         Change of Control and other Payments. Except as set forth on Schedule 4.27, there are no “change of control” payments or any other amounts due to any Person other than in their capacity as a holder of Waterloo Common Stock as a result of the execution of this Agreement by Waterloo and the closing of the Contemplated Transactions or any other consulting or employment agreements with any Person pursuant to which the termination of (i) such agreement or (ii) the employment or consulting relationship with such Person, would trigger any such payment.

Section 4.28         Disclosure. Neither any representation nor warranty of Waterloo in, nor any Schedule to, this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. No notice given pursuant to Section 6.5 will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MIDLAND STATES

Midland States hereby represents and warrants to Waterloo as follows:

Section 5.1            Midland States Organization. Midland States:  (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is

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also in good standing in each other jurisdiction in which the nature of business conducted or the properties or assets owned or leased by it makes such qualification necessary; (b) is registered with the Federal Reserve as a bank holding company under the BHCA; and (c) has full power and authority, corporate and otherwise, to operate as a bank holding company and to own, operate and lease its properties as presently owned, operated and leased, including the stock of Midland States Bank, and to carry on its business as it is now being conducted.

Section 5.2            Midland States Subsidiary Organization.

(a)           Acquisition Co.:  (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois and is also in good standing in each other jurisdiction in which the nature of business conducted or the properties or assets owned or leased by it makes such qualification necessary, and (b) is a wholly owned subsidiary of Midland States and has full power and authority, corporate and otherwise, to carry on its business as it is now being conducted.

(b)           Midland States Bank is an Illinois chartered state bank duly organized, validly existing and in good standing under the laws of the State of Illinois. Midland States Bank has full power and authority, corporate and otherwise, to own, operate and lease its properties as presently owned, operated and leased, and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted or the properties or assets owned or leased by it makes such qualification necessary.

Section 5.3            Authorization; Enforceability.

(a)           Each of Midland States and Acquisition Co., has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by each of Midland States and Acquisition Co., and the consummation by it of its obligations under this Agreement, have been authorized by all necessary corporate action, subject to shareholder approval, if required, and this Agreement constitutes a legal, valid and binding obligation of each of Midland States and Acquisition Co. enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity.

(b)           No “business combination,” “moratorium,” “control share” or other state anti-takeover statute or regulation or any provisions contained in the articles of incorporation or bylaws of Midland States or any Midland States Subsidiary:  (i) prohibits or restricts Midland States’ or Acquisition Co.’s ability to perform its obligations under this Agreement, or its ability to consummate the Contemplated Transactions; (ii) would have the effect of invalidating or voiding this Agreement, or any provision hereof; or (iii) would subject Waterloo to any material impediment or condition in connection with the exercise of any of its rights under this Agreement. The board of directors of Midland States and Acquisition Co. have each approved the execution of, and performance by each of Midland States and Acquisition Co. of their respective obligations under, this Agreement.

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Section 5.4            No Conflict. Neither the execution nor delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time) in a manner which would be reasonably expected to impair Midland States obligation or ability to close:  (a) contravene, conflict with or result in a violation of any provision of the certificate of incorporation or charter (or similar organizational documents) or bylaws, each as in effect on the date of this Agreement, or any currently effective resolution adopted by the board of directors or shareholders of, Midland States or any Midland States Subsidiary; (b) contravene, conflict with or result in a violation of, or give any Regulatory Authority or other Person the valid and enforceable right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Midland States or any Midland States Subsidiary, or any of their respective assets that are owned or used by them, may be subject, except for any contravention, conflict or violation that is permissible by virtue of obtaining the regulatory approvals necessitated by the Contemplated Transactions, including any such approvals under the FDI Act, the BHCA and the Illinois Statutes. Except for the approvals set forth in Section 8.1 and the requisite approval, if required, of its shareholders, neither Midland States nor any Midland States Subsidiary is or will be required to give any notice to or obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

Section 5.5            Disclosure. Neither any representation nor warranty of Midland States in, nor any Schedule to, this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.

ARTICLE 6
WATERLOO’S COVENANTS

Section 6.1            Access and Investigation. Prior to the Closing Date, Midland States and its Representatives shall, at all times during normal business hours and with reasonable advance notice, have full and continuing access to the facilities, operations, records and properties of Waterloo and each Waterloo Subsidiary in accordance with the provisions of this Section 6.1. Midland States and its Representatives may, prior to the Closing Date, make or cause to be made such reasonable investigation of the operations, records and properties of Waterloo and each Waterloo Subsidiary and of their respective financial and legal conditions as Midland States shall deem necessary or advisable to familiarize itself with such records, properties and other matters; provided, however, that such access or investigation shall not interfere materially with the normal operations of Waterloo or any Waterloo Subsidiary. Upon request, Waterloo and each Waterloo Subsidiary will furnish Midland States or its Representatives attorneys’ responses to auditors’ requests for information regarding Waterloo or such Waterloo Subsidiary, as the case may be, and such financial and operating data and other information reasonably requested by Midland States (provided that, with respect to attorneys, such disclosure would not result in the waiver by Waterloo or any Waterloo Subsidiary of any claim of attorney-client privilege), and will permit Midland States and its Representatives to discuss such information directly with any individual or firm performing auditing or accounting functions for Waterloo or such Waterloo Subsidiary, and such auditors and accountants shall be directed to furnish copies of any reports or financial information as developed to Midland States or its Representatives. No investigation

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by Midland States or any of its. Representatives shall affect the representations and warranties made by Waterloo. Waterloo shall also cooperate with Midland States with respect to Midland States obtaining additional evidence of Waterloo’s good title to the real properties it owns beyond that reflected in Waterloo’s books and records, including title insurance; provided however that any such additional evidence, including title insurance, shall be at the expense of Midland States. This Section 6.1 shall not require the disclosure of any information the disclosure of which to Midland States would be prohibited by any Legal Requirement.

Section 6.2            Operation of Waterloo. Except with the prior written consent of Midland States, which consent shall not be unreasonably withheld or delayed, between the date of this Agreement and the Closing Date, Waterloo will:

(a)           conduct its business only in the Ordinary Course of Business;

(b)           use its reasonable best efforts to preserve intact its current business organization, keep available the services of its current officers, employees and agents, and maintain the relations and goodwill with its suppliers, customers, landlords, creditors, employees, agents and others having business relationships with it;

(c)           confer with Midland States concerning issues or events which, in the reasonable judgment of Waterloo would be reasonably likely to have a Material Adverse Effect on Waterloo or Waterloo Bank at such time as Waterloo’s management determines that such issues or events are reasonably likely to arise or occur, or events which could reasonably lead to such issues or events occurring prior to the Closing do in fact occur;

(d)           enter into loan and deposit transactions practices and its formal loan policy and, from the date of this Agreement to the Closing Date, not enter into any new credit or new lending relationship in excess of either (i) $100,000; or (ii) conforming Fannie Mae loans pertaining to 1-4 family residential properties, provided that, if Waterloo has made a written request to Midland States for permission to make an otherwise prohibited loan and has provided Midland States with all information necessary for Midland States to make an informed decision with respect to such request, and Midland States has failed to respond to such request within five (5) Business Days after Midland States’ receipt of such request, Midland States’ consent shall be deemed to have been given with respect to an action taken under with respect to such a prohibited loan;

(e)           not acquire loan pool participations;

(f)            maintain all of its assets necessary for the conduct of its business in good operating condition and repair, reasonable wear and tear and damage by fire or unavoidable casualty excepted, and maintain policies of insurance upon its assets and with respect to the conduct of its business in amounts and kinds comparable to that in effect on the date hereof and pay all premiums on such policies when due;

(g)           not buy or sell any security held, or intended to be held, for investment; provided, however, that such restriction shall not affect (i) the buying and selling by Waterloo of Federal Funds or the reinvestment of dividends paid on any securities owned by Waterloo as of the date of this Agreement, and (ii) the Corporate Securities listed on Schedule 4.6(i) (including the

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distribution of such securities for the benefit of the Waterloo stockholders); provided further, that such restriction shall not prohibit Waterloo or any Waterloo Subsidiary from buying or selling securities with a maturity of one (1) year or less in the Ordinary Course of Business;

(h)           amend any Waterloo Benefit Plans to comply with Section 409A of the Code and any Internal Revenue Service guidance or U.S. Treasury Department regulations issued thereunder; provided that, any such amendment shall not have a materially adverse effect on the “grandfathered” status of any such plan.

(i)            not purchase securities in connection with any agreements with the Federal Home Loan Bank of Chicago;

(j)            file in a timely manner all required filings with all Regulatory Authorities and cause such filings to be true and correct in all material respects; and

(k)           maintain its books, accounts and records in the usual, regular and ordinary manner, on a basis consistent with prior years, and comply with all Legal Requirements.

Section 6.3            Negative Covenant. Except as otherwise expressly permitted by this Agreement, or as contemplated by Schedule 4.17 between the date of this Agreement and the Closing Date, Waterloo will not, and will cause each Waterloo Subsidiary not to, without the prior written consent of Midland States, which consent shall not be unreasonably withheld or delayed, take any affirmative action, or fail to take any reasonable action within its control, as a result of which any of the changes or events listed in Section 4.18 is likely to occur. For purposes of this Section 6.3, Midland States’ consent shall be deemed to have been given if Waterloo has made a written request for permission to take any action otherwise prohibited by this Section 6.3 and has provided Midland States with information sufficient for Midland States to make an informed decision with respect to such request, and Midland States has failed to respond to such request within five (5) Business Days after Midland States’ receipt of such request.

Section 6.4            Subsequent Waterloo Financial Statements. As soon as available after the date of this Agreement, Waterloo will furnish Midland States with copies of (a) the monthly unaudited balance sheets, statements of income of Waterloo Bank, prepared for the internal use of Waterloo Bank, (b) balance sheet for Waterloo Bank as of December 31, 2008 (if applicable) and the related statement of income of Waterloo Bank as of and for the year ended December 3l, 2008 and as of and for any other period after the date hereof but prior to the Effective Date, (c) the monthly unaudited balance sheet and statement of income for Waterloo, prepared for the internal use of Waterloo, (d) balance sheet for Waterloo as of December 31, 2008 (if applicable) and the related statement of income as of and for the year ended December 31, 2008 and for any other period, after the date hereof but prior to the Effective Date, (e) Waterloo Bank’s Call Reports for each quarterly period completed after September 30, 2008 and (f) all other financial reports or statements submitted after the date hereof by Waterloo or Waterloo to Regulatory Authorities, to the extent permitted by law (collectively, the “Subsequent Waterloo Financial Statements”). The Subsequent Waterloo Financial Statements shall be prepared on a basis consistent with past accounting practices and shall fairly present in all material respects the consolidated financial condition and results of operations for the dates and periods presented. To

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the extent Waterloo prepares or receives subsequent quarterly unaudited, or annual audited, consolidated and consolidating balance sheets, consolidated and consolidating statements of income, consolidated and consolidating statements of cash flows and consolidated and consolidating statements of shareholders’ equity of Waterloo and/or Waterloo Bank, Waterloo shall make the same immediately available to Midland States.

Section 6.5            Advice of Changes. Between the date of this Agreement and the Closing Date, Waterloo will promptly notify Midland States in writing if Waterloo or any Waterloo Subsidiary becomes aware of any fact or condition that causes or constitutes a breach of any of Waterloo’s representations and warranties as of the date of this Agreement, or if Waterloo or any Waterloo Subsidiary becomes aware of the occurrence after the date of this Agreement of any fact or condition that would. (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. If any such fact or condition would require any change in, the Waterloo Schedules if such Waterloo Schedules were dated the date of the occurrence or discovery of any such fact or condition, Waterloo will promptly deliver to Midland States a supplement to the Waterloo Schedules specifying such change.  During the same period, Waterloo will promptly notify Midland States of the occurrence of any breach of any covenant of Waterloo in this ARTICLE 6 or of the occurrence of any event that might reasonably be expected to make the satisfaction of the conditions in ARTICLE 9 impossible or unlikely; and will permit Midland States to review its Loans and discuss with Waterloo possible additions to the Loan Loss Reserve of Waterloo Bank in connection with such Loans; provided, however, that any such additions to the Loan Loss Reserve made at the request of Midland States other than additions that are in accordance with the past practices of Waterloo shall not be deemed to effect the Waterloo Adjusted Stockholders’ Equity, as defined in Section 6.15.

Section 6.6            Other Offers.

(a)           Until such time, if any, as this Agreement is terminated pursuant to ARTICLE 11, Waterloo will not, and will cause each Waterloo Subsidiary and their respective Representatives not to, directly or indirectly solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Midland States) relating to any Acquisition Transaction or a potential Acquisition Transaction involving Waterloo or any Waterloo Subsidiary. Notwithstanding the foregoing, Waterloo may provide information at the request of, or enter into negotiations with, a third party with respect to an Acquisition Transaction that was not directly or indirectly, after the date hereof, made, encouraged, facilitated, solicited, initiated or assisted by Waterloo, any Waterloo Subsidiary or any of their respective Representatives or Affiliates (an “Unsolicited Waterloo Proposal”), but only to the extent that the board of directors of Waterloo determines, in good faith, that the exercise of its fiduciary duties to Waterloo’s shareholders under applicable law, as advised by its counsel, requires it to take such action; provided, however, that Waterloo may not, in any event, provide to such third party any information which it has not provided to Midland States. Waterloo shall promptly notify Midland States orally, confirmed in writing within two (2) Business Days thereafter, in the event it receives any such inquiry or proposal, and such written notice shall contain (i) a copy of the Unsolicited Waterloo Proposal, if such proposal was

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received in writing or any written statements which were provided in connection with an oral proposal, (ii) a written summary of the terms, sufficiently detailed to outline the material terms of the Unsolicited Waterloo Proposal if such proposal was received orally, and such summary shall be promptly followed by delivery of all written materials subsequently received in connection therewith, (iii) such other information as Midland States shall reasonably need to evaluate the merits of such proposal, or the Person(s) making the proposal, that is reasonably available to Waterloo and (iv) the same information contained in subparagraphs (i) through (iii) for any subsequent Unsolicited Waterloo Proposal or any amendment or modification thereof.

(b)           Waterloo may enter into a definitive agreement with respect to an Unsolicited Waterloo Proposal that is submitted to Waterloo after the date of this Agreement and prior to the Closing Date, if and so long as (i) neither Waterloo nor any Waterloo Subsidiary has violated any of the provisions of this Agreement, (ii) Waterloo provides Midland States with written notice indicating that Waterloo, acting in good faith, believes that the Unsolicited Waterloo Proposal is reasonably likely to constitute a Superior Waterloo Proposal, which notice shall be delivered to Midland States at least three (3) Business Days prior to the date of the meeting of the board of directors of Waterloo considering whether the Unsolicited Waterloo Proposal is a Superior Waterloo Proposal, (iii) during the three (3) Business Day period after Waterloo provides Midland States with the written notice described in clause (ii) above, Waterloo shall and shall cause its financial and legal advisors to negotiate in good faith with Midland States (to the extent Midland States wishes to negotiate) in an effort to make such adjustments to the terms and conditions of this Agreement such that the Unsolicited Waterloo Proposal would not constitute a Superior Waterloo Proposal and, therefore, Waterloo would be required to proceed with the transactions contemplated hereby on such adjusted terms, (iv) notwithstanding the negotiations and adjustments pursuant to clause (iii) above, the board of directors of Waterloo makes the determination necessary for such Unsolicited Waterloo Proposal to constitute a Superior Waterloo Proposal, (v) notwithstanding the negotiations and adjustments pursuant to clause (iii) above, the requisite number of the members of the board of directors of Waterloo determines, in good faith after consultation with its outside legal counsel, that failing to approve or recommend or enter into a definitive agreement with respect to such Unsolicited Waterloo Proposal would constitute a breach of its fiduciary duties to Waterloo’s shareholders under applicable Legal Requirements, (vi) Waterloo does not approve or recommend or enter into a definitive agreement with respect to such Unsolicited Waterloo Proposal at any time before the date that is the third (3rd) Business Day after Midland States receives a written notice to the effect that the board of directors of Waterloo has made the determinations described in clauses (iv) and (v) above, (vii) within five (5) Business Days after Waterloo provides Midland States with the written notice described in clause (vi) above, Midland States does not make a written offer to adjust the terms and conditions of this Agreement and a majority of the board of directors of Waterloo determines in good faith, after consultation with its financial advisor and its outside legal counsel, that such written offer is not as favorable to Waterloo’s shareholders from a financial point of view as the Unsolicited Waterloo Proposal then determined to be a Superior Waterloo Proposal and (viii) not later than the execution and delivery of a definitive agreement with respect to, any such Superior Waterloo Proposal, Waterloo (1) terminates this Agreement pursuant to Section 11.1 and (2) makes the payments required to be made pursuant to Section 11.4 and Section 11.5.

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Section 6.7            Shareholders’ Meeting.  Waterloo shall cause a meeting of its shareholders for the purpose of acting upon this Agreement to be held at the earliest practicable date. Waterloo shall mail to its shareholders, at least twenty (20) calendar days prior to such meeting, notice of such meeting together with the Proxy Statement, which shall include a copy of this Agreement.  Subject to its fiduciary duties, Waterloo and its board of directors shall recommend to shareholders the approval of this Agreement and shall solicit proxies voting only in favor thereof from the shareholders of Waterloo. For the avoidance of doubt, the parties acknowledge that the failure of Waterloo to cause a meeting of its shareholders to be held for the purposes set forth in the Agreement or otherwise to make the recommendations required by or to withdraw, modify or change such recommendation as provided in the provisions of this Section 6.7 shall be deemed to have a Material Adverse Effect on Waterloo on a consolidated basis and on Midland States’ and its shareholders’ rights under this Agreement.

Section 6.8            Information Provided to Midland States. Waterloo agrees that the information concerning Waterloo or any Waterloo Subsidiary that is included in the Proxy Statement and any other documents to be filed with any Regulatory Authority in connection with the Contemplated Transactions will, at the respective times such documents are filed and, with respect to the Proxy Statement, when mailed, will not be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the meeting of Waterloo’s shareholders referred to above, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the meeting in connection with which the Proxy Statement shall be mailed. Notwithstanding the foregoing, Waterloo shall have no responsibility for the truth or accuracy of any information with respect to Midland States or any Midland States Subsidiary or any of their Affiliates provided by Midland States in writing and contained in the Proxy Statement or in any document submitted to, or other communication with, any Regulatory Authority.

Section 6.9            Accounting and Other Adjustments. Waterloo agrees that it shall, and shall cause each Waterloo Subsidiary, to:  (a) make any accounting adjustments or entries to its books of account and other financial records; (b) make additional provisions to any allowance for loan and lease losses; (c) sell or transfer any investment securities held by it; (d) charge-off any loan or lease; (e) create any new reserve account or make additional provisions to any other existing reserve account; (f) make changes in any accounting method; (g) accelerate, defer or accrue any anticipated obligation, expense or income item; and (h) make any other adjustments that would affect the financial reporting of Midland States, on a consolidated basis after the Effective Time, in any case as Midland States shall reasonably request, provided, however, that neither Waterloo nor any Waterloo Subsidiary shall be obligated to take any such requested action until immediately prior to the Closing and at such time as Midland States shall confirm in writing that it has satisfied all of the conditions listed in ARTICLE 10 (except for the completion of actions to be taken at the Closing), unless the satisfaction of any such conditions shall have been waived by Waterloo, and that, to the Knowledge of Midland States, there are no facts or circumstances which would prevent Midland States from consummating the Contemplated Transactions.

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Section 6.10         Capital Stock. Except as otherwise permitted in or contemplated by this Agreement and without the prior written consent of Midland States, from the date of this Agreement to the earlier of the Effective Time or the termination of this Agreement, Waterloo shall not, and shall not enter into any agreement to, issue, sell or otherwise permit to become outstanding any additional shares of Waterloo Common Stock or any other capital stock of Waterloo, or any stock appreciation rights, or any option, warrant, conversion or other right to acquire any such stock, or any security convertible into any such stock. No additional shares of Waterloo Common Stock shall become subject to new grants of employee stock options, stock appreciation rights or similar stock based employee compensation rights.

Section 6.11         Dividends. Waterloo agrees that, between the date of this Agreement and the Effective Time, it shall not declare, pay or make any other dividend or other distribution or payment in respect of, or redemption of, shares of Waterloo Common Stock.

Section 6.12         Consents; and Third Party Approvals. As soon as practicable after the date of this Agreement, Waterloo shall use its commercially reasonable efforts to obtain the approvals listed on Schedule 4.4.

Section 6.13         Bonus and Directors’ Fee Payments. Waterloo agrees that, between the date of this Agreement and the Effective Time, it shall not declare, pay or make any bonuses to its employees and extraordinary fees to its directors; provided that, this Section 6.13 shall not prohibit the payment of bonuses consistent with bonus practices and amounts in 2007.

Section 6.14         Voting Agreements. Concurrently with the execution of this Agreement, each member of the Waterloo board of directors and each executive officer of Waterloo shall deliver to Midland States voting agreements in the form attached hereto as Exhibit A whereby such persons agree, in their capacity as individual record holders of Waterloo Common Stock, to vote their individually held shares in all manners consistent with this agreement and the Contemplated Transactions and, in their capacity as individual record holders of Waterloo Common Stock, will not persuade, lobby or suggest any other holder of Waterloo Common Stock to vote their shares against this Agreement and the Contemplated Transactions.

Section 6.15         Minimum Equity Requirement. The Waterloo Adjusted Stockholders’ Equity, calculated as of the close of business on the third (3rd) Business Day prior to the Closing Date, shall not be less than $7,873,000 (such amount representing the Waterloo Adjusted Stockholders’ Equity as of September 30, 2008 of $8,683,000 minus $810,000). Any negative difference in Waterloo Adjusted Stockholder Equity below $7,873,000 shall be referred to as the “Negative Equity Amount”; provided, however, that no negative change in the Waterloo Adjusted Stockholders’ Equity resulting from (i) payments made or to be made to Mr. Keith Francis pursuant to his employment agreement, or (ii) a sale or distribution of corporate bonds listed on Schedule 4.6(i), shall be deemed to be part of the Negative Equity Amount. In the event of a Negative Equity Amount, the Purchase Price shall be adjusted by the product of (1) the Negative Equity Amount multiplied by (2) 0.613 (the “Tax Factor”); provided, however, that any Losses treated on the books of Waterloo on an after tax adjusted basis shall not be multiplied by the Tax Factor.

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“Waterloo Adjusted Stockholders’ Equity” means the consolidated shareholders’ equity of Waterloo, calculated in accordance with regulatory accounting standards and consistent with past accounting practices, and reflecting the recognition of or accrual for all expenses paid or incurred or projected to be paid or incurred by Waterloo or Waterloo Bank in connection with this Agreement and the Contemplated Transactions, including Waterloo Transactional Expenses, but adjusted to exclude any adjustments made in accordance with Statement of Financial Accounting Standard No. 115 related to the fair market value of investment securities available for sale.

Section 6.16         Environmental Reports.  Waterloo shall cause to be delivered to Midland States prior to or at the Closing Phase I environmental reports in a form acceptable to Midland States with respect to any real estate serving as collateral for any Loan of Waterloo Bank or owned by Waterloo or Waterloo Bank reasonably requested by Midland States; provided, however, such reports shall be at the expense of Midland States.

ARTICLE 7
MIDLAND STATES’ COVENANTS

Section 7.1            Access and Investigation.  Solely for the purpose of verifying the representations and warranties made by Midland States in this Agreement, prior to the Closing Date, Waterloo and its Representatives shall, at all times during normal business hours and with reasonable advance notice, have full and continuing access to the facilities, operations, records and properties of Midland States and each Midland States Subsidiary in accordance with the provisions of this Section 7.1; provided, however, that such access or investigation shall not interfere materially with the normal operations of Midland States or any Midland States Subsidiary.  No investigation by Waterloo or any of its Representatives shall affect the representations and warranties made by Midland States. This Section 7.1 shall not require the disclosure of any information the disclosure of which to Waterloo would be prohibited by any Legal Requirement.

Section 7.2            Information Provided to Waterloo. Midland States agrees that none of the information concerning Midland States or any Midland States Subsidiary that is provided or to be provided in writing by Midland States to Waterloo for inclusion or that is included in the Proxy Statement and any other documents to be filed with any Regulatory Authority with respect to the Proxy Statement, when mailed, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the meeting of Midland States’ shareholders referred to above, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the meeting in connection with which the Proxy Statement shall be mailed. Notwithstanding the foregoing, Midland States shall have no responsibility for the truth or accuracy of any information with respect to Waterloo or any Waterloo Subsidiary or any of their Affiliates contained in the Proxy Statement or in any document submitted to, or other communication with, any Regulatory Authority.

Section 7.3            Indemnification; Insurance. Except as may be limited by applicable Legal Requirements, Midland States shall honor any of Waterloo’s and Waterloo Bank’s

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obligations in respect of indemnification and advancement of expenses currently provided by Waterloo in its articles of incorporation or by-laws, or the charter or by-laws of Waterloo, in favor of the current and former directors and officers of Waterloo and Waterloo, respectively, for not less than three (3) years from the Effective Time with respect to matters occurring prior to the Effective Time. Midland States shall maintain in effect for a period of three (3) years from the date hereof, a policy of directors and officers insurance applicable to acts and omissions of Waterloo and Waterloo Bank prior to the date hereof.

ARTICLE 8
COVENANTS OF ALL PARTIES

Section 8.1            Regulatory Approvals. Midland States and Waterloo shall use their commercially reasonable best efforts to make or cause to be made, within ten (10) days after the date of this Agreement, all appropriate filings with Regulatory Authorities for approval of the Contemplated Transactions, including the preparation of an application or any amendment thereto or any other required statements or documents filed or to be filed by any party with:  (a) the Federal Reserve pursuant to the BHCA; (b) the Division pursuant to the Illinois Banking Act; (c) the FDIC pursuant to the FDI Act; and (d) any other Person or Regulatory Authority pursuant to any applicable Legal, Requirement, for authority to consummate the Contemplated Transactions. The parties shall pursue in good faith the regulatory approvals necessary to consummate the Contemplated Transactions. In advance of any filing made under this Section, each party and its counsel shall be provided with the opportunity to comment thereon, and agrees promptly to advise the other and its counsel of any material communication received by it or its counsel from any Regulatory Authorities with respect to such filings, and to provide copies of any such written communication.

Section 8.2            Customer and Employee Relationships. Waterloo agrees that the officers, managers and employees of Midland States may, as of the date of this Agreement:

(a)           participate in meetings or discussions with officers and employees of Waterloo in connection with employment opportunities with Midland States after the Effective Time and may enter into a written employment agreement with Mr. Keith Francis for employment with Midland States or Midland States Bank after the Effective Time; and

(b)           contact Persons having dealings with Waterloo for the purpose of informing such Persons of the services to be offered by Midland States after the Effective Time.

Section 8.3            Publicity. Prior to the Effective Time, the parties to this Agreement will consult with each other and provide each party opportunity to comment and review before issuing any press releases or otherwise making any public statements with respect to this Agreement or the Contemplated Transactions. The parties to this Agreement further agree not to make any public statement which is in material contravention of any such press releases or public statements or the provisions of this Agreement unless required by law.

Section 8.4            Best Efforts; Cooperation. Each of Midland States and Waterloo agrees to exercise good faith and use its commercially reasonable best efforts to satisfy the various covenants and conditions to Closing in this Agreement, and to consummate the Contemplated

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Transactions as promptly as possible. Neither Midland States nor Waterloo will intentionally take or intentionally permit to be taken any action that would be a breach of the terms or provisions of this Agreement. Between the date of this Agreement and the Closing Date, each of Midland States and Waterloo will, and will cause each of Midland States and each Waterloo Subsidiary, respectively, and all of their respective Affiliates and Representatives to, cooperate with respect to all filings that any party is required by Legal Requirements to make in connection with the Contemplated Transactions.

Section 8.5            Tax Treatment and Filings. In accordance with and for purposes of United States federal income Tax law, the parties to this Agreement intend the Merger to be treated as a taxable sale of the stock of Waterloo to Midland States.

Section 8.6            Employee Benefits. Prior to the Closing, Waterloo shall, or shall cause Waterloo Bank to, terminate all of the Waterloo Benefit Plans and provide to Midland States written evidence of such terminations. Midland States shall offer to employees of Waterloo and any Waterloo Subsidiary, respectively, benefits which are substantially similar in the aggregate to the types of benefits presently offered to employees of Midland States and its Subsidiaries, as applicable; provided, however, that other than with respect to amounts required under the employment agreement of Mr. Keith Francis, Midland States only be required to pay severance to Waterloo or Waterloo Subsidiary employees to be terminated in connection with the consolidation of the operations of Waterloo and Waterloo Bank with Midland States and Midland States Bank in a manner determined to be reasonable by Midland States, even if such amounts are not equal to the amounts which would have been payable under Midland States’ severance policy. All continuing employees of Waterloo or any Waterloo Subsidiary shall receive full service credit (other than for benefit accrual purposes) for all years of employment with such entity. Each of Midland States and Waterloo agrees to cooperate and use its commercially reasonable best efforts to facilitate termination of the Waterloo 401(k) plan identified on Schedule 4.15.

ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF MIDLAND STATES

The obligations of Midland States to consummate the Contemplated Transactions and to take the other actions required to be taken by Midland States at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Midland States, in whole or in part):

Section 9.1            Accuracy of Representations and Warranties. All of the representations and warranties of Waterloo set forth in this Agreement shall be true and correct with the same force and effect as if all of such representations and warranties were made at the Closing Date, provided, however, that to the extent such representations and warranties expressly relate to an earlier date, such representations shall be true and correct in all material respects on and as of such earlier date.

Section 9.2            Waterloo’s Performance. Waterloo shall have performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date, provided, however, that

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to the extent performance and compliance with such covenants and obligations are subject in this Agreement to a standard of materiality, Waterloo shall have performed and complied in all respects with such covenants and obligations.

Section 9.3            Documents Satisfactory. All proceedings, corporate or other, to be taken by Waterloo in connection with the Contemplated Transactions, and all documents incident thereto and to be delivered by Waterloo pursuant to Section 2.8 hereof, shall be reasonably satisfactory in form and substance to counsel for Midland States .

Section 9.4            Corporate Approval. This Agreement and the Contemplated Transactions shall have been duly and validly approved as necessary under applicable Legal Requirements by the shareholders of Waterloo.

Section 9.5            No Proceedings. Since the date of this Agreement, there must not have been commenced or Threatened against Waterloo or any Waterloo Subsidiary any Proceeding:  (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions; or (b) that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the Contemplated Transactions, in either case that would have a Material Adverse Effect on Waterloo on a consolidated basis or on Midland States’ rights under this Agreement.

Section 9.6            Absence of Material Adverse Changes. From the date hereof to the Closing, there shall be no event or occurrence that has had or would be reasonably likely to have a Material Adverse Effect on Waterloo on a consolidated basis.

Section 9.7            Consents and Approvals. Any consents or approvals required to be secured by either party by the terms of this Agreement shall have been obtained and shall be reasonably satisfactory to Midland States, and all applicable waiting periods shall have expired, except to the extent that the failure to obtain any such consents or approvals would not have a Material Adverse Effect on Waterloo on a consolidated basis or on Midland States’ rights under this Agreement.

Section 9.8            No Prohibition. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), contravene, or conflict with or result in a violation of:  (a) any applicable Legal Requirement or Order; or (b) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Regulatory Authority.

Section 9.9            Dissenting Shares. The holders of Waterloo Common Stock who have exercised their rights to dissent from the Merger, and have not withdrawn the same, shall represent and hold, of record not more than 5% of the total issued and outstanding shares of Waterloo.

Section 9.10         Change of Control Payments by Waterloo.  All payments included on Schedule 4.27 shall have been paid by Waterloo to the individuals set forth on Schedule 4.27 prior to the Closing Date.

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Section 9.11         Loan Payoff. Any obligations of Waterloo other than Transactional Expenses (which Transactional Expenses shall include attorney fees) or Loans the proceeds of which were used to pay Transactional Expenses shall be indefeasibly paid in full and all obligations, liabilities and security interests granted in connection therewith shall be automatically terminated and released upon such indefeasible payment in full or shall be a further adjustment to the Purchase Price if not so paid in full by Waterloo prior to the Closing.

ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WATERLOO

The obligations of Waterloo to consummate the Contemplated Transactions and to take the other actions required to be taken by Waterloo at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Waterloo, in whole or in part):

Section 10.1         Accuracy of Representations and Warranties. All of the representations and warranties of Midland States set forth in this Agreement shall be materially true and correct with the same force and effect as if all of such representations and warranties were made at the Closing Date, provided, however, that to the extent such representations and warranties expressly relate to an earlier date, such representations shall be true and correct in all material respects on and as of such earlier date.

Section 10.2         Midland States’ Performance. Midland States shall have performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date, provided, however, that to the extent performance and compliance with such covenants and obligations are subject in this Agreement to a standard of materiality, Midland States shall have performed and complied in all respects with such covenants and obligations.

Section 10.3         Documents Satisfactory. All proceedings, corporate or other, to be taken by Midland States in connection with the Contemplated Transactions, and all documents incident thereto, and all documents incident thereto and to be delivered by Midland States pursuant to Section 2.7 hereof, shall be reasonably satisfactory in form and substance to counsel for Waterloo.

Section 10.4         Corporate Approval. This Agreement and the Contemplated Transactions shall have been duly and validly approved as necessary under applicable Legal Requirements by the shareholders of Waterloo.

Section 10.5         No Proceedings. Since the date of this Agreement, there must not have been commenced or Threatened against Midland States or any Midland States Subsidiary any Proceeding:  (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions; or (b) that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the Contemplated Transactions, in either case that would have a Material Adverse Effect on Midland States, on a consolidated basis, or on Waterloo’s rights under this Agreement.

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Section 10.6         Consents and Approvals. Any consents or approvals required to be secured by either party by the terms of this Agreement shall have been obtained and shall be reasonably satisfactory to Waterloo, and all applicable waiting periods shall have expired, except to the extent that the failure to obtain any such consents or approvals would not have a Material Adverse Effect on Midland States, on a consolidated basis, or on Waterloo’s rights under this Agreement.

Section 10.7         No Prohibitions. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), contravene, or conflict with or result in a violation of: (a) any applicable Legal Requirement or Order; or (b) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Regulatory Authority.

ARTICLE 11
TERMINATION

Section 11.1         Termination of Agreement. This Agreement may be terminated only as set forth below:

(a)           by mutual consent of the boards of directors of Midland States and Waterloo, each evidenced by appropriate written resolutions;

(b)           by Midland States if:  (i) any of the conditions in ARTICLE 9 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Midland States to comply with its obligations under this Agreement); (ii) the failure to satisfy such condition would reasonably be expected to have a Material Adverse Effect upon Midland States or Waterloo if the Closing were to occur (for purposes hereof the failure of the condition set forth in Section 9.11 shall be deemed to have a Material Adverse Effect); and (iii) Midland States has not waived such condition on or before the Closing Date, provided, however, that the condition set forth in clause (ii) of this paragraph need not be satisfied to terminate this Agreement if the failure to satisfy any condition was the result of any intentional or grossly negligent:  (A) action, (B) failure to act or (C) misrepresentation, of or by Waterloo;

(c)           by Waterloo if: (i) any of the conditions in ARTICLE 10 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Waterloo to comply with its obligations under this Agreement); (ii) the failure to satisfy such condition would reasonably be expected to have a Material Adverse Effect upon Midland States, on a consolidated basis, if the Closing were to occur; and (iii) Waterloo has not waived such condition on or before the Closing Date, provided, however, that the condition set forth in clause (ii) of this paragraph need not be satisfied to terminate this Agreement if the failure to satisfy any condition was the result of any intentional or grossly negligent:  (A) action, (B) failure to act or (C) misrepresentation, of or by Midland States;

(d)           by Midland States by giving written notice of such termination to Waterloo if:  (i) there has been (A) a breach of any covenant herein that could reasonably be expected to have a Material Adverse Effect on Midland States or Waterloo (except for breaches of Section 6.6 or

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Section 6.7, which are separately addressed in Section 11.1(g)), on the part of Waterloo which has not been cured or adequate assurance of cure given, in either case within thirty (30) Business Days following notice of such breach from Midland States, unless such breach or failure is a result of the failure by Midland States to perform and comply in all material respects with any of its material obligations under this Agreement that are to be performed or complied with by it prior to or on the date required hereunder; or (B) a breach of a representation or warranty of Waterloo herein that (individually or, together with other such breaches, in the aggregate) could reasonably be expected to have a Material Adverse Effect on Midland States or Waterloo, and that, in the reasonable opinion of Midland States’ board of directors, by its nature cannot be cured on or prior to the Termination Date (as defined below); or (ii) there shall have occurred or been proposed after the date of this Agreement, any change in any Legal Requirement, or after the date of this Agreement there shall have been any Order by any Regulatory Authority that could reasonably be expected to prevent or delay consummation of the Merger beyond the Termination Date;

(e)           by Waterloo by giving written notice of such termination to Midland States if:  (i) there has been (A) a breach of any covenant herein that could reasonably be expected to have a Material Adverse Effect on Midland States, on a consolidated basis, on the part of Midland States which has not been cured or adequate assurance of cure given, in either case within thirty (30) Business Days following notice of such breach from Waterloo, unless such breach or failure is a result of the failure by Waterloo to perform and comply in all material respects with any of its material obligations under this Agreement which are to be performed or complied with by it prior to or on the date required hereunder; or (B) a breach of a representation or warranty of Midland States herein that (individually or, together with other such breaches, in the aggregate) could reasonably be expected to have a Material Adverse Effect on Midland States, on a consolidated basis, and that, in the reasonable opinion of Waterloo’s board of directors, by its nature cannot be cured on or prior to the Termination Date; or (ii) there shall have occurred or been proposed after the date of this Agreement, any change in any Legal Requirement, or after the date of this Agreement there shall have been any Order by any Regulatory Authority that could reasonably be expected to prevent or delay consummation of the Merger beyond the Termination Date;

(f)            by Midland States or Waterloo, by giving written notice of such termination to the other party, if: (i) the Federal Reserve, the Division or any Regulatory Authority the approval of which is required for consummation of the Contemplated Transactions has denied approval of any of the Contemplated Transactions and such denial has become final and nonappealable; (ii) any application, filing or notice for a regulatory approval has been withdrawn at the request or recommendation of the applicable Regulatory Authority and a petition for rehearing shall not have been granted or an amended application shall not have been accepted for filing by the applicable Regulatory Authority within the sixty (60) day period following such withdrawal; or (iii) the Effective Time shall not have occurred at or before 11:59 p.m. on May 1, 2008 (the “Termination Date”); provided, however (and without limiting the applicability, if any, of the provisions of Section 11.2 below, with respect to the occurrence of any event described in clauses (i) or (ii) above), that the right to terminate this Agreement under this Section 11.1(f) shall not be available to any party to this Agreement whose failure to fulfill any of its obligations (excluding warranties and representations) under this Agreement has been the cause of or resulted in the occurrence of the event described in clause (iii) above;

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(g)           by Midland States, by giving written notice of such termination to Waterloo, and subject to the amounts set forth in Section 11.4 and Section 11.5 if:  (i) Waterloo breaches any of its obligations under Section 6.6; (ii) Waterloo breaches any of its obligations under Section 6.7 or (iii) Waterloo’s shareholders fail to approve this Agreement and the Merger at the meeting of shareholders called for such purpose pursuant to Section 6.7;

(h)           by Waterloo upon Midland States’ actual receipt of the amounts set forth in Section 11.4 and Section 11.5(a), by giving written notice of such termination to Midland States if Waterloo receives an Unsolicited Waterloo Proposal that is determined in good faith by the Waterloo Board of Directors, is on terms that are more favorable to the shareholders of Waterloo than the Merger (a “Superior Waterloo Proposal”), provided, however, that Waterloo shall not be permitted to terminate this Agreement pursuant to this Section 11.1(h) unless Waterloo shall have complied with all of the provisions of Section 6.6.

Section 11.2         Effect of Termination or Abandonment. In the event of the termination of this Agreement and the abandonment of the Merger pursuant to Section 11.1, this Agreement shall become null and void, Midland States shall bear all Midland States Transactional Expenses, Waterloo shall bear all Waterloo Transactional Expenses, and there shall be no liability of one party to the other or any restrictions on the future activities on the part of any party to this Agreement, or its respective Representatives or shareholders, except for the obligations of Midland States and Waterloo concerning confidentiality referred to in Section 6.1 and except as provided under Section 11.3, Section 11.4 and Section 11.5.

Section 11.3         Payments to Waterloo. Subject to the further provisions of this Section 11.3, if Waterloo terminates this Agreement pursuant to Section 11.1(e)(i)(A) or Section 11.1(e)(i)(B) (and such representation was breached as of the date of this Agreement), then in any such case, Midland States shall pay to Waterloo, upon its written demand, the Waterloo Transactional Expenses in an amount not to exceed $100,000. The payment of the sums described in this Section shall be made by wire transfer of immediately available funds to such account as Waterloo shall designate, such sums shall constitute liquidated damages and the receipt thereof shall be the sole and exclusive remedy of Waterloo and the Waterloo Subsidiary against Midland States, any Midland States Subsidiary and their respective Representatives and shareholders for any claims arising from or relating in any way to this Agreement or the transactions contemplated herein; provided, however, that nothing herein shall preclude or bar Waterloo from asserting or enforcing any such claim against any Person other than Midland States, the Midland States Subsidiaries and their respective Representatives and shareholders and the foregoing is made expressly subject to the provisions of Section 11.5(b).

Section 11.4         Payments to Midland States. Subject to the further provisions of this Section 11.4, if Midland States terminates this Agreement pursuant to Section 11.1(d)(i)(A), Section 11.1(d)(i)(B) (and such representation was breached as of the date of this Agreement), or, Section 11.1(g), or by Waterloo pursuant to Section 11(h), upon its written demand, Midland States shall be entitled to receive the Midland States Transactional Expenses in an amount not to exceed $100,000. The payment of the sums described in this Section shall be made by wire transfer of immediately available funds to such account as Midland States shall designate, and subject to the additional amounts which may be due pursuant to Section 11.5, such sums shall constitute liquidated damages and the receipt thereof shall be the sole and exclusive remedy of

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Midland States and the Midland States Subsidiaries against Waterloo and its Representatives and shareholders for any claims arising from or relating in any way to this Agreement or the transactions contemplated herein; provided, however, that nothing herein shall preclude or bar Midland States from asserting or enforcing any such claim against any Person other than Waterloo and its Representatives and shareholders and the foregoing is made expressly subject to the provisions of Section 11.5(b).

Section 11.5         Special Termination Fees. (a) If this Agreement is terminated: (1) pursuant to Section 11.1(g)(i), Section 11.1(g)(ii) or Section 11(h); or (2) if this Agreement is terminated pursuant Section 11.1(d)(i)(A), Section 11.1(d)(i)(B) or Section 11.1(g) and within twelve (12) months after such termination Waterloo shall enter into a definitive written agreement or one or more written agreements or transactions with any Person or Affiliated Persons (other than Midland States and its Affiliates) with respect to an acquisition of an aggregate of fifty percent (50%) or more of the outstanding shares of Waterloo Common Stock or all or substantially all of the assets of Waterloo or Waterloo; then in either such case Waterloo shall pay to Midland States, within ten (10) Business Days after the execution of such termination in the case of (1), or the date definitive agreement in the case of (2), the amount of $400,000 by wire transfer of immediately available funds to such account as Midland States shall designate.

(b)           Subject to any other payments required by Section 11.3 or Section 11.4 all payments made pursuant to this Section shall constitute liquidated damages and the receipt thereof shall be the sole and exclusive remedy of the receiving party against the party making such payment, its Affiliates and their respective directors, officers and shareholders for any claims arising out of or relating in any way to this Agreement or the transactions contemplated herein; provided, however, that nothing herein shall preclude or bar the party receiving such payment from asserting or enforcing any such claim against any Person other than the party making such payment, such party’s Affiliates and their respective Representatives and shareholders.

ARTICLE 12
MISCELLANEOUS

Section 12.1         Governing Law. All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to Contracts made and wholly to be performed in such state without regard to conflicts of laws.

Section 12.2         Assignments, Successors and No Third Party Rights. Neither party to this Agreement may assign any of its rights under this Agreement without the prior written consent of the other party. Subject to the preceding sentence, this Agreement and every representation, warranty, covenant, agreement and provision hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.

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Section 12.3         Waiver. Except as provided in ARTICLE 11, the rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law:  (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

Section 12.4         Confidentiality. Between the date of this Agreement and the Closing Date, each of Midland States and Waterloo will maintain in confidence, and will cause each of its respective Representatives to maintain in confidence, and not use to the detriment of the other or its Subsidiaries any written, oral, or other information obtained in confidence from the other of any of its Subsidiaries in connection with this Agreement or the Contemplated Transactions, unless:  (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party; (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions; or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with any legal proceedings. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request.

Section 12.5         Notices. All notices, consents, waivers and other communications under this Agreement must be in writing (which shall include facsimile communication) and will be deemed to have been duly given if delivered by hand or by nationally recognized overnight delivery service (receipt requested), mailed by registered or certified U.S. mail (return receipt requested) postage prepaid or telecopied:

If to Midland States, to:

Midland States Bancorp, Inc.

133 W Jefferson St.

Effingham, IL  62401

Telephone:  (217) 342-7366

Facsimile:   (217) 342-9462

Attention:    Leon Holschbach

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with copies to:

Quarles & Brady LLP

500 West Madison Street, Suite 3700

Chicago, IL  60661

Telephone:  (312) 715-5079

Facsimile:   (312) 715-5000

Attention:    Douglas J. Tucker

If to Waterloo, to:

Waterloo Bancshares, Inc.

101 South Main Street

Waterloo, IL  62298

Telephone:  (618) 939-8666

Facsimile:   (618) 939-4440

Attention:    Mr. Todd Quernheim, Chairman of the Board

with copies to:

Polsinelli Shalton Flanigan Suelthaus PC

100 S. Fourth Street, Suite 1100

St Louis, MO  63102

Telephone:  (314) 231-1950

Facsimile:   (314) 231-1776

Attention:    Joseph T. Porter, Jr., Esq

or to such other Person or place as Waterloo shall furnish to Midland States or Midland States shall furnish to Waterloo in writing. Except as otherwise provided herein, all such notices, consents, waivers and other communications shall be effective:  (a) if delivered by hand, when delivered; (b) if mailed in the manner provided in this Section 12.5, five (5) Business Days after deposit with the United States Postal Service; (c) if delivered by overnight express delivery service, on the next Business Day after deposit with such service; and (d) if by facsimile, on the next Business Day. For any notice delivered to Midland States pursuant to Section 6.2(d), Waterloo shall not be required to provide a copy of such notice to any Person other than Midland States.

Section 12.6         Entire Agreement.  This Agreement, the Schedules, any documents executed by the parties pursuant to this Agreement and referred to herein, constitute the entire understanding and agreement of the parties hereto and supersede all other prior agreements and understandings, written or oral, relating to such subject matter between the parties.

Section 12.7         Modification. This Agreement may not be amended except by a written agreement signed by each of Waterloo and Midland States. Without limiting the foregoing, Waterloo and Midland States may by written agreement signed by each of them:  (a) extend the time for the performance of any of the obligations or other acts of the parties hereto; (b) waive

48

any inaccuracies in the representations or warranties contained in this Agreement or in any document delivered pursuant to this Agreement; and (c) waive compliance with or modify, amend or supplement any of the conditions, covenants, agreements, representations or warranties contained in this Agreement or waive or modify performance of any of the obligations of any of the parties hereto, which are for the benefit of the waiving party; provided however, that no such modification, amendment or supplement agreed to after authorization of this Agreement by the shareholders of Midland States and Waterloo shall affect the rights of Midland States’ or Waterloo’s shareholders, respectively, in any manner which is materially adverse to such Persons.

Section 12.8         Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement unless the consummation of the Contemplated Transactions is adversely affected thereby.

Section 12.9         Further Assurances. The parties agree:  (a) to furnish upon request to each other such further information; (b) to execute and deliver to each other such other documents; and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

Section 12.10       Survival. Except for the Confidentiality Agreement and covenants that are expressly to be performed after the Closing, the representations, warranties and covenants contained herein shall not survive beyond the Closing.

Section 12.11       Counterparts. This Agreement and any amendments thereto may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

*          *          *          *          *

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers on the day and year first written above.

MIDLAND STATES BANCORP, INC.
By:	/s/ Leon J. Holschbach
Name:	Leon J. Holschbach
Title:	Executive Vice President
MIDLAND STATES ACQUISITION, INC.
By:	/s/ Leon J. Holschbach
Name:	Leon J. Holschbach
Title:	President
WATERLOO BANCSHARES, INC.
By:	/s/ Todd Quernheim
Name:	Todd Quernheim
Title:	Chairman

(Signature Page to Execution Copy of Merger Agreement)

EX-2.2

Exhibit 2.2

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”) is entered into as of this 22nd day of October, 2010, by and between MIDLAND STATES BANCORP, INC., a Delaware corporation (“Midland”), and NEW MIDLAND STATES, INC., an Illinois corporation and a wholly owned subsidiary of Midland (“Newco”).  Midland and Newco may be referred to herein as the “Constituent Corporations.”

RECITALS

A.Midland is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, having its registered office in the State of Delaware at 1209 Orange Street in the City of Wilmington, County of New Castle, and whose registered agent in charge of such office is The Corporation Trust Company.

B.Newco is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois, having its registered office in the State of Illinois at 133 West Jefferson Avenue, Effingham, Illinois, County of Effingham, and whose registered agent is Douglas J. Tucker.

C.Newco has been organized solely for the purpose of merging with Midland and has not conducted any business other than business relating to its organization and to the merger contemplated in this Agreement.

D.The parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”), and to cause the merger described herein to qualify as a reorganization under the provisions of Sections 368(a)(1)(F) and (E) of the Code.

E.As of the date of this Agreement, the authorized capital stock of Midland consists of 1,500,000 shares of common stock, par value $2.00 per share, of which 416,646 shares are issued and outstanding, and 150,000 shares of preferred stock, par value $2.00 per share, of which:

a.10,189 shares have been designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and none of which shares are outstanding;

b.510.02004 shares have been designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series B, and none of which shares are outstanding;

c.3,130 shares have been designated as Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share (the “Delaware Series C Preferred Stock”), and of which 2,360 shares are issued and outstanding; and

d.4,400 shares have been designated as Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share (the “Delaware Series D Preferred Stock”), and of which 2,377 shares are issued and outstanding.

F.As of the date of this Agreement: (i) the authorized capital stock of Newco consists of 40,000,000 shares of common stock, par value of $0.01 per share, of which 100 shares are issued and outstanding, and 4,000,000 shares of preferred stock, par value of $2.00 per share, of which 2,360 shares have been designated as Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share (the “Illinois Series C Preferred Stock”), and 2,377 shares have been designated as Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, liquidation preference $10,000 per share (the “Illinois Series D Preferred Stock”), but none of which shares of preferred stock are issued and outstanding; and (ii) Midland owns all of the 100 outstanding shares of the common stock of Newco.

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AGREEMENTS

NOW, THEREFORE, in consideration of the recitals, which are hereby incorporated into this Agreement, and the mutual covenants hereinafter set forth, the parties hereto agree that Midland shall be merged with and into Newco, and that the terms and conditions of such merger and the manner of carrying the same into effect shall be as follows:

1.The Merger.  At the Effective Time (as defined in Section 8), Midland and Newco shall be merged into a single corporation pursuant to the terms and conditions hereinafter set forth and in accordance with the applicable provisions of the Delaware General Corporation Law (“Delaware Law”) and the Illinois Business Corporation Act of 1983 (“Illinois Law”) pursuant to a merger whereby Midland will be merged into Newco, with Newco being the surviving corporation (the “Merger”).  After the consummation of the Merger, Newco may be referred to as the “Surviving Corporation.”  Upon consummation of the Merger, the separate existence and corporate organization of Midland shall cease, and the existence of Newco shall continue unaffected and unimpaired by the Merger with all the rights, privileges, immunities and powers, and subject to all the duties and liabilities of a corporation organized under Illinois Law.  The name of the Surviving Corporation shall be changed to “Midland States Bancorp, Inc.” immediately following the Effective Time.

2.Articles of Incorporation and Bylaws.  Upon the consummation of the Merger, the Articles of Incorporation of the Surviving Corporation shall be the Articles of Incorporation of Newco as existing immediately preceding the Merger until the same shall be amended in the manner provided in Illinois Law, and the Bylaws of the Surviving Corporation shall be the Bylaws of Newco as existing immediately preceding the Merger until the same shall be amended in the manner provided in Illinois Law; provided, however, that the Articles of Incorporation of the Surviving Corporation shall be amended immediately following the Effective Time to change the name of the Surviving Corporation to “Midland States Bancorp, Inc.” and the Bylaws of the Surviving Corporation shall be amended to reflect such change.

3.Directors and Officers.  Upon the consummation of the Merger, the directors and senior executive officers of Newco immediately prior to the Effective Time shall become and remain the directors and officers of the Surviving Corporation until their respective successors are elected or appointed and qualified in the manner provided in the Bylaws of the Surviving Corporation.

4.Effect of Merger.  At and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, immunities, powers and franchises, of a public as well as a private nature, of each of the Constituent Corporations.  All property, real, personal and mixed, and all debts due on whatever account, and all other choses in action, and all and every interest of, or belonging to, or due to, each of the Constituent Corporations shall be taken and deemed to be transferred to and vested in, or continue to be vested in, the Surviving Corporation without further act or deed.  The title to any real estate, or any interest therein, vested in either of the Constituent Corporations shall not revert or be in any way impaired by reason of the Merger.  The Surviving Corporation shall thereupon and thereafter be responsible and liable for all of the liabilities and obligations of each of the Constituent Corporations and any claim existing, or action or proceeding pending against either of the Constituent Corporations may be prosecuted against the Surviving Corporation in place of either or both of the Constituent Corporations.  Neither the rights of creditors nor any liens upon the property of either Constituent Corporation shall be impaired by the Merger.  All corporate acts, plans, policies, agreements, arrangements, approvals and authorizations of Midland, its stockholders, board of directors and committees thereof, officers and agents, which were valid and effective immediately prior to the Effective Time of the Merger, shall be taken for all purposes as the acts, plans, policies, agreements, arrangements, approvals and authorizations of the Surviving Corporation and shall be effective and binding thereon as if the same were with respect to Midland.  The employees and agents of Midland shall become the employees and agents of the Surviving Corporation and continue to be entitled to the same rights and benefits which they enjoyed as employees and agents of Midland.

5.Cancellation and Conversion of Securities.  At the Effective Time, each of the 100 shares of the issued and outstanding common stock of Newco owned by the sole shareholder of Newco immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Newco, Midland or the holders of the capital stock of Newco or Midland, shall be cancelled.  At the Effective Time:

(a)each of the shares of the issued and outstanding common stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the common stock of

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Midland, shall be converted into ten (10) fully paid and non-assessable shares of the common stock of the Surviving Corporation;

(b)each of the shares of the issued and outstanding common stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time that is restricted or not fully vested shall upon conversion have the same restrictions or vesting arrangements applicable to such shares as prior to the conversion;

(c)each of the shares of the issued and outstanding Delaware Series C Preferred Stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the preferred stock of Midland, shall be converted into one share of the Illinois Series C Preferred Stock of the Surviving Corporation;

(d)each of the shares of the issued and outstanding Delaware Series D Preferred Stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the preferred stock of Midland, shall be converted into one share of the Illinois Series D Preferred Stock of the Surviving Corporation; and

(e)the Surviving Corporation shall assume and continue the stock option plans and all other employee benefit, profit sharing and incentive compensation plans of Midland; each outstanding and unexercised option, warrant and stock purchase right (each, a “Derivative Security”) of Midland shall become a Derivative Security of the Surviving Corporation on the basis of ten (10) shares of common stock of the Surviving Corporation for each one share of common stock of Midland issuable pursuant to any such Derivative Security, on the same terms and conditions applicable to any such Midland Derivative Security at the Effective Time; and the exercise price for each share of common stock of the Surviving Corporation issuable pursuant to any such Derivative Security shall be equal to the exercise price applicable to any such Midland Derivative Security at the Effective Time, adjusted as necessary to account for the conversion ratio set forth in Section 5(a).

6.Stock Certificates.  From and after the Effective Time, all of the outstanding certificates which prior to that time represented shares of capital stock of Midland (including the Delaware Series C Preferred Stock and the Delaware Series D Preferred Stock) shall be deemed for all purposes to evidence ownership and to represent the shares of capital stock of the Surviving Corporation into which such shares of Midland represented by such certificates have been converted as provided in Section 5.  The registered owner on the books and records of the Surviving Corporation or its transfer agent of any such outstanding stock certificate shall, until such certificate shall have been surrendered for transfer or otherwise accounted for to the Surviving Corporation or its transfer agent, have and be entitled to exercise any voting and other rights with respect to and to receive any dividend and other distributions upon the shares of capital stock of the Surviving Corporation evidenced by such outstanding certificates as above provided.  Each certificate representing capital stock of the Surviving Corporation so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of Midland so converted and given in exchange therefor, unless otherwise determined by the board of directors of the Surviving Corporation in compliance with applicable laws, and any additional legends required by applicable Blue Sky laws.  If any certificate for shares of Surviving Corporation stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition of issuance thereof that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer, that such transfer otherwise be proper and that the person requesting such transfer pay to the exchange agent any transfer or other taxes payable by reason of the issuance of such new certificate in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not payable.

7.Validity of Surviving Corporation Common Stock.  All shares of common stock of Midland into which shares of common stock of the Surviving Corporation are to be converted pursuant to the Merger shall not be subject to any statutory or contractual preemptive rights, shall, when issued, be validly issued, fully paid and non-assessable and shall be issued in full satisfaction of all rights pertaining to such common stock of the Surviving Corporation.

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8.Effective Time of Merger.  The Effective Time of the Merger shall be the close of business on the day when the appropriate articles of merger with respect to the Merger (the “Articles of Merger”) have been accepted for filing by the Secretary of State of the State of Illinois (the “Effective Time”).

9.Amendment.  At any time prior to the Effective Time, whether before or after approval by the respective stockholders of Midland and Newco, this Agreement may be amended by the mutual agreement of the boards of directors of Midland and Newco.

10.Termination.  At any time prior to the Effective Time, whether before or after approval by the respective stockholders of Midland and Newco, this Agreement may be terminated and the Merger abandoned by the mutual agreement of the boards of directors of Midland and Newco.

11.Expenses.  Newco, as the Surviving Corporation, shall pay all the expenses of carrying this Agreement into effect and accomplishing the Merger provided for herein.

12.Further Assurances.  If at any time or from time to time the Surviving Corporation shall determine or be advised that any further assignment or assurance in law is necessary or desirable to vest in the Surviving Corporation, or perfect its title to, any property or rights of Midland, the proper officers and directors of Midland shall execute, make and deliver, without further consideration, all such proper assignments and assurances in law and do all other things necessary or desirable to vest or perfect title to such property or rights in the Surviving Corporation, and otherwise to carry out the purposes of this Agreement; and the proper officers and directors of the Surviving Corporation are fully authorized in the name of and on behalf of Midland, or otherwise, to take any and all such action.

13.Stockholder Approval.

(a)This Agreement shall be submitted to the stockholders of Midland as provided by law.  Upon the approval or adoption thereof by the stockholders of Midland in accordance with the laws of the State of Delaware and the certificate of incorporation of Midland, and upon the execution, filing and recording of such documents and the doing of such acts and things as shall be required for accomplishing the Merger under the laws of the State of Delaware and the State of Illinois, this Agreement shall take effect and be deemed to be the Agreement and Plan of Merger of the Constituent Corporations.

(b)By its execution and delivery of this Agreement, Midland, as the sole shareholder of Newco, consents to, approves and adopts this Agreement and the Articles of Merger, and approves the Merger.  Midland agrees to execute such instruments as may be necessary or desirable to evidence its approval and adoption of this Agreement, the Articles of Merger and the Merger as the sole shareholder of Newco.

14.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

15.Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute a single agreement.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned have set their hands the day and year first written above.

MIDLAND STATES BANCORP, INC.		NEW MIDLAND STATES, INC.
a Delaware corporation		an Illinois corporation
By:	/s/ Leon J. Holschbach	By:	/s/ Leon J. Holschbach
	Leon J. Hoslchbach		Leon J. Hoslchbach
	President		President

EX-2.3

Exhibit 2.3

PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

AMONG

FEDERAL DEPOSIT INSURANCE CORPORATION,

RECEIVER OF STRATEGIC CAPITAL BANK,

CHAMPAIGN, IL

FEDERAL DEPOSIT INSURANCE CORPORATION

and

MIDLAND STATES BANK

DATED AS OF

22 MAY 2009

TABLE OF CONTENTS

ARTICLE I	DEFINITIONS	2
ARTICLE II	ASSUMPTION OF LIABILITIES	8
2.1	Liabilities Assumed by Assuming Bank	8
2.2	Interest on Deposit Liabilities	10
2.3	Unclaimed Deposits	10
2.4	Employee Plans	10
ARTICLE III	PURCHASE OF ASSETS	11
3.1	Assets Purchased by Assuming Bank	11
3.2	Asset Purchase Price	11
3.3	Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.	11
3.4	Puts of Assets to the Receiver	12
3.5	Assets Not Purchased by Assuming Bank	13
3.6	Assets Essential to Receiver	14
ARTICLE IV	ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS	15
4.1	Continuation of Banking Business	15
4.2	Agreement with Respect to Credit Card Business	16
4.3	Agreement with Respect to Safe Deposit Business	16
4.4	Agreement with Respect to Safekeeping Business	16
4.5	Agreement with Respect to Trust Business	16
4.6	Agreement with Respect to Bank Premises	17
4.7	Agreement with Respect to Leased Data Processing Equipment	19
4.8	Agreement with Respect to Certain Existing Agreements	20
4.9	Informational Tax Reporting	21
4.10	Insurance	21
4.11	Office Space for Receiver and Corporation	21
4.12	Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees	22
4.13	Agreement with Respect to Interim Asset Servicing	22

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ARTICLE V	DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK	23
5.1	Payment of Checks, Drafts and Orders	23
5.2	Certain Agreements Related to Deposits	23
5.3	Notice to Depositors	23
ARTICLE VI	RECORDS	24
6.1	Transfer of Records	24
6.2	Delivery of Assigned Records	25
6.3	Preservation of Records	25
6.4	Access to Records; Copies	25
ARTICLE VII	FIRST LOSS TRANCHE	26
ARTICLE VIII	ADJUSTMENTS	26
8.1	Pro Forma Statement	26
8.2	Correction of Errors and Omissions; Other Liabilities	26
8.3	Payments	27
8.4	Interest	27
8.5	Subsequent Adjustments	27
ARTICLE IX	CONTINUING COOPERATION	27
9.1	General Matters	27
9.2	Additional Title Documents	27
9.3	Claims and Suits	27
9.4	Payment of Deposits	28
9.5	Withheld Payments	28
9.6	Proceedings with Respect to Certain Assets and Liabilities	29
9.7	Information	29
ARTICLE X	CONDITION PRECEDENT	29
ARTICLE XI	REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK	30
ARTICLE XII	INDEMNIFICATION	31
12.1	Indemnification of Indemnitees	31
12.2	Conditions Precedent to Indemnification	34
12.3	No Additional Warranty	34
12.4	Indemnification of Corporation and Receiver	35

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12.5	Obligations Supplemental	35
12.6	Criminal Claims	35
12.7	Limited Guaranty of the Corporation	35
12.8	Subrogation	36
ARTICLE XIII	MISCELLANEOUS	36
13.1	Entire Agreement	36
13.2	Headings	36
13.3	Counterparts	36
13.4	Governing Law	36
13.5	Successors	36
13.6	Modification; Assignment	37
13.7	Notice	37
13.8	Manner of Payment	38
13.9	Costs, Fees and Expenses	38
13.10	Waiver	38
13.11	Severability	38
13.12	Term of Agreement	38
13.13	Survival of Covenants, Etc.	38
SCHEDULES*
2.1	Certain Liabilities Assumed
2.1(a)	Excluded Deposit Liability Accounts
3.1	Certain Assets Purchased
3.2	Purchase Price of Assets or Assets
3.5(l)	Excluded Private Label Assets-Backed Securities
4.15A	Single Family Loss Share Loans
4.15B	Non-Single Family Loss Share Loans
7	Calculation of Deposit Premium
EXHIBITS*
4.13	Interim Asset Servicing Arrangement
4.15A	Single Family Loss Share Agreement
4.15B	Non-Single Family Loss Share Agreement

*  Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities and Exchange Act of 1934, as amended. The Company agrees to furnish a supplemental copy of any omitted exhibit or schedule to the SEC upon request.

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PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

THIS AGREEMENT, made and entered into as of the 22nd day of May, 2009, by and among the FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER of STRATEGIC CAPITAL BANK, CHAMPAIGN, IL (the “Receiver”), MIDLAND STATES BANK, organized under the laws of the State of Illinois, and having its principal place of business in EFFINGHAM, IL (the “Assuming Bank”), and the FEDERAL DEPOSIT INSURANCE CORPORATION, organized under the laws of the United States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the “Corporation”).

WITNESSETH:

WHEREAS, on Bank Closing, the Chartering Authority closed STRATEGIC CAPITAL BANK (the “Failed Bank”) pursuant to applicable law and the Corporation was appointed Receiver thereof; and

WHEREAS, the Assuming Bank desires to purchase certain assets and assume certain deposit and other liabilities of the Failed Bank on the terms and conditions set forth in this Agreement; and

WHEREAS, pursuant to 12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to the Assuming Bank to facilitate the transactions contemplated by this Agreement, which assistance may include indemnification pursuant to Article XII; and

WHEREAS, the Board of Directors of the Corporation (the “Board”) has determined to provide assistance to the Assuming Bank on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, the Board has determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such assistance is necessary to meet the obligation of the Corporation to provide insurance coverage for the insured deposits in the Failed Bank.

NOW THEREFORE, in consideration of the mutual promises herein set forth and other valuable consideration, the parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings set forth in this Article I, or elsewhere in this Agreement. As used herein, words imparting the singular include the plural and vice versa.

“Accounting Records” means the general ledger and subsidiary ledgers and supporting schedules which support the general ledger balances.

“Acquired Subsidiaries” means Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.

“Adversely Classified” means, with respect to any Loan or security, a Loan or security which, as of the date of the most recent pertinent data made available to the Assuming Bank as part of the Information Package, has been designated in the most recent report of examination as “Substandard,” “Doubtful” or “Loss” by the Failed Bank’s appropriate Federal or State Chartering Authority or regulator.

“Affiliate” of any Person means any director, officer, or employee of that Person and any other Person (i) who is directly or indirectly controlling, or controlled by, or under direct or indirect common control with, such Person, or (ii) who is an affiliate of such Person as the term “affiliate” is defined in Section 2 of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.

“Agreement” means this Purchase and Assumption Agreement by and among the Assuming Bank, the Corporation and the Receiver, as amended or otherwise modified from time to time.

“Assets” means all assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this definition.

“Assumed Deposits” means Deposits.

“Bank Closing” means the close of business of the Failed Bank on the date on which the Chartering Authority closed such institution.

“Bank Premises” means the banking houses, drive-in banking facilities, and teller facilities (staffed or automated) together with appurtenant parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, that are owned or leased by the Failed Bank and that are occupied by the Failed Bank as of Bank Closing.

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“Book Value” means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Receiver for differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections and for setoffs, whether voluntary or involuntary. The Book Value of a Subsidiary of the Failed Bank acquired by the Assuming Bank shall be determined from the investment in subsidiary and related accounts on the “bank only” (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting. Without limiting the generality of the foregoing, (i) the Book Value of a Liability Assumed shall include all accrued and unpaid interest thereon as of Bank Closing, and (ii) the Book Value of a Loan shall reflect adjustments for earned interest, or unearned interest (as it relates to the “rule of 78s” or add-on-interest loans, as applicable), if any, as of Bank Closing, adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, if any, attributable to the Failed Bank as of Bank Closing, and adjustments for Failed Bank Advances, if any, in each case as determined for financial reporting purposes. The Book Value of an Asset shall not include any adjustment for loan premiums, discounts or any related deferred income or fees, or general or specific reserves on the Accounting Records of the Failed Bank. The Book Value for securities valuations shall be net of market adjustments.

“Business Day” means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws of the State where the Failed Bank is located, or a day on which the principal office of the Corporation is closed.

“Chartering Authority” means (i) with respect to a national bank, the Office of the Comptroller of the Currency, (ii) with respect to a Federal savings association or savings bank, the Office of Thrift Supervision, (iii) with respect to a bank or savings institution chartered by a State, the agency of such State charged with primary responsibility for regulating and/or closing banks or savings institutions, as the case may be, (iv) the Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to self appointment, or (v) the appropriate Federal banking agency in accordance with 12 U.S.C. 1821(c)(9).

“Commitment” means the unfunded portion of a line of credit or other commitment reflected on the books and records of the Failed Bank to make an extension of credit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of Bank Closing, other than extensions of credit pursuant to the credit card business and overdraft protection plans of the Failed Bank, if any.

“Credit Documents” mean the agreements, instruments, certificates or other documents at any time evidencing or otherwise relating to, governing or executed in connection with or as security for, a Loan, including without limitation notes, bonds, loan agreements, letter of credit applications, lease financing contracts, banker’s acceptances, drafts, interest protection agreements, currency exchange agreements, repurchase agreements, reverse repurchase agreements, guarantees, deeds of trust, mortgages, assignments, security agreements, pledges, subordination or priority agreements, lien priority agreements, undertakings, security instruments, certificates, documents, legal opinions, participation agreements and intercreditor

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agreements, and all amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.

“Credit File” means all Credit Documents and all other credit, collateral, or insurance documents in the possession or custody of the Assuming Bank, or any of its Subsidiaries or Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies of any thereof.

“Data Processing Lease” means any lease or licensing agreement, binding on the Failed Bank as of Bank Closing, the subject of which is data processing equipment or computer hardware or software used in connection with data processing activities. A lease or licensing agreement for computer software used in connection with data processing activities shall constitute a Data Processing Lease regardless of whether such lease or licensing agreement also covers data processing equipment.

“Deposit” means a deposit as defined in 12 U.S.C. Section 1813(l), including without limitation, outstanding cashier’s checks and other official checks and all uncollected items included in the depositors’ balances and credited on the books and records of the Failed Bank; provided, that the term “Deposit” shall not include all or any portion of those deposit balances which, in the discretion of the Receiver or the Corporation, (i) may be required to satisfy it for any liquidated or contingent liability of any depositor arising from an unauthorized or unlawful transaction, or (ii) may be needed to provide payment of any liability of any depositor to the Failed Bank or the Receiver, including the liability of any depositor as a director or officer of the Failed Bank, whether or not the amount of the liability is or can be determined as of Bank Closing.

“Equity Adjustment” means the dollar amount resulting by subtracting the Book Value, as of Bank Closing, of all Liabilities Assumed under this Agreement by the Assuming Bank from the Book Value, as of Bank Closing, of all Assets acquired under this Agreement by the Assuming Bank, which may be a positive or a negative number.

“Failed Bank Advances” means the total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay ad valorem taxes and hazard insurance, and (iii) pay credit life insurance, accident and health insurance, and vendor’s single interest insurance.

“Fair Market Value” means (i)(a) “Market Value” as defined in the regulation prescribing the standards for real estate appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and accordingly shall mean the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

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(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale;

as determined as of Bank Closing by an appraiser chosen by the Assuming Bank from a list of acceptable appraisers provided by the Receiver; any costs and fees associated with such determination shall be shared equally by the Receiver and the Assuming Bank, and (b) which, with respect to Bank Premises (to the extent, if any, that Bank Premises are purchased utilizing this valuation method), shall be determined not later than sixty (60) days after Bank Closing by an appraiser selected by the Receiver and the Assuming Bank within seven (7) days after Bank Closing; or (ii) with respect to property other than Bank Premises purchased utilizing this valuation method, the price therefore as established by the Receiver and agreed to by the Assuming Bank, or in the absence of such agreement, as determined in accordance with clause (i)(a) above.

“First Loss Tranche” means the dollar amount of liability that the Assuming Bank will incur prior to the commencement of loss sharing, which is the sum of (i) the Assuming Bank’s asset premium (discount) bid, as reflected on the Assuming Bank’s bid form, plus (ii) the Assuming Bank’s Deposit premium bid, as reflected on the Assuming Bank’s bid form, plus (iii) the Equity Adjustment. The First Loss Tranche may be a positive or negative number.

“Fixtures” means those leasehold improvements, additions, alterations and installations constituting all or a part of Bank Premises and which were acquired, added, built, installed or purchased at the expense of the Failed Bank, regardless of the holder of legal title thereto as of Bank Closing.

“Furniture and Equipment” means the furniture and equipment, other than motor vehicles, leased or owned by the Failed Bank and reflected on the books of the Failed Bank as of Bank Closing, including without limitation automated teller machines, carpeting, furniture, office machinery (including personal computers), shelving, office supplies, telephone, surveillance and security systems. Motor vehicles shall be considered other assets and pass at Book Value.

“Indemnitees” means, except as provided in paragraph (k) of Section 12.1, (i) the Assuming Bank, (ii) the Subsidiaries and Affiliates of the Assuming Bank other than any Subsidiaries or Affiliates of the Failed Bank that are or become Subsidiaries or Affiliates of the Assuming Bank, and (iii) the directors, officers, employees and agents of the Assuming Bank and its Subsidiaries and Affiliates who are not also present or former directors, officers, employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank.

“Information Package” means the most recent compilation of financial and other data with respect to the Failed Bank, including any amendments or supplements thereto,

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provided to the Assuming Bank by the Corporation on the web site used by the Corporation to market the Failed Bank to potential acquirers.

“Legal Balance” means the amount of indebtedness legally owed by an Obligor with respect to a Loan, including principal and accrued and unpaid interest, late fees, attorneys’ fees and expenses, taxes, insurance premiums, and similar charges, if any.

“Liabilities Assumed” has the meaning provided in Section 2.1.

“Lien” means any mortgage, lien, pledge, charge, assignment for security purposes, security interest, or encumbrance of any kind with respect to an Asset, including any conditional sale agreement or capital lease or other title retention agreement relating to such Asset.

“Loans” means all of the following owed to or held by the Failed Bank as of Bank Closing:

(i)loans (including loans which have been charged off the Accounting Records of the Failed Bank in whole or in part prior to the date of the most recent pertinent data made available to the Assuming Bank as part of the Information Package), participation agreements, interests in participations, overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a deposit account), revolving commercial lines of credit, home equity lines of credit, Commitments, United States and/or State-guaranteed student loans, and lease financing contracts;

(ii)all Liens, rights (including rights of set-off), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (i) above, including but not limited to those arising under or based upon Credit Documents, casualty insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds at any time and from time to time existing with respect to any of the obligations or instruments referred to in clause (i) above; and

(iii)all amendments, modifications, renewals, extensions, refinancings, and refundings of or for any of the foregoing.

“Obligor” means each Person liable for the full or partial payment or performance of any Loan, whether such Person is obligated directly, indirectly, primarily, secondarily, jointly, or severally.

“Other Real Estate” means all interests in real estate (other than Bank Premises and Fixtures) and loans on “in substance foreclosure” status as of Bank Closing as recorded on the Accounting Records of the Failed Bank, including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights that are owned by the Failed Bank.

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“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof, excluding the Corporation.

“Primary Indemnitor” means any Person (other than the Assuming Bank or any of its Affiliates) who is obligated to indemnify or insure, or otherwise make payments (including payments on account of claims made against) to or on behalf of any Person in connection with the claims covered under Article XII, including without limitation any insurer issuing any directors and officers liability policy or any Person issuing a financial institution bond or banker’s blanket bond.

“Proforma” means producing a balance sheet that reflects a reasonably accurate financial statement of the Failed bank through the date of closing. The Proforma financial statements serve as a basis for the opening entries of both the Assuming Bank and the Receiver.

“Put Date” has the meaning provided in Section 3.4.

“Put Notice” has the meaning provided in Section 3.4.

“Qualified Financial Contract” means a qualified financial contract as defined in 12 U.S.C. Section 1821(e)(8)(D).

“Record” means any document, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank generated or maintained by the Failed Bank that is owned by or in the possession of the Receiver at Bank Closing.

“Related Liability” with respect to any Asset means any liability existing and reflected on the Accounting Records of the Failed Bank as of Bank Closing for (i) indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting such Asset, (ii) ad valorem taxes applicable to such Asset, and (iii) any other obligation determined by the Receiver to be directly related to such Asset.

“Related Liability Amount” with respect to any Related Liability on the books of the Assuming Bank, means the amount of such Related Liability as stated on the Accounting Records of the Assuming Bank (as maintained in accordance with generally accepted accounting principles) as of the date as of which the Related Liability Amount is being determined. With respect to a liability that relates to more than one asset, the amount of such Related Liability shall be allocated among such assets for the purpose of determining the Related Liability Amount with respect to any one of such assets. Such allocation shall be made by specific allocation, where determinable, and otherwise shall be pro rata based upon the dollar amount of such assets stated on the Accounting Records of the entity that owns such asset.

“Repurchase Price” means, with respect to any Loan the Book Value, adjusted to reflect changes to Book Value after Bank Closing, plus (ii) any advances and interest on such

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Loan after Bank Closing, minus (iii) the total of amounts received by the Assuming Bank for such Loan, regardless of how applied, after Bank Closing, plus (iv) advances made by Assuming Bank, plus (v) total disbursements of principal made by Receiver that are not included in the Book Value.

“Safe Deposit Boxes” means the safe deposit boxes of the Failed Bank, if any, including the removable safe deposit boxes and safe deposit stacks in the Failed Bank’s vault(s), all rights and benefits under rental agreements with respect to such safe deposit boxes, and all keys and combinations thereto.

“Settlement Date” means the first Business Day immediately prior to the day which is one hundred eighty (180) days after Bank Closing, or such other date prior thereto as may be agreed upon by the Receiver and the Assuming Bank. The Receiver, in its discretion, may extend the Settlement Date.

“Settlement Interest Rate” means, for the first calendar quarter or portion thereof during which interest accrues, the rate determined by the Receiver to be equal to the equivalent coupon issue yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank Closing as published in The Wall Street Journal; provided, that if no such equivalent coupon issue yield is available as of Bank Closing, the equivalent coupon issue yield for such Treasury Bills most recently published in The Wall Street Journal prior to Bank Closing shall be used. Thereafter, the rate shall be adjusted to the rate determined by the Receiver to be equal to the equivalent coupon issue yield on such Treasury Bills in effect as of the first day of each succeeding calendar quarter during which interest accrues as published in The Wall Street Journal.

“Subsidiary” has the meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(w)(4), as amended.

ARTICLE II

ASSUMPTION OF LIABILITIES

2.1Liabilities Assumed by Assuming Bank. The Assuming Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge all of the following liabilities of the Failed Bank as of Bank Closing, except as otherwise provided in this Agreement (such liabilities referred to as “Liabilities Assumed”):

(a)Assumed Deposits, except those Deposits specifically listed on Schedule 2.1(a); provided, that as to any Deposits of public money which are Assumed Deposits, the Assuming Bank agrees to properly secure such Deposits with such of the Assets as appropriate which, prior to Bank Closing, were pledged as security therefor by the Failed Bank, or with assets of the Assuming Bank, if such securing Assets, if any, are insufficient to properly secure such Deposits;

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(b)liabilities for indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting any Assets, if any; provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(c)borrowings from Federal Reserve Banks and Federal Home Loan Banks, if any, provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the assets securing such liability as determined by the Receiver; and overdrafts, debit balances, service charges, reclamations, and adjustments to accounts with the Federal Reserve Banks as reflected on the books and records of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if any;

(d)ad valorem taxes applicable to any Asset, if any; provided, that the assumption of any ad valorem taxes pursuant to this paragraph shall be limited to an amount equal to the market value of the Asset to which such taxes apply as determined by the Receiver;

(e)liabilities, if any, for federal funds purchased, repurchase agreements and overdrafts in accounts maintained with other depository institutions (including any accrued and unpaid interest thereon computed to and including Bank Closing); provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(f)United States Treasury tax and loan note option accounts, if any;

(g) liabilities for any acceptance or commercial letter of credit (other than “standby letters of credit” as defined in 12 C.F.R. Section 337.2(a)); provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(h)duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank’s credit card business, overdraft protection plans, safe deposit business, safekeeping business or trust business, if any;

(i)liabilities, if any, for Commitments;

(j)liabilities, if any, for amounts owed to any Subsidiary of the Failed Bank acquired under Section 3.1;

(k)liabilities, if any, with respect to Qualified Financial Contracts;

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(l)duties and obligations under any contract pursuant to which the Failed Bank provides mortgage servicing for others, or mortgage servicing is provided to the Failed Bank by others; and

(m)all asset-related offensive litigation liabilities and all asset-related defensive litigation liabilities, but only to the extent such liabilities relate to assets subject to a loss share agreement, and provided that all other defensive litigation and any class actions with respect to credit card business are retained by the Receiver.

Schedule 2.1 attached hereto and incorporated herein sets forth certain categories of Liabilities Assumed and the aggregate Book Value of the Liabilities Assumed in such categories. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII.

2.2Interest on Deposit Liabilities. The Assuming Bank agrees that, from and after Bank Closing, it will accrue and pay interest on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it shall determine; provided, that for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Bank to its depositors for non-transaction deposit accounts. The Assuming Bank shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor’s Deposit, whether or not the Assuming Bank elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, that if such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Bank shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay and of such withdrawal rights.

2.3Unclaimed Deposits.  If, within eighteen (18) months after Bank Closing, any depositor of the Failed Bank does not claim or arrange to continue such depositor’s Deposit assumed pursuant to Section 2.1 at the Assuming Bank, the Assuming Bank shall, within fifteen (15) Business Days after the end of such eighteen (18)-month period, (i) refund to the Corporation the full amount of each such Deposit (without reduction for service charges), (ii) provide to the Corporation a schedule of all such refunded Deposits in such form as may be prescribed by the Corporation, and (iii) assign, transfer, convey and deliver to the Receiver all right, title and interest of the Assuming Bank in and to Records previously transferred to the Assuming Bank and other records generated or maintained by the Assuming Bank pertaining to such Deposits. During such eighteen (18)-month period, at the request of the Corporation, the Assuming Bank promptly shall provide to the Corporation schedules of unclaimed deposits in such form as may be prescribed by the Corporation.

2.4Reserved.

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ARTICLE III

PURCHASE OF ASSETS

3.1Assets Purchased by Assuming Bank. With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Bank hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Schedules 3.1 and 3.1a attached hereto and incorporated herein. sets forth certain categories of Assets purchased hereunder. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII. Assets are purchased hereunder by the Assuming Bank subject to all liabilities for indebtedness collateralized by Liens affecting such Assets to the extent provided in Section 2.1. The subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated being purchased by the Assuming Bank includes, but is not limited to, the entities listed on Schedule 3.1a. Notwithstanding Section 4.8, the Assuming Bank specifically purchases all mortgage servicing rights and obligations of the Failed Bank.

3.2Asset Purchase Price.

(a)All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Bank shall be purchased for the amount, or the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank prior to the date of the most recent pertinent data made available to the Assuming Bank as part of the Information Package shall be purchased at a price of zero.

(b)Reserved

(c)Reserved.

3.3Manner of Conveyance; Limited Warranty; Nonrecourse; Etc. THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING BANK UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF SALE, “AS IS”, “WHERE IS”, WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY,

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DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.

3.4Puts of Assets to the Receiver.

(a)Puts Prior to the Settlement Date.

(i) During the period from Bank Closing to and including the Business Day immediately preceding the Settlement Date, the Assuming Bank shall be entitled to require the Receiver to purchase any Asset which the Assuming Bank can establish is evidenced by forged or stolen instruments as of Bank Closing; provided, that, the Assuming Bank shall not have the right to require the Receiver to purchase any such Asset with respect to which the Assuming Bank has taken any action referred to in Section 3.4(a)(ii) with respect to such Asset.

(ii) At the end of the thirty (30)-day period following Bank Closing and at that time only, in accordance with this Section 3.4, the Assuming Bank shall be entitled to require the Receiver to purchase any remaining overdraft transferred to the Assuming Bank pursuant to 3.1 which both was made after the “as of” the date of the most recent pertinent data made available to the Assuming Bank as part of the Information Package and was not made pursuant to an overdraft protection plan or similar extension of credit.

The Assuming Bank shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Bank with respect to any such Asset, as provided in Section 12.4.

(b)Notices to the Receiver. In the event that the Assuming Bank elects to require the Receiver to purchase one or more Assets, the Assuming Bank shall deliver to the Receiver a notice (a “Put Notice”) which shall include:

(i)a list of all Assets that the Assuming Bank requires the Receiver to purchase;

(ii)a list of all Related Liabilities with respect to the Assets identified pursuant to (i) above; and

(iii)a statement of the estimated Repurchase Price of each Asset identified pursuant to (i) above as of the applicable Put Date.

Such notice shall be in the form prescribed by the Receiver or such other form to which the Receiver shall consent. As provided in Section 9.6, the Assuming Bank shall deliver to the Receiver such documents, Credit Files and such additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide to the Receiver full access to all other relevant books and records.

(c)Purchase by Receiver. The Receiver shall purchase Assets that are specified in the Put Notice and shall assume Related Liabilities with respect to such Assets, and the transfer

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of such Assets and Related Liabilities shall be effective as of a date determined by the Receiver which date shall not be later than thirty (30) days after receipt by the Receiver of the Put Notice (the “Put Date”).

(d)Purchase Price and Payment Date. Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Asset less the Related Liability Amount applicable to such Asset, in each case determined as of the applicable Put Date. If the difference between such Repurchase Price and such Related Liability Amount is positive, then the Receiver shall pay to the Assuming Bank the amount of such difference; if the difference between such amounts is negative, then the Assuming Bank shall pay to the Receiver the amount of such difference. The Assuming Bank or the Receiver, as the case may be, shall pay the purchase price determined pursuant to this Section 3.4(d) not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including the day preceding the date upon which payment is made.

(e)Servicing. The Assuming Bank shall administer and manage any Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until such time as such Asset is purchased by the Receiver.

(f)Reversals. In the event that the Receiver purchases an Asset (and assumes the Related Liability) that it is not required to purchase pursuant to this Section 3.4, the Assuming Bank shall repurchase such Asset (and assume such Related Liability) from the Receiver at a price computed so as to achieve the same economic result as would apply if the Receiver had never purchased such Asset pursuant to this Section 3.4.

3.5 Assets Not Purchased by Assuming Bank. The Assuming Bank does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:

(a)any financial institution bonds, banker’s blanket bonds, or public liability, fire, or extended coverage insurance policy or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;

(b)any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to Bank Closing arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds, banker’s blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss resulting from such Person’s failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank; provided, that for the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have occurred on or before Bank Closing, regardless of when any such claim is discovered and regardless of whether any such

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claim is made with respect to a financial institution bond, banker’s blanket bond, or any other insurance policy of the Failed Bank in force as of Bank Closing;

(c)prepaid regulatory assessments of the Failed Bank, if any;

(d)legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;

(e)amounts reflected on the Accounting Records of the Failed Bank as of Bank Closing as a general or specific loss reserve or contingency account, if any;

(f)leased or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures and data processing equipment (including hardware and software) located on leased or owned Bank Premises, if any; provided, that the Assuming Bank does obtain an option under Section 4.6, Section 4.7 or Section 4.8, as the case may be, with respect thereto;

(g)owned Bank Premises which the Receiver, in its discretion, determines may contain environmentally hazardous substances;

(h)any “goodwill,” as such term is defined in the instructions to the report of condition prepared by banks examined by the Corporation in accordance with 12 C.F.R. Section 304.4, and other intangibles;

(i)any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j)reserved;

(k)assets essential to the Receiver in accordance with Section 3.6; and

(l)all private label asset-backed securities, including, but not limited to, those listed on the attached Schedule 3.5(l).

3.6Retention or Repurchase of Assets Essential to Receiver.

(a)The Receiver may refuse to sell to the Assuming Bank, or the Assuming Bank agrees, at the request of the Receiver set forth in a written notice to the Assuming Bank, to assign, transfer, convey, and deliver to the Receiver all of the Assuming Bank’s right, title and interest in and to, any Asset or asset essential to the Receiver as determined by the Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Asset or asset that the Receiver determines to be:

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(i)made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;

(ii)the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;

(iii)made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;

(iv)secured by collateral which also secures any asset owned by the Receiver; or

(v)related to any asset of the Failed Bank not purchased by the Assuming Bank under this Article III or any liability of the Failed Bank not assumed by the Assuming Bank under Article II.

(b)Each such Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Asset or asset, in each case determined as of the date of the notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming Bank not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the date of receipt of such documents to and including the day preceding the day on which payment is made. The Assuming Bank agrees to administer and manage each such Asset or asset in accordance with usual and prudent banking standards and business practices until each such Asset or asset is purchased by the Receiver. All transfers with respect to Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Bank shall transfer all such Asset or assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Bank with respect to any such Asset or asset, as provided in Section 12.4.

ARTICLE IV

ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS

The Assuming Bank agrees with the Receiver and the Corporation as follows:

4.1Continuation of Banking Business. The Assuming Bank agrees to provide full service banking in the trade area of the Failed Bank commencing on the first banking business day after Bank Closing and to maintain such presence until it has received all necessary regulatory approvals to cease providing such banking services in the trade area. At the option of the Assuming Bank, such banking services may be provided at any or all of the Bank Premises, or at other premises within such trade area.

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4.2Agreement with Respect to Credit Card Business. The Assuming Bank agrees to honor and perform, from and after Bank Closing, all duties and obligations with respect to the Failed Bank’s credit card business, and/or processing related to credit cards, if any, and assumes all outstanding extensions of credit with respect thereto.

4.3Agreement with Respect to Safe Deposit Business. The Assuming Bank assumes and agrees to discharge, from and after Bank Closing, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefor paid to the Failed Bank, subject to the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes; provided, that the Assuming Bank may relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Bank located in the trade area of the Failed Bank. Fees related to the safe deposit business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Bank.

4.4Agreement with Respect to Safekeeping Business. The Receiver transfers, conveys and delivers to the Assuming Bank and the Assuming Bank accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of Bank Closing. The Assuming Bank assumes and agrees to honor and discharge, from and after Bank Closing, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Bank shall be entitled to all rights and benefits heretofore accrued or hereafter accruing with respect thereto. The Assuming Bank shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after Bank Closing. Fees related to the safekeeping business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Bank.

4.5Agreement with Respect to Trust Business.

(a)The Assuming Bank shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all to the same extent as though the Assuming Bank had assumed the same from the Failed Bank prior to Bank Closing; provided, that any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business is not assumed hereunder.

(b)The Assuming Bank shall, to the full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills, whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.

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(c)In the event additional proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Bank agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use reasonable efforts to assist the Assuming Bank in accomplishing such transfer.

(d)The Assuming Bank shall provide to the Receiver written verification of the assets held in connection with the Failed Bank’s trust business within sixty (60) days after Bank Closing.

4.6Agreement with Respect to Bank Premises.

(a)Option to Purchase. Subject to Section 3.5, the Receiver hereby grants to the Assuming Bank an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to purchase any or all owned Bank Premises, including all Furniture, Fixtures and Equipment located on the Bank Premises. The Assuming Bank shall give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such premises shall be effective as of the date of Bank Closing and such purchase shall be consummated as soon as practicable thereafter, and in no event later than the Settlement Date.

(b)Option to Lease. The Receiver hereby grants to the Assuming Bank an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to cause the Receiver to assign to the Assuming Bank any or all leases for leased Bank Premises, if any, which have been continuously occupied by the Assuming Bank from Bank Closing to the date it elects to accept an assignment of the leases with respect thereto to the extent such leases can be assigned; provided, that the exercise of this option with respect to any lease must be as to all premises or other property subject to the lease. If an assignment cannot be made of any such leases, the Receiver may, in its discretion, enter into subleases with the Assuming Bank containing the same terms and conditions provided under such existing leases for such leased Bank Premises or other property. The Assuming Bank shall give notice to the Receiver within the option period of its election to accept or not to accept an assignment of any or all leases (or enter into subleases or new leases in lieu thereof). The Assuming Bank agrees to assume all leases assigned (or enter into subleases or new leases in lieu thereof) pursuant to this Section 4.6.

(c)Facilitation. The Receiver agrees to facilitate the assumption, assignment or sublease of leases or the negotiation of new leases by the Assuming Bank; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Bank or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d)Occupancy. The Assuming Bank shall give the Receiver fifteen (15) days’ prior written notice of its intention to vacate prior to vacating any leased Bank Premises with respect to which the Assuming Bank has not exercised the option provided in Section 4.6(b). Any such notice shall be deemed to terminate the Assuming Bank’s option with respect to such leased Bank Premises.

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(e)Occupancy Costs.

(i)The Assuming Bank agrees to pay to the Receiver, or to appropriate third parties at the direction of the Receiver, during and for the period of any occupancy by it of (x) owned Bank Premises the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (y) leased Bank Premises, all operating costs with respect thereto and to comply with all relevant terms of applicable leases entered into by the Failed Bank, including without limitation the timely payment of all rent. Operating costs include, without limitation all taxes, fees, charges, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Bank elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid (and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Bank assumes liability) by the Assuming Bank with respect thereto shall be applied as an offset against the purchase price thereof.

(ii)The Assuming Bank agrees during the period of occupancy by it of owned or leased Bank Premises, to pay to the Receiver rent for the use of all owned or leased Furniture and Equipment and all owned or leased Fixtures located on such Bank Premises for the period of such occupancy. Rent for such property owned by the Failed Bank shall be the market rental value thereof, as determined by the Receiver within sixty (60) days after Bank Closing. Rent for such leased property shall be an amount equal to any and all rent and other amounts which the Receiver incurs or accrues as an obligation or is obligated to pay for such period of occupancy pursuant to all leases and contracts with respect to such property. If the Assuming Bank purchases any owned Furniture and Equipment or owned Fixtures in accordance with Section 4.6(f) or 4.6(h), the amount of any rents paid by the Assuming Bank with respect thereto shall be applied as an offset against the purchase price thereof.

(f)Certain Requirements as to Furniture, Equipment and Fixtures. If the Assuming Bank purchases owned Bank Premises or accepts an assignment of the lease (or enters into a sublease or a new lease in lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the Assuming Bank does not exercise such option but within twelve (12) months following Bank Closing obtains the right to occupy such premises (whether by assignment, lease, sublease, purchase or otherwise), other than in accordance with Section 4.6(a) or (b), the Assuming Bank shall (i) effective as of the date of Bank Closing, purchase from the Receiver all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value and located thereon as of Bank Closing, (ii) accept an assignment or a sublease of the leases or negotiate new leases for all Furniture and Equipment and Fixtures leased by the Failed Bank and located thereon, and (iii) if applicable, accept an assignment or a sublease of any ground lease or negotiate a new ground lease with respect to any land on which such Bank Premises are located; provided, that the Receiver shall not have disposed of such Furniture and Equipment and Fixtures or repudiated the leases specified in clause (ii) or (iii).

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(g)Vacating Premises.

(i)If the Assuming Bank elects not to purchase any owned Bank Premises, the notice of such election in accordance with Section 4.6(a) shall specify the date upon which the Assuming Bank’s occupancy of such premises shall terminate, which date shall not be later than ninety (90) days after the date of the Assuming Bank’s notice not to exercise such option. The Assuming Bank promptly shall relinquish and release to the Receiver such premises and the Furniture and Equipment and Fixtures located thereon in the same condition as at Bank Closing, normal wear and tear excepted. By occupying any such premises after the expiration of such ninety (90)-day period, the Assuming Bank shall, at the Receiver’s option, (x) be deemed to have agreed to purchase such Bank Premises, and to assume all leases, obligations and liabilities with respect to leased Furniture and Equipment and leased Fixtures located thereon and any ground lease with respect to the land on which such premises are located, and (y) be required to purchase all Furniture and Equipment and Fixtures owned by the Failed Bank and located on such premises as of Bank Closing.

(ii)If the Assuming Bank elects not to accept an assignment of the lease or sublease any leased Bank Premises, the notice of such election in accordance with Section 4.6(b) shall specify the date upon which the Assuming Bank’s occupancy of such leased Bank Premises shall terminate, which date shall not be later than the date which is one hundred eighty (180) days after Bank Closing. Upon vacating such premises, the Assuming Bank shall relinquish and release to the Receiver such premises and the Fixtures and the Furniture and Equipment located thereon in the same condition as at Bank Closing, normal wear and tear excepted. By failing to provide notice of its intention to vacate such premises prior to the expiration of the option period specified in Section 4.6(b), or by occupying such premises after the one hundred eighty (180)-day period specified above in this paragraph (ii), the Assuming Bank shall, at the Receiver’s option, (x) be deemed to have assumed all leases, obligations and liabilities with respect to such premises (including any ground lease with respect to the land on which premises are located), and leased Furniture and Equipment and leased Fixtures located thereon in accordance with this Section 4.6 (unless the Receiver previously repudiated any such lease), and (y) be required to purchase all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value and located on such premises as of Bank Closing.

(h)Furniture and Equipment and Certain Other Equipment. The Receiver hereby grants to the Assuming Bank an option to purchase all Furniture and Equipment or any telecommunications, data processing equipment (including hardware and software) and check processing and similar operating equipment owned by the Failed Bank at Fair Market Value and located at any leased Bank Premises that the Assuming Bank elects to vacate or which it could have, but did not occupy, pursuant to this Section 4.6; provided, that, the Assuming Bank shall give the Receiver notice of its election to purchase such property at the time it gives notice of its intention to vacate such Bank Premises or within ten (10) days after Bank Closing for Bank Premises it could have, but did not, occupy.

4.7Agreement with Respect to Leased Data Processing Equipment

(a)The Receiver hereby grants to the Assuming Bank an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to accept an assignment from

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the Receiver of any or all Data Processing Leases to the extent that such Data Processing Leases can be assigned.

(b)The Assuming Bank shall (i) give written notice to the Receiver within the option period specified in Section 4.7(a) of its intent to accept or decline an assignment or sublease of any or all Data Processing Leases and promptly accept an assignment or sublease of such Data Processing Leases, and (ii) give written notice to the appropriate lessor(s) that it has accepted an assignment or sublease of any such Data Processing Leases.

(c)The Receiver agrees to facilitate the assignment or sublease of Data Processing Leases or the negotiation of new leases or license agreements by the Assuming Bank; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation or make payments to the Assuming Bank or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation.

(d)The Assuming Bank agrees, during its period of use of any property subject to a Data Processing Lease, to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of the applicable Data Processing Leases entered into by the Failed Bank, including without limitation the timely payment of all rent, taxes, fees, charges, utilities, insurance and assessments.

(e)The Assuming Bank shall, not later than fifty (50) days after giving the notice provided in Section 4.7(b), (i) relinquish and release to the Receiver all property subject to the relevant Data Processing Lease, in the same condition as at Bank Closing, normal wear and tear excepted, or (ii) accept an assignment or a sublease thereof or negotiate a new lease or license agreement under this Section 4.7.

4.8Agreement with Respect to Certain Existing Agreements.

(a)Subject to the provisions of Section 4.8(b), with respect to agreements existing as of Bank Closing which provide for the rendering of services by or to the Failed Bank, within ninety (90) days after Bank Closing, the Assuming Bank shall give the Receiver written notice specifying whether it elects to assume or not to assume each such agreement. Except as may be otherwise provided in this Article IV, the Assuming Bank agrees to comply with the terms of each such agreement for a period commencing on the day after Bank Closing and ending on: (i) in the case of an agreement that provides for the rendering of services by the Failed Bank, the date which is ninety (90) days after Bank Closing, and (ii) in the case of an agreement that provides for the rendering of services to the Failed Bank, the date which is thirty (30) days after the Assuming Bank has given notice to the Receiver of its election not to assume such agreement; provided, that the Receiver can reasonably make such service agreements available to the Assuming Bank. The Assuming Bank shall be deemed by the Receiver to have assumed agreements for which no notification is timely given. The Receiver agrees to assign, transfer, convey, and deliver to the Assuming Bank all right, title and interest of the Receiver, if any, in and to agreements the Assuming Bank assumes hereunder. In the event the Assuming Bank elects not to accept an assignment of any lease (or sublease) or negotiate a new lease for leased Bank Premises under Section 4.6 and does not otherwise occupy such premises, the provisions of

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this Section 4.8(a) shall not apply to service agreements related to such premises. The Assuming Bank agrees, during the period it has the use or benefit of any such agreement, promptly to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of such agreement.

(b)The provisions of Section 4.8(a) regarding the Assuming Bank’s election to assume or not assume certain agreements shall not apply to (i) agreements pursuant to which the Failed Bank provides mortgage servicing for others or mortgage servicing is provided to the Failed Bank by others, (ii) agreements that are subject to Sections 4.1 through 4.7 and any insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, and (iii) consulting, management or employment agreements, if any, between the Failed Bank and its employees or other Persons. Except as otherwise expressly set forth elsewhere in this Agreement, the Assuming Bank does not assume any liabilities or acquire any rights under any of the agreements described in this Section 4.8(b).

4.9Informational Tax Reporting. The Assuming Bank agrees to perform all obligations of the Failed Bank with respect to Federal and State income tax informational reporting related to (i) the Assets and the Liabilities Assumed, (ii) deposit accounts that were closed and loans that were paid off or collateral obtained with respect thereto prior to Bank Closing, (iii) miscellaneous payments made to vendors of the Failed Bank, and (iv) any other asset or liability of the Failed Bank, including, without limitation, loans not purchased and Deposits not assumed by the Assuming Bank, as may be required by the Receiver.

4.10Insurance. The Assuming Bank agrees to obtain insurance coverage effective from and after Bank Closing, including public liability, fire and extended coverage insurance acceptable to the Receiver with respect to owned or leased Bank Premises that it occupies, and all owned or leased Furniture and Equipment and Fixtures and leased data processing equipment (including hardware and software) located thereon, in the event such insurance coverage is not already in force and effect with respect to the Assuming Bank as the insured as of Bank Closing. All such insurance shall, where appropriate (as determined by the Receiver), name the Receiver as an additional insured.

4.11Office Space for Receiver and Corporation. For the period commencing on the day following Bank Closing and ending on the one hundred eightieth (180th) day thereafter, the Assuming Bank agrees to provide to the Receiver and the Corporation, without charge, adequate and suitable office space (including parking facilities and vault space), furniture, equipment (including photocopying and telecopying machines), email accounts, network access and technology resources (such as shared drive) and utilities (including local telephone service and fax machines) at the Bank Premises occupied by the Assuming Bank for their use in the discharge of their respective functions with respect to the Failed Bank. In the event the Receiver and the Corporation determine that the space provided is inadequate or unsuitable, the Receiver and the Corporation may relocate to other quarters having adequate and suitable space and the costs of relocation and any rental and utility costs for the balance of the period of occupancy by the Receiver and the Corporation shall be borne by the Assuming Bank. Additionally, the Assuming Bank agrees to pay such bills and invoices on behalf of the Receiver and Corporation as the Receiver or Corporation may direct for the period beginning on the date of Bank Closing

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and ending on Settlement Date. Assuming Bank shall submit it requests for reimbursement of such expenditures pursuant to Article VIII of this Agreement.

4.12Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees of the Failed Bank.

(a)The Assuming Bank agrees to assist the Receiver, as provided in this Section 4.12, in offering individuals who were employees or former employees of the Failed Bank, or any of its Subsidiaries, and who, immediately prior to Bank Closing, were receiving, or were eligible to receive, health insurance coverage or health insurance continuation coverage from the Failed Bank (“Eligible Individuals”), the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan which provides for health insurance continuation coverage to such Eligible Individuals who are qualified beneficiaries of the Failed Bank as defined in Section 607 of the Employee Retirement Income Security Act of 1974, as amended (respectively, “qualified beneficiaries” and “ERISA”). The Assuming Bank shall consult with the Receiver and not later than five (5) Business Days after Bank Closing shall provide written notice to the Receiver of the number (if available), identity (if available) and addresses (if available) of the Eligible Individuals who are qualified beneficiaries of the Failed Bank and for whom a “qualifying event” (as defined in Section 603 of ERISA) has occurred and with respect to whom the Failed Bank’s obligations under Part 6 of Subtitle B of Title I of ERISA have not been satisfied in full, and such other information as the Receiver may reasonably require. The Receiver shall cooperate with the Assuming Bank in order to permit it to prepare such notice and shall provide to the Assuming Bank such data in its possession as may be reasonably required for purposes of preparing such notice.

(b)The Assuming Bank shall take such further action to assist the Receiver in offering the Eligible Individuals who are qualified beneficiaries of the Failed Bank the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan as the Receiver may direct. All expenses incurred and paid by the Assuming Bank (i) in connection with the obligations of the Assuming Bank under this Section 4.12, and (ii) in providing health insurance continuation coverage to any Eligible Individuals who are hired by the Assuming Bank and such employees’ qualified beneficiaries shall be borne by the Assuming Bank.

(c)This Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement, and for the benefit of no other Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee). Nothing in this Section 4.12 is intended by the parties, or shall be construed, to give any Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee) other than the Corporation, the Receiver and the Assuming Bank any legal or equitable right, remedy or claim under or with respect to the provisions of this Section.

4.13Agreement with Respect to Interim Asset Servicing. At any time after Bank Closing, the Receiver may establish on its books an asset pool(s) and may transfer to such asset pool(s) (by means of accounting entries on the books of the Receiver) all or any assets and

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liabilities of the Failed Bank which are not acquired by the Assuming Bank, including, without limitation, wholly unfunded Commitments and assets and liabilities which may be acquired, funded or originated by the Receiver subsequent to Bank Closing. The Receiver may remove assets (and liabilities) from or add assets (and liabilities) to such pool(s) at any time in its discretion. At the option of the Receiver, the Assuming Bank agrees to service, administer, and collect such pool assets in accordance with and for the term set forth in Exhibit 4.13 “Interim Asset Servicing Arrangement”.

4.14Reserved.

4.15Agreement with Respect to Loss Sharing. The Assuming Bank shall be entitled to require reimbursement from the Receiver for loss sharing on certain loans in accordance with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and the Non-SF Shared-Loss Agreement attached hereto as Exhibit 4.15B, collectively, the “Shared-Loss Agreements.” The Loans that shall be subject to the Shared-Loss Agreements are identified on the Schedule of Loans 4.15A and 4.15B attached hereto.

ARTICLE V

DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK

5.1Payment of Checks, Drafts and Orders. Subject to Section 9.5, the Assuming Bank agrees to pay all properly drawn checks, drafts and withdrawal orders of depositors of the Failed Bank presented for payment, whether drawn on the check or draft forms provided by the Failed Bank or by the Assuming Bank, to the extent that the Deposit balances to the credit of the respective makers or drawers assumed by the Assuming Bank under this Agreement are sufficient to permit the payment thereof, and in all other respects to discharge, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to the Deposit balances due and owing to the depositors of the Failed Bank assumed by the Assuming Bank under this Agreement.

5.2Certain Agreements Related to Deposits. Subject to Section 2.2, the Assuming Bank agrees to honor the terms and conditions of any written escrow or mortgage servicing agreement or other similar agreement relating to a Deposit liability assumed by the Assuming Bank pursuant to this Agreement.

5.3Notice to Depositors.

(a)Within seven (7)days after Bank Closing, the Assuming Bank shall give (i) notice to depositors of the Failed Bank of its assumption of the Deposit liabilities of the Failed Bank, and (ii) any notice required under Section 2.2, by mailing to each such depositor a notice with respect to such assumption and by advertising in a newspaper of general circulation in the county or counties in which the Failed Bank was located. The Assuming Bank agrees that it will obtain prior approval of all such notices and advertisements from counsel for the Receiver and that such notices and advertisements shall not be mailed or published until such approval is received.

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(b)The Assuming Bank shall give notice by mail to depositors of the Failed Bank concerning the procedures to claim their deposits, which notice shall be provided to the Assuming Bank by the Receiver or the Corporation. Such notice shall be included with the notice to depositors to be mailed by the Assuming Bank pursuant to Section 5.3(a).

(c)If the Assuming Bank proposes to charge fees different from those charged by the Failed Bank before it establishes new deposit account relationships with the depositors of the Failed Bank, the Assuming Bank shall give notice by mail of such changed fees to such depositors.

ARTICLE VI

RECORDS

6.1Transfer of Records.

(a)In accordance with Section 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Bank the following Records pertaining to the Deposit liabilities of the Failed Bank assumed by the Assuming Bank under this Agreement, except as provided in Section 6.4:

(i)signature cards, orders, contracts between the Failed Bank and its depositors and Records of similar character;

(ii)passbooks of depositors held by the Failed Bank, deposit slips, cancelled checks and withdrawal orders representing charges to accounts of depositors;

and the following Records pertaining to the Assets:

(iii)records of deposit balances carried with other banks, bankers or trust companies;

(iv)Loan and collateral records and Credit Files and other documents;

(v)deeds, mortgages, abstracts, surveys, and other instruments or records of title pertaining to real estate or real estate mortgages;

(v)signature cards, agreements and records pertaining to Safe Deposit Boxes, if any; and

(vii)records pertaining to the credit card business, trust business or safekeeping business of the Failed Bank, if any.

(b)The Receiver, at its option, may assign and transfer to the Assuming Bank by a single blanket assignment or otherwise, as soon as practicable after Bank Closing, any other

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Records not assigned and transferred to the Assuming Bank as provided in this Agreement, including but not limited to loan disbursement checks, general ledger tickets, official bank checks, proof transactions (including proof tapes) and paid out loan files.

6.2Delivery of Assigned Records. The Receiver shall deliver to the Assuming Bank all Records described in (i) Section 6.1(a) as soon as practicable on or after the date of this Agreement, and (ii) Section 6.1(b) as soon as practicable after making any assignment described therein.

6.3Preservation of Records. The Assuming Bank agrees that it will preserve and maintain for the joint benefit of the Receiver, the Corporation and the Assuming Bank, all Records of which it has custody for such period as either the Receiver or the Corporation in its discretion may require, until directed otherwise, in writing, by the Receiver or Corporation. The Assuming Bank shall have the primary responsibility to respond to subpoenas, discovery requests, and other similar official inquiries with respect to the Records of which it has custody.

6.4Access to Records; Copies. The Assuming Bank agrees to permit the Receiver and the Corporation access to all Records of which the Assuming Bank has custody, and to use, inspect, make extracts from or request copies of any such Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the Corporation, any Record in the form of microfilm or microfiche pertaining to Deposit account relationships; provided, that in the event that the Failed Bank maintained one or more duplicate copies of such microfilm or microfiche Records, the Assuming Bank hereby assigns, transfers, and conveys to the Corporation one such duplicate copy of each such Record without cost to the Corporation, and agrees to deliver to the Corporation all Records assigned and transferred to the Corporation under this Article VI as soon as practicable on or after the date of this Agreement. The party requesting a copy of any Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as determined by the Receiver) for providing such duplicate Records. A copy of each Record requested shall be provided as soon as practicable by the party having custody thereof.

ARTICLE VII

FIRST LOSS TRANCHE

The Assuming Bank has submitted to the Receiver an asset premium (discount) bid of ($54,402,000.00) and a Deposit premium bid of 1.0%. The Deposit premium bid will be applied to the total of all Assumed Deposits except for brokered, CDARS, and any market place or similar subscription services Deposits. The First Loss Tranche shall be determined by adding (i) the asset premium (discount) bid, (ii) the Deposit premium bid, and (iii) the Equity Adjustment. If the First Loss Tranche is a positive number, then this is the Losses on Single Family Shared-Loss Loans and Net Charge-offs on Shared Loss Assets that the Assuming Bank will incur before loss-sharing commences under Exhibits 4.15A and 4.15B. If the First Loss Tranche is a

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negative number, the Corporation shall pay such amount by wire transfer to the Assuming Bank by the end of the first business day following Bank Closing and loss sharing shall commence immediately.

ARTICLE VIII

ADJUSTMENTS

8.1 Pro Forma Statement. The Receiver, as soon as practicable after Bank Closing, in accordance with the best information then available, shall provide to the Assuming Bank a pro forma statement reflecting any adjustments of such liabilities and assets as may be necessary. Such pro forma statement shall take into account, to the extent possible, (i) liabilities and assets of a nature similar to those contemplated by Section 2.1 or Section 3.1, respectively, which at Bank Closing were carried in the Failed Bank’s suspense accounts, (ii) accruals as of Bank Closing for all income related to the assets and business of the Failed Bank acquired by the Assuming Bank hereunder, whether or not such accruals were reflected on the Accounting Records of the Failed Bank in the normal course of its operations, and (iii) adjustments to determine the Book Value of any investment in an Acquired Subsidiary and related accounts on the “bank only” (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting, whether or not the Failed Bank used the equity method of accounting for investments in subsidiaries, except that the resulting amount cannot be less than the Acquired Subsidiary’s recorded equity as of Bank Closing as reflected on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the Assuming Bank pursuant to Section 3.1 which the Failed Bank charged off during the period following the date of the most recent pertinent data made available to the Assuming Bank as part of the Information Package to Bank Closing shall be deemed not to be charged off for the purposes of the pro forma statement, and the purchase price shall be determined pursuant to Section 3.2.

8.2Correction of Errors and Omissions; Other Liabilities.

(a)In the event any bookkeeping omissions or errors are discovered in preparing any pro forma statement or in completing the transfers and assumptions contemplated hereby, the parties hereto agree to correct such errors and omissions, it being understood that, as far as practicable, all adjustments will be made consistent with the judgments, methods, policies or accounting principles utilized by the Failed Bank in preparing and maintaining Accounting Records, except that adjustments made pursuant to this Section 8.2(a) are not intended to bring the Accounting Records of the Failed Bank into accordance with generally accepted accounting principles.

(b)If the Receiver discovers at any time subsequent to the date of this Agreement that any claim exists against the Failed Bank which is of such a nature that it would have been included in the liabilities assumed under Article II had the existence of such claim or the facts giving rise thereto been known as of Bank Closing, the Receiver may, in its discretion, at any time, require that such claim be assumed by the Assuming Bank in a manner consistent with the intent of this Agreement. The Receiver will make appropriate adjustments to the pro forma

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statement provided by the Receiver to the Assuming Bank pursuant to Section 8.1 as may be necessary.

8.3Payments. The Receiver agrees to cause to be paid to the Assuming Bank, or the Assuming Bank agrees to pay to the Receiver, as the case may be, on the Settlement Date, a payment in an amount which reflects net adjustments (including any costs, expenses and fees associated with determinations of value as provided in this Agreement) made pursuant to Section 8.1 or Section 8.2, plus interest as provided in Section 8.4. The Receiver and the Assuming Bank agree to effect on the Settlement Date any further transfer of assets to or assumption of liabilities or claims by the Assuming Bank as may be necessary in accordance with Section 8.1 or Section 8.2.

8.4Interest. Any amounts paid under Section 8.3 or Section 8.5, shall bear interest for the period from and including the day following Bank Closing to and including the day preceding the payment at the Settlement Interest Rate.

8.5Subsequent Adjustments. In the event that the Assuming Bank or the Receiver discovers any errors or omissions as contemplated by Section 8.2 or any error with respect to the payment made under Section 8.3 after the Settlement Date, the Assuming Bank and the Receiver agree to promptly correct any such errors or omissions, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction plus interest as provided in Section 8.4.

ARTICLE IX

CONTINUING COOPERATION

9.1General Matters. The parties hereto agree that they will, in good faith and with their best efforts, cooperate with each other to carry out the transactions contemplated by this Agreement and to effect the purposes hereof.

9.2Additional Title Documents. The Receiver, the Corporation and the Assuming Bank each agree, at any time, and from time to time, upon the request of any party hereto, to execute and deliver such additional instruments and documents of conveyance as shall be reasonably necessary to vest in the appropriate party its full legal or equitable title in and to the property transferred pursuant to this Agreement or to be transferred in accordance herewith. The Assuming Bank shall prepare such instruments and documents of conveyance (in form and substance satisfactory to the Receiver) as shall be necessary to vest title to the Assets in the Assuming Bank. The Assuming Bank shall be responsible for recording such instruments and documents of conveyance at its own expense.

9.3Claims and Suits.

(a)The Receiver shall have the right, in its discretion, to (i) defend or settle any claim or suit against the Assuming Bank with respect to which the Receiver has indemnified the Assuming Bank in the same manner and to the same extent as provided in Article XII, and (ii)

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defend or settle any claim or suit against the Assuming Bank with respect to any Liability Assumed, which claim or suit may result in a loss to the Receiver arising out of or related to this Agreement, or which existed against the Failed Bank on or before Bank Closing. The exercise by the Receiver of any rights under this Section 9.3(a) shall not release the Assuming Bank with respect to any of its obligations under this Agreement.

(b)In the event any action at law or in equity shall be instituted by any Person against the Receiver and the Corporation as codefendants with respect to any asset of the Failed Bank retained or acquired pursuant to this Agreement by the Receiver, the Receiver agrees, at the request of the Corporation, to join with the Corporation in a petition to remove the action to the United States District Court for the proper district. The Receiver agrees to institute, with or without joinder of the Corporation as coplaintiff, any action with respect to any such retained or acquired asset or any matter connected therewith whenever notice requiring such action shall be given by the Corporation to the Receiver.

9.4Payment of Deposits. In the event any depositor does not accept the obligation of the Assuming Bank to pay any Deposit liability of the Failed Bank assumed by the Assuming Bank pursuant to this Agreement and asserts a claim against the Receiver for all or any portion of any such Deposit liability, the Assuming Bank agrees on demand to provide to the Receiver funds sufficient to pay such claim in an amount not in excess of the Deposit liability reflected on the books of the Assuming Bank at the time such claim is made. Upon payment by the Assuming Bank to the Receiver of such amount, the Assuming Bank shall be discharged from any further obligation under this Agreement to pay to any such depositor the amount of such Deposit liability paid to the Receiver.

9.5Withheld Payments. At any time, the Receiver or the Corporation may, in its discretion, determine that all or any portion of any deposit balance assumed by the Assuming Bank pursuant to this Agreement does not constitute a “Deposit” (or otherwise, in its discretion, determine that it is the best interest of the Receiver or Corporation to withhold all or any portion of any deposit), and may direct the Assuming Bank to withhold payment of all or any portion of any such deposit balance. Upon such direction, the Assuming Bank agrees to hold such deposit and not to make any payment of such deposit balance to or on behalf of the depositor, or to itself, whether by way of transfer, set-off, or otherwise. The Assuming Bank agrees to maintain the “withheld payment” status of any such deposit balance until directed in writing by the Receiver or the Corporation as to its disposition. At the direction of the Receiver or the Corporation, the Assuming Bank shall return all or any portion of such deposit balance to the Receiver or the Corporation, as appropriate, and thereupon the Assuming Bank shall be discharged from any further liability to such depositor with respect to such returned deposit balance. If such deposit balance has been paid to the depositor prior to a demand for return by the Corporation or the Receiver, and payment of such deposit balance had not been previously withheld pursuant to this Section, the Assuming Bank shall not be obligated to return such deposit balance to the Receiver or the Corporation. The Assuming Bank shall be obligated to reimburse the Corporation or the Receiver, as the case may be, for the amount of any deposit balance or portion thereof paid by the Assuming Bank in contravention of any previous direction to withhold payment of such deposit balance or return such deposit balance the payment of which was withheld pursuant to this Section.

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9.6Proceedings with Respect to Certain Assets and Liabilities.

(a)In connection with any investigation, proceeding or other matter with respect to any asset or liability of the Failed Bank retained by the Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement, the Assuming Bank shall cooperate to the extent reasonably required by the Receiver.

(b)In addition to its obligations under Section 6.4, the Assuming Bank shall provide representatives of the Receiver access at reasonable times and locations without other limitation or qualification to (i) its directors, officers, employees and agents and those of the Subsidiaries acquired by the Assuming Bank, and (ii) its books and records, the books and records of such Subsidiaries and all Credit Files, and copies thereof. Copies of books, records and Credit Files shall be provided by the Assuming Bank as requested by the Receiver and the costs of duplication thereof shall be borne by the Receiver.

(c)Not later than ten (10) days after the Put Notice pursuant to Section 3.4 or the date of the notice of transfer of any Loan by the Assuming Bank to the Receiver pursuant to Section 3.6, the Assuming Bank shall deliver to the Receiver such documents with respect to such Loan as the Receiver may request, including without limitation the following: (i) all related Credit Documents (other than certificates, notices and other ancillary documents), (ii) a certificate setting forth the principal amount on the date of the transfer and the amount of interest, fees and other charges then accrued and unpaid thereon, and any restrictions on transfer to which any such Loan is subject, and (iii) all Credit Files, and all documents, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) maintained by, owned by, or in the possession of the Assuming Bank or any Affiliate of the Assuming Bank relating to the transferred Loan.

9.7Information. The Assuming Bank promptly shall provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of this Agreement as the Corporation or the Receiver may request from time to time, and, at the request of the Receiver, make available employees of the Failed Bank employed or retained by the Assuming Bank to assist in preparation of the pro forma statement pursuant to Section 8.1.

ARTICLE X

CONDITION PRECEDENT

The obligations of the parties to this Agreement are subject to the Receiver and the Corporation having received at or before Bank Closing evidence reasonably satisfactory to each of any necessary approval, waiver, or other action by any governmental authority, the board of directors of the Assuming Bank, or other third party, with respect to this Agreement and the transactions contemplated hereby, the closing of the Failed Bank and the appointment of the Receiver, the chartering of the Assuming Bank, and any agreements, documents, matters or proceedings contemplated hereby or thereby.

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ARTICLE XI

REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK

The Assuming Bank represents and warrants to the Corporation and the Receiver as follows:

(a)Corporate Existence and Authority. The Assuming Bank (i) is duly organized, validly existing and in good standing under the laws of its Chartering Authority and has full power and authority to own and operate its properties and to conduct its business as now conducted by it, and (ii) has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Assuming Bank has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the performance of the transactions contemplated hereby.

(b)Third Party Consents. No governmental authority or other third party consents (including but not limited to approvals, licenses, registrations or declarations) are required in connection with the execution, delivery or performance by the Assuming Bank of this Agreement, other than such consents as have been duly obtained and are in full force and effect.

(c)Execution and Enforceability. This Agreement has been duly executed and delivered by the Assuming Bank and when this Agreement has been duly authorized, executed and delivered by the Corporation and the Receiver, this Agreement will constitute the legal, valid and binding obligation of the Assuming Bank, enforceable in accordance with its terms.

(d)Compliance with Law.

(i)Neither the Assuming Bank nor any of its Subsidiaries is in violation of any statute, regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having jurisdiction over the Assuming Bank or any of its Subsidiaries or any assets of any such Person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of the Assuming Bank or of any of its Subsidiaries, or the ownership of the properties of the Assuming Bank or any of its Subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business, operations or condition (financial or otherwise) of the Assuming Bank or the ability of the Assuming Bank to perform, satisfy or observe any obligation or condition under this Agreement.

(ii)Neither the execution and delivery nor the performance by the Assuming Bank of this Agreement will result in any violation by the Assuming Bank of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.

e)Representations Remain True. The Assuming Bank represents and warrants that it has executed and delivered to the Corporation a Purchaser Eligibility Certification and Confidentiality Agreement and that all information provided and representations made by or on

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behalf of the Assuming Bank in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification and Confidentiality Agreement (which are affirmed and ratified hereby) are and remain true and correct in all material respects and do not fail to state any fact required to make the information contained therein not misleading.

ARTICLE XII

INDEMNIFICATION

12.1Indemnification of Indemnitees. From and after Bank Closing and subject to the limitations set forth in this Section and Section 12.6 and compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify and hold harmless the Indemnitees against any and all costs, losses, liabilities, expenses (including attorneys’ fees) incurred prior to the assumption of defense by the Receiver pursuant to paragraph (d) of Section 12.2, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with claims against any Indemnitee based on liabilities of the Failed Bank that are not assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank for which indemnification is provided hereunder in (a) of this Section 12.1, subject to certain exclusions as provided in (b) of this Section 12.1:

(a)

(1) claims based on the rights of any shareholder or former shareholder as such of (x) the Failed Bank, or (y) any Subsidiary or Affiliate of the Failed Bank;

(2) claims based on the rights of any creditor as such of the Failed Bank, or any creditor as such of any director, officer, employee or agent of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank arising prior to Bank Closing;

(3) claims based on the rights of any present or former director, officer, employee or agent as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank;

(4) claims based on any action or inaction prior to Bank Closing of the Failed Bank, its directors, officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate;

(5) claims based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business of the Failed Bank, if any;

(6) claims based on any failure or alleged failure (not in violation of law) by the Assuming Bank to continue to perform any service or activity previously performed by the Failed Bank which the Assuming Bank is not required to perform pursuant to this Agreement or

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which arise under any contract to which the Failed Bank was a party which the Assuming Bank elected not to assume in accordance with this Agreement and which neither the Assuming Bank nor any Subsidiary or Affiliate of the Assuming Bank has assumed subsequent to the execution hereof;

(7) claims arising from any action or inaction of any Indemnitee, including for purposes of this Section 12.1(a)(7) the former officers or employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken upon the specific written direction of the Corporation or the Receiver, other than any action or inaction taken in a manner constituting bad faith, gross negligence or willful misconduct; and

(8) claims based on the rights of any depositor of the Failed Bank whose deposit has been accorded “withheld payment” status and/or returned to the Receiver or Corporation in accordance with Section 9.5 and/or has become an “unclaimed deposit” or has been returned to the Corporation or the Receiver in accordance with Section 2.3;

(b)provided, that, with respect to this Agreement, except for paragraphs (7) and (8) of Section 12.1(a), no indemnification will be provided under this Agreement for any:

(1) judgment or fine against, or any amount paid in settlement (without the written approval of the Receiver) by, any Indemnitee in connection with any action that seeks damages against any Indemnitee (a “counterclaim”) arising with respect to any Asset and based on any action or inaction of either the Failed Bank, its directors, officers, employees or agents as such prior to Bank Closing, unless any such judgment, fine or amount paid in settlement exceeds the greater of (i) the Repurchase Price of such Asset, or (ii) the monetary recovery sought on such Asset by the Assuming Bank in the cause of action from which the counterclaim arises; and in such event the Receiver will provide indemnification only in the amount of such excess; and no indemnification will be provided for any costs or expenses other than any costs or expenses (including attorneys’ fees) which, in the determination of the Receiver, have been actually and reasonably incurred by such Indemnitee in connection with the defense of any such counterclaim; and it is expressly agreed that the Receiver reserves the right to intervene, in its discretion, on its behalf and/or on behalf of the Receiver, in the defense of any such counterclaim;

(2) claims with respect to any liability or obligation of the Failed Bank that is expressly assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

(3) claims with respect to any liability of the Failed Bank to any present or former employee as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank, which liability is expressly assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

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(4) claims based on the failure of any Indemnitee to seek recovery of damages from the Receiver for any claims based upon any action or inaction of the Failed Bank, its directors, officers, employees or agents as fiduciary, agent or custodian prior to Bank Closing;

(5) claims based on any violation or alleged violation by any Indemnitee of the antitrust, branching, banking or bank holding company or securities laws of the United States of America or any State thereof;

(6) claims based on the rights of any present or former creditor, customer, or supplier as such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

(7) claims based on the rights of any present or former shareholder as such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank regardless of whether any such present or former shareholder is also a present or former shareholder of the Failed Bank;

(8) claims, if the Receiver determines that the effect of providing such indemnification would be to (i) expand or alter the provisions of any warranty or disclaimer thereof provided in Section 3.3 or any other provision of this Agreement, or (ii) create any warranty not expressly provided under this Agreement;

(9) claims which could have been enforced against any Indemnitee had the Assuming Bank not entered into this Agreement;

(10) claims based on any liability for taxes or fees assessed with respect to the consummation of the transactions contemplated by this Agreement, including without limitation any subsequent transfer of any Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Bank;

(11) except as expressly provided in this Article XII, claims based on any action or inaction of any Indemnitee, and nothing in this Agreement shall be construed to provide indemnification for (i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates; provided, that the Receiver, in its discretion, may provide indemnification hereunder for any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates who is also or becomes a director, officer, employee or agent of the Assuming Bank or its Subsidiaries or Affiliates;

(12) claims or actions which constitute a breach by the Assuming Bank of the representations and warranties contained in Article XI;

(13) claims arising out of or relating to the condition of or generated by an Asset arising from or relating to the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant, or condition of such Asset which violate any applicable Federal, State or local law or regulation concerning environmental protection; and

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(14) claims based on, related to or arising from any asset, including a loan, acquired or liability assumed by the Assuming Bank, other than pursuant to this Agreement.

12.2Conditions Precedent to Indemnification. It shall be a condition precedent to the obligation of the Receiver to indemnify any Person pursuant to this Article XII that such Person shall, with respect to any claim made or threatened against such Person for which such Person is or may be entitled to indemnification hereunder:

(a)give written notice to the Regional Counsel (Litigation Branch) of the Corporation in the manner and at the address provided in Section 13.7 of such claim as soon as practicable after such claim is made or threatened; provided, that notice must be given on or before the date which is six (6) years from the date of this Agreement;

(b)provide to the Receiver such information and cooperation with respect to such claim as the Receiver may reasonably require;

(c)cooperate and take all steps, as the Receiver may reasonably require, to preserve and protect any defense to such claim;

(d)in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Receiver the right, which the Receiver may exercise in its sole discretion, to conduct the investigation, control the defense and effect settlement of such claim, including without limitation the right to designate counsel and to control all negotiations, litigation, arbitration, settlements, compromises and appeals of any such claim, all of which shall be at the expense of the Receiver; provided, that the Receiver shall have notified the Person claiming indemnification in writing that such claim is a claim with respect to which the Person claiming indemnification is entitled to indemnification under this Article XII;

(e)not incur any costs or expenses in connection with any response or suit with respect to such claim, unless such costs or expenses were incurred upon the written direction of the Receiver; provided, that the Receiver shall not be obligated to reimburse the amount of any such costs or expenses unless such costs or expenses were incurred upon the written direction of the Receiver;

(f)not release or settle such claim or make any payment or admission with respect thereto, unless the Receiver consents in writing thereto, which consent shall not be unreasonably withheld; provided, that the Receiver shall not be obligated to reimburse the amount of any such settlement or payment unless such settlement or payment was effected upon the written direction of the Receiver; and

(g)take reasonable action as the Receiver may request in writing as necessary to preserve, protect or enforce the rights of the indemnified Person against any Primary Indemnitor.

12.3No Additional Warranty. Nothing in this Article XII shall be construed or deemed to (i) expand or otherwise alter any warranty or disclaimer thereof provided under Section 3.3 or any other provision of this Agreement with respect to, among other matters, the

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title, value, collectibility, genuineness, enforceability or condition of any (x) Asset, or (y) asset of the Failed Bank purchased by the Assuming Bank subsequent to the execution of this Agreement by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank, or (ii) create any warranty not expressly provided under this Agreement with respect thereto.

12.4Indemnification of Receiver and Corporation. From and after Bank Closing, the Assuming Bank agrees to indemnify and hold harmless the Corporation and the Receiver and their respective directors, officers, employees and agents from and against any and all costs, losses, liabilities, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any of the following:

(a)claims based on any and all liabilities or obligations of the Failed Bank assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank, whether or not any such liabilities subsequently are sold and/or transferred, other than any claim based upon any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a); and

(b)claims based on any act or omission of any Indemnitee (including but not limited to claims of any Person claiming any right or title by or through the Assuming Bank with respect to Assets transferred to the Receiver pursuant to Section 3.4 or 3.6), other than any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a) .

12.5Obligations Supplemental. The obligations of the Receiver, and the Corporation as guarantor in accordance with Section 12.7, to provide indemnification under this Article XII are to supplement any amount payable by any Primary Indemnitor to the Person indemnified under this Article XII. Consistent with that intent, the Receiver agrees only to make payments pursuant to such indemnification to the extent not payable by a Primary Indemnitor. If the aggregate amount of payments by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, and all Primary Indemnitors with respect to any item of indemnification under this Article XII exceeds the amount payable with respect to such item, such Person being indemnified shall notify the Receiver thereof and, upon the request of the Receiver, shall promptly pay to the Receiver, or the Corporation as appropriate, the amount of the Receiver’s (or Corporation’s) payments to the extent of such excess.

12.6Criminal Claims. Notwithstanding any provision of this Article XII to the contrary, in the event that any Person being indemnified under this Article XII shall become involved in any criminal action, suit or proceeding, whether judicial, administrative or investigative, the Receiver shall have no obligation hereunder to indemnify such Person for liability with respect to any criminal act or to the extent any costs or expenses are attributable to the defense against the allegation of any criminal act, unless (i) the Person is successful on the merits or otherwise in the defense against any such action, suit or proceeding, or (ii) such action, suit or proceeding is terminated without the imposition of liability on such Person.

12.7Limited Guaranty of the Corporation. The Corporation hereby guarantees performance of the Receiver’s obligation to indemnify the Assuming Bank as set forth in this Article XII. It is a condition to the Corporation’s obligation hereunder that the Assuming Bank

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shall comply in all respects with the applicable provisions of this Article XII. The Corporation shall be liable hereunder only for such amounts, if any, as the Receiver is obligated to pay under the terms of this Article XII but shall fail to pay. Except as otherwise provided above in this Section 12.7, nothing in this Article XII is intended or shall be construed to create any liability or obligation on the part of the Corporation, the United States of America or any department or agency thereof under or with respect to this Article XII, or any provision hereof, it being the intention of the parties hereto that the obligations undertaken by the Receiver under this Article XII are the sole and exclusive responsibility of the Receiver and no other Person or entity.

12.8Subrogation. Upon payment by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, to any Indemnitee for any claims indemnified by the Receiver under this Article XII, the Receiver, or the Corporation as appropriate, shall become subrogated to all rights of the Indemnitee against any other Person to the extent of such payment.

ARTICLE XIII

MISCELLANEOUS

13.1Entire Agreement. This Agreement embodies the entire agreement of the parties hereto in relation to the subject matter herein and supersedes all prior understandings or agreements, oral or written, between the parties.

13.2Headings. The headings and subheadings of the Table of Contents, Articles and Sections contained in this Agreement, except the terms identified for definition in Article I and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

13.3Counterparts. This Agreement may be executed in any number of counterparts and by the duly authorized representative of a different party hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

13.4GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.

13.5Successors. All terms and conditions of this Agreement shall be binding on the successors and assigns of the Receiver, the Corporation and the Assuming Bank. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give any Person other than the Receiver, the Corporation and the Assuming Bank any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all

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other conditions and provisions hereof are for the sole and exclusive benefit of the Receiver, the Corporation and the Assuming Bank and for the benefit of no other Person.

13.6Modification; Assignment. No amendment or other modification, rescission, release, or assignment of any part of this Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties hereto.

13.7Notice. Any notice, request, demand, consent, approval or other communication to any party hereto shall be effective when received and shall be given in writing, and delivered in person against receipt therefore, or sent by certified mail, postage prepaid, courier service, telex, facsimile transmission or email to such party (with copies as indicated below) at its address set forth below or at such other address as it shall hereafter furnish in writing to the other parties. All such notices and other communications shall be deemed given on the date received by the addressee.

Assuming Bank

Midland States Bank

133 W. Jefferson

Effingham, IL 62401

Receiver and Corporation

Federal Deposit Insurance Corporation,

Receiver of STRATEGIC CAPITAL BANK

1601 Bryan Street, Suite 1700

Dallas, Texas 75201

Attention: Settlement Manager

with copy to: Regional Counsel (Litigation Branch)

and with respect to notice under Article XII:

Federal Deposit Insurance Corporation

Receiver of STRATEGIC CAPITAL BANK

1601 Bryan Street, Suite 1700

Dallas, Texas 75201

Attention: Regional Counsel (Litigation Branch)

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13.8Manner of Payment. All payments due under this Agreement shall be in lawful money of the United States of America in immediately available funds as each party hereto may specify to the other parties; provided, that in the event the Receiver or the Corporation is obligated to make any payment hereunder in the amount of $25,000.00 or less, such payment may be made by check.

13.9Costs, Fees and Expenses. Except as otherwise specifically provided herein, each party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its accountants and counsel; provided, that the Assuming Bank shall pay all fees, costs and expenses (other than attorneys’ fees incurred by the Receiver) incurred in connection with the transfer to it of any Assets or Liabilities Assumed hereunder or in accordance herewith.

13.10Waiver. Each of the Receiver, the Corporation and the Assuming Bank may waive its respective rights, powers or privileges under this Agreement; provided, that such waiver shall be in writing; and further provided, that no failure or delay on the part of the Receiver, the Corporation or the Assuming Bank to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege by the Receiver, the Corporation, or the Assuming Bank under this Agreement, nor will any such waiver operate or be construed as a future waiver of such right, power or privilege under this Agreement.

13.11Severability. If any provision of this Agreement is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.

13.12Term of Agreement. This Agreement shall continue in full force and effect until the sixth (6th) anniversary of Bank Closing; provided, that the provisions of Section 6.3 and 6.4 shall survive the expiration of the term of this Agreement. Provided, however, the receivership of the Failed Bank may be terminated prior to the expiration of the term of this Agreement; in such event, the guaranty of the Corporation, as provided in and in accordance with the provisions of Section 12.7 shall be in effect for the remainder of the term. Expiration of the term of this Agreement shall not affect any claim or liability of any party with respect to any (i) amount which is owing at the time of such expiration, regardless of when such amount becomes payable, and (ii) breach of this Agreement occurring prior to such expiration, regardless of when such breach is discovered.

13.13Survival of Covenants, Etc. The covenants, representations, and warranties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

	FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF STRATEGIC CAPITAL BANK CHAMPAIGN, IL
	BY:	/s/ Daniel M. Bell
	NAME:	Daniel M. Bell
	TITLE:	Receiver In Charge
Attest:
/s/ Mark A. Harris
Mark A. Harris
	FEDERAL DEPOSIT INSURANCE CORPORATION
	BY:	/s/ Daniel M. Bell
	NAME:	Daniel M. Bell
	TITLE:	Senior Strategic Operations Specialist
Attest:
/s/ Mark A. Harris
Mark A. Harris
	MIDLAND STATES BANK
	BY:	/s/ Jeff Ludwig
	NAME:	Jeff Ludwig
	TITLE:	SVP of Finance and Chief Financial Officer
Attest:
/s/ Leon J. Holschbach
Leon J. Holschbach, President

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EXHIBIT 4.15A

SINGLE FAMILY SHARED-LOSS AGREEMENT

This agreement for the reimbursement of loss sharing on certain single family residential mortgage loans (the “Single Family Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Single Family Shared-Loss Loans as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Single Family Shared-Loss Agreement is attached as Exhibit 4.15A and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Single Family Shared-Loss Agreement with respect to the subject matter of this Single Family Shared-Loss Agreement, the terms of this Single Family Shared-Loss Agreement shall control. References in this Single Family Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Single Family Shared-Loss Agreement, unless the context indicates that it is intended to be a reference to a Section of the Purchase and Assumption Agreement.

ARTICLE I — DEFINITIONS

The capitalized terms used in this Single Family Shared-Loss Agreement that are not defined in this Single Family Shared-Loss Agreement are defined in the Purchase and Assumption Agreement In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Single Family Shared-Loss Agreement.

“Accounting Records” means the subsidiary system of record on which the loan history and balance of each Single Family Shared-Loss Loan is maintained; individual loan files containing either an original or copies of documents that are customary and reasonable with respect to loan servicing, including management and disposition of Other Real Estate; the records documenting alternatives considered with respect to loans in default or for which a default is reasonably foreseeable; records of loss calculations and supporting documentation with respect to line items on the loss calculations; and, monthly delinquency reports and other performance reports customarily utilized by the Assuming Bank in management of loan portfolios.

“Accrued Interest” means, with respect to Single Family Shared-Loss Loans, the amount of earned and unpaid interest at the note rate specified in the applicable loan documents, limited to 90 days.

“Commencement Date” means the first calendar day following the Bank Closing Date.

“Cumulative Loss Amount” means the sum of the Monthly Loss Amounts less the sum of all Recovery Amounts.

“Cumulative Shared-Loss Amount” means the excess, if any, of the Cumulative Loss Amount over the First Loss Tranche.

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“Customary Servicing Procedures” means procedures (including collection procedures) that the Assuming Bank customarily employs and exercises in servicing and administering mortgage loans for its own accounts and the servicing procedures established by FNMA or FHLMC, which are in accordance with accepted mortgage servicing practices of prudent lending institutions.

“Final Shared-Loss Month” means the calendar month in which the tenth anniversary of the Commencement Date occurs.

“Final Shared-Loss Recovery Month” means the calendar month in which the tenth anniversary of the Commencement Date occurs.

“Foreclosure Loss” means the loss realized when the Assuming Bank has completed the foreclosure on a Single Family Shared-Loss Loan and realized final recovery on the collateral through liquidation and recovery of all insurance proceeds. Each Foreclosure Loss shall be calculated in accordance with the form and methodology specified in Exhibit 2a.

“Loss” means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, or Portfolio Loss.

“Loss Amount” means the dollar amount of loss incurred and reported on the Monthly Certificate for a Single Family Shared-Loss Loan.

“Monthly Certificate” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

“Monthly Loss Amount” means the sum of all Foreclosure Losses, Restructuring Losses, Short Sale Losses and Portfolio Losses realized by the Assuming Bank for any Shared Loss Month.

“Monthly Shared-Loss Amount” means the change in the Cumulative Shared-Loss Amount from the beginning of each month to the end of each month.

“Portfolio Loss” means the loss realized on a portfolio sale of Single Family Shared-Loss Loans in accordance with the terms of Article IV.

“Recovery Amount” means, with respect to any period prior to the Termination Date, the amount of collected funds received by the Assuming Bank that (i) are applicable against a Foreclosure Loss which has previously been paid to the Assuming Bank by the Receiver or (ii) gains realized from a Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming Bank has previously received a Restructuring Loss payment from the Receiver.

“Restructuring Loss” means the loss on a modified or restructured loan measured by the difference between (a) the principal, Accrued Interest, tax and insurance

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advances and third party fees due on a loan prior to the modification or restructuring, and (b) the net present value of estimated cash flows on the modified or restructured loan, discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be calculated in accordance with the form and methodology attached as Exhibit 2b and Exhibit 5.

“Restructured Loan” means a Single Family Shared-Loss Loan for which the Assuming Bank has received a Restructuring Loss payment from the Receiver.

“Servicing Officer” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

“Shared Loss Payment Trigger” means when the sum of the Cumulative Loss Amount under this Single Family Shared-Loss Agreement and the cumulative Net Charge-Offs under the Non-SF Shared-Loss Agreement, exceeds the First Loss Tranche.

“Single Family Shared-Loss Loans” means the single family one-to-four residential mortgage loans identified on Schedule 4.15A of the Purchase and Assumption Agreement.

“Shared-Loss Month” means each calendar month between the Commencement Date and the last day of the month in which the tenth anniversary of the Commencement Date occurs, provided that, the first Shared-Loss Month shall begin on the Commencement Date and end on the last day of that month.

“Short-Sale Loss” means the loss resulting from the Assuming Bank’s agreement with the mortgagor to accept a payoff in an amount less than the balance due on the loan, further provided, that each Short-Sale Loss shall be calculated in accordance with the form and methodology specified in Exhibit 2c.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $167,000,000.00.

“Termination Date” means the last day of the Final Shared-Loss Recovery Month.

“Then-Current Interest Rate” means the most recently published Freddie Mac survey rate for 30-year fixed-rate loans.

ARTICLE II — SHARED-LOSS ARRANGEMENT

2.1Shared-Loss Arrangement.

(a)Loss Mitigation and Consideration of Alternatives. For each Single Family Shared-Loss Loan in default or for which a default is reasonably foreseeable, the

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Assuming Bank shall undertake reasonable and customary loss mitigation efforts, in accordance with Exhibit 5, FDIC Mortgage Loan Modification Program. The Assuming Bank shall document its consideration of foreclosure, loan restructuring, and short-sale (if short-sale is a viable option) alternatives and shall select the alternative resulting in the least Loss. Assuming Bank shall retain its calculations of the estimated loss under each alternative, such calculations to be provided to the Receiver upon request.

(b)Monthly Certificates.

Not later than fifteen (15) days after the end of each Shared-Loss Month, beginning with the month in which the Commencement Date occurs and ending in the month in which the tenth anniversary of the Commencement Date occurs, the Assuming Bank shall deliver to the Receiver a certificate, signed by an officer of the Assuming Bank involved in, or responsible for, the administration and servicing of the Single Family Shared-Loss Loans whose name appears on a list of servicing officers furnished by the Assuming Bank to the Receiver, (a “Servicing Officer”) setting forth in such form and detail as the Receiver may reasonably specify (a “Monthly Certificate”):

(A)a schedule substantially in the form of Exhibit 1 listing:

(i) each Single Family Shared-Loss Loan for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Single Family Shared- Loss Loan, and the total Monthly Loss Amount for all Single Family Shared-Loss Loans;

(ii) each Single Family Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Single Family Shared-Loss Loan, and the total Recovery Amount for all Single Family Shared-Loss Loans;

(iii) the total Monthly Loss Amount for all Single Family Shared-Loss Loans minus the total monthly Recovery Amount for all Single Family Shared-Loss Loans;

(iv) the Cumulative Shared-Loss Amount as of the beginning and end of the month;

(v) the Monthly Shared Loss Amount;

(vi) the result obtained in (v) times 80%, or times 95% if the Stated Threshold has been reached, which in either case is the amount to be paid under Section 2.1(d) of this Single Family Shared-Loss Agreement by the Receiver to the Assuming Bank if the amount is a positive number, or by the Assuming Bank to the Receiver if the amount is a negative number;

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(B)for each of the Single Family Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a schedule showing the calculation of the Loss Amount using the form and methodology shown in Exhibit 2a, Exhibit 2b, or Exhibit 2c, as applicable.

(C)For each of the Restructured Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2, a schedule showing the calculation using the form and methodology shown in Exhibit 2d.

(D)a portfolio performance and summary schedule substantially in the form shown in Exhibit 3.

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(c)Monthly Data Download. Not later than fifteen (15) days after the end of each month, beginning with the month in which the Commencement Date occurs and ending with the Final Shared-Loss Recovery Month, Assuming Bank shall provide Receiver:

(i)the servicing file in machine-readable format including but not limited to the following fields for each outstanding Single Family Shared-Loss Loan, as applicable:

(A)Loan number

(B)FICO score

(C)Origination date

(D)Original principal amount

(E)Maturity date

(F)Paid-to date

(G)Last payment date

(H)Loan status (bankruptcy, in foreclosure, etc.)

(I)Delinquency counters

(J)Current principal balance

(K)Current escrow account balance

(L)Current Appraisal/BPO value

(M)Current Appraisal/BPO date

(N)Interest rate

(O)Monthly principal and interest payment amount

(P)Monthly escrow payment for taxes and insurance

(Q)Interest rate type (fixed or adjustable)

(R)If adjustable: index, margin, next interest rate reset date

(S)Payment/Interest rate cap and/or floor

(T)Underwriting type (Full doc, Alt Doc, No Doc)

(U)Lien type (1st , 2nd, )

(V)Amortization type (amortizing or I/O)

(W)Property address, including city, state, zip code

(X)A code indicating whether the Mortgaged Property is owner- occupied

(Y)Property type (single-family detached, condominium, duplex, etc.)

(ii)An Excel file for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan listing:

(A)Foreclosure date

(B)Unpaid loan principal balance

(C)Appraised value or BPO value, as applicable

(D)Projected liquidation date

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(d)Payments With Respect to Shared-Loss Assets.

(i) Losses Under the Stated Threshold.  After the Shared Loss Payment Trigger is reached, not later than fifteen (15) days after the date on which the Receiver receives the Monthly Certificate, the Receiver shall pay to the Assuming Bank, in immediately available funds, an amount equal to eighty percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Bank shall pay to the Receiver in immediately available funds eighty percent (80%) of that amount.

(ii) Losses in Excess of the Stated Threshold. In the event that the Stated Threshold has been met the loss/recovery sharing percentages shall change from 80/20 to 95/5 and thereafter the Receiver shall pay to the Assuming Bank, in immediately available funds, an amount equal to ninety-five percent (95%) of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Bank shall pay to the Receiver in immediately available funds ninety-five percent (95%) of that amount..

(e)Limitations on Shared-Loss Payment.  The Receiver shall not be required to make any payments pursuant to Section 2.1 (d) with respect to any Foreclosure Loss, Restructuring Loss, Short Sale Loss or Portfolio Loss that the Receiver determines, based upon the criteria set forth in this Single Family Shared-Loss Agreement (including the analysis and documentation requirements of Section 2.1(a)) or Customary Servicing Procedures, should not have been effected by the Assuming Bank. In the event that the Receiver does not make any payment with respect to Losses claimed pursuant to Section 2.1(d), the Receiver and Assuming Bank shall make the necessary adjustments to the Monthly Shared-Loss Amount for that Monthly Certificate and the payment pursuant to Section 2.1(d) above shall be adjusted accordingly.

(f)Payments by Wire-Transfer. All payments under this Single Family Shared-Loss Agreement shall be made by wire-transfer in accordance with the wire-transfer instructions on Exhibit 4.

2.2Auditor Report; Right to Audit

(a)Within ninety (90) days after the end of each calendar year during which the Receiver makes any payment to the Assuming Bank under this Single Family Shared-Loss Agreement, the Assuming Bank shall deliver to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Single Family Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Bank’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such calendar year pursuant to this Article II were not made by the Assuming Bank in accordance herewith. In the event that the Assuming Bank cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that,

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after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such year pursuant to this Article II were not made by the Assuming Bank in accordance herewith. In such event, the Assuming Bank and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

(b)The Receiver or the FDIC in its corporate capacity (“Corporation”) may perform an audit or audits to determine the Assuming Bank’s compliance with the provisions of this Single Family Shared-Loss Agreement, including this Article II, by providing not less than ten (10) Business Days’ prior written notice. Assuming Bank shall provide access to pertinent records and proximate working space in Assuming Bank’s facilities. The scope and duration of any such audit shall be within the sole discretion of the Receiver or the Corporation. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit or audits, the Assuming Bank and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.3Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Federal Deposit Insurance Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Monthly Certificate delivered pursuant to Section 2.1, if there is a reasonable basis for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Bank detailing the grounds for withholding such payment. At such time as the Assuming Bank demonstrates to the satisfaction of the Receiver, in its reasonable judgment, that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Bank the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days.

2.4Books and Records. The Assuming Bank shall at all times keep books and records sufficient to ensure and document compliance with the terms of this Single Family Shared-Loss Agreement, including but not limited to (a) documentation of alternatives considered with respect to defaulted loans or loans for which default is reasonably foreseeable, (b) documentation showing the calculation of loss for claims submitted to the Receiver, (c) retention of documents that support each line item on the loss claim forms, and (d) documentation with respect to the Recovery Amount on loans for which the Receiver has made a loss-share payment

2.5Information. The Assuming Bank shall promptly provide to the Receiver such other information, including but not limited to, financial statements, computations, and bank policies and procedures, relating to the performance of the provisions of this Single Family Shared-Loss Agreement, as the Receiver may reasonably request from time to time.

2.6Tax Ruling. The Assuming Bank shall not at any time, without the Receiver’s prior written consent, seek a private letter ruling or other determination from the Internal

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Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver pursuant to this Single Family Shared-Loss Agreement.

2.7Sale of Single Family Shared-Loss Loans. The Receiver shall be relieved of its obligations with respect to a Single Family Shared-Loss Loan upon payment of a Foreclosure Loss amount or a Short Sale Loss amount with respect to such Single Family Shared-Loss Loan or upon the sale of a Single Family Shared-Loss Loan by Assuming Bank to an unaffiliated person or entity. The Assuming Bank shall provide the Receiver with timely notice of any such sale. Notwithstanding the foregoing, a sale of the Single Family Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to have occurred as the result of (i) any change in the ownership or control of Assuming Bank, (ii) a merger by Assuming Bank with or into any other entity, or (iii) a sale by Assuming Bank of all or substantially all of its assets.

ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SINGLE FAMILY SHARED-LOSS LOANS

3.1Agreement with Respect to Administration. The Assuming Bank shall (and shall cause any of its Affiliates to which the Assuming Bank transfers any Single Family Shared-Loss Loans to) manage, administer, and collect the Single Family Shared-Loss Loans while owned by the Assuming Bank or any Affiliate thereof during the term of this Single Family Shared-Loss Agreement in accordance with the rules set forth in this Article III. The Assuming Bank shall be responsible to the Receiver in the performance of its duties hereunder and shall provide to the Receiver such reports as the Receiver reasonably deems advisable, including but not limited to the reports required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Bank’s performance of its duties hereunder.

3.2Duties of the Assuming Bank. (a) In performance of its duties under this Article III , the Assuming Bank shall:

(i) manage and administer each Single Family Shared-Loss Loan in accordance with Assuming Bank’s usual and prudent business and banking practices and Customary Servicing Procedures;

(ii) exercise its best business judgment in managing, administering and collecting amounts owed on the Single Family Shared-Loss Loans;

(iii) use commercially reasonable efforts to maximize Recoveries with respect to Losses on Single Family Shared-Loss Loans without regard to the effect of maximizing collections on assets held by the Assuming Bank or any of its Affiliates that are not Single Family Shared-Loss Loans;

(iv) retain sufficient staff to perform its duties hereunder; and

(v) comply with the terms of Exhibit 5 attached hereto, the FDIC Loan Modification Program, for any Single Family Shared-Loss Loans meeting the requirements set forth

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therein. The Assuming Bank may propose exceptions to Exhibit 5 for a group of Loans with similar characteristics, with the objectives of (1) minimizing the loss to the Assuming Bank and the FDIC and (2) maximizing the opportunity for qualified homeowners to remain in their homes with affordable mortgage payments.

(b) Any transaction with or between any Affiliate of the Assuming Bank with respect to any Single Family Shared-Loss Loan including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Bank will manage, administer or collect any of the Single Family Shared-Loss Loans shall be subject to the prior written approval of the Receiver.

3.3Shared-Loss Asset Records and Reports. The Assuming Bank shall establish and maintain such records as may be appropriate to account for the Single Family Shared-Loss Loans in such form and detail as the Receiver may reasonably require, and to enable the Assuming Bank to prepare and deliver to the Receiver such reports as the Receiver may from time to time request regarding the Single Family Shared-Loss Loans and the Monthly Certificates required by Section 2.1 of this Single Family Shared-Loss Agreement.

3.4Related Loans.

(a)Assuming Bank shall use its best efforts to determine which loans are “Related Loans”, as hereinafter defined. The Assuming Bank shall not manage, administer or collect any “Related Loan” in any manner that would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Single Family Shared-Loss Loan to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Bank at any time on or prior to the end of the Final Shared-Loss Month that is made to an Obligor of a Single Family Shared-Loss Loan.

(b)The Assuming Bank shall prepare and deliver to the Receiver with the Monthly Certificates for the calendar months ending June 30 and December 31, a schedule of all Related Loans on the Accounting Records of the Assuming Bank as of the end of each such semi-annual period.

3.5Legal Action; Utilization of Special Receivership Powers. The Assuming Bank shall notify the Receiver in writing (such notice to be given in accordance with Article V below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Bank derives as a result of having acquired an asset from the Receiver, and the Assuming Bank shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Bank and the Assuming Bank shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Bank will advise the Receiver as to the status of any such legal action. The Assuming Bank shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

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ARTICLE IV — PORTFOLIO SALE

4.1Assuming Bank Portfolio Sale of Remaining Single Family Shared-Loss Loans. The Assuming Bank shall have the right with the concurrence of the Receiver to liquidate for cash consideration, all or a portion of Single Family Shared-Loss Loans held by the Assuming Bank at any time prior to the Termination Date (“Portfolio Sale”). If the Assuming Bank exercises its option under this Section 4.1, it must give thirty (30) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale which shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors. Sales of Restructured Loans shall be sold in a separate pool from Single Family Shared-Loss Loans not restructured. The Receiver’s review of the Assuming Bank’s proposed Portfolio Sale will be considered in a timely fashion and approval will not be unreasonably withheld, delayed or conditioned.

4.2Assuming Bank’s Liquidation of Remaining Single Family Shared-Loss Loans. In the event that the Assuming Bank does not conduct a Portfolio Sale pursuant to Section 4.1 the Receiver shall have the right, exercisable in its sole and absolute discretion, to require the Assuming Bank to liquidate for cash consideration, any Single Family Shared-Loss Loans held by the Assuming Bank at any time after the date that is six months prior to the Termination Date. If the Receiver exercises its option under this Section 4.2, it must give notice in writing to the Assuming Bank, setting forth the time period within which the Assuming Bank shall be required to liquidate the Single Family Shared-Loss Loans. The Assuming Bank will comply with the Receiver’s notice and must liquidate the Single Family Shared-Loss Loans as soon as reasonably practicable by means of sealed bid sales to third parties, not including any of the Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors. The selection of any financial advisor or other third party broker or sales agent retained for the liquidation of the remaining Single Family Shared-Loss Loans pursuant to this Section shall be subject to the prior approval of the Receiver, such approval not to be unreasonably withheld, delayed or conditioned.

4.3Calculation of Sale Gain or Loss. For Single Family Shared-Loss Loans that are not Restructured Loans gain or loss on the sales under Section 4.1 or Section 4.2 will be calculated as the sale price received by the Assuming Bank less the unpaid principal balance of the remaining Single Family Shared-Loss Loans. For any Restructured Loan included in the sale gain or loss on sale will be calculated as (a) the sale price received by the Assuming Bank less (b) the net present value of estimated cash flows on the Restructured Loan that was used in the calculation of the related Restructuring Loss plus (c) Loan principal payments collected by the Assuming Bank from the date the Loan was restructured to the date of sale. (See Exhibit 2d for example calculation).

ARTICLE V — LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER

All notices, demands and other communications hereunder shall be in writing and shall be delivered by hand, or overnight courier, receipt requested, addressed to the parties as follows:

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If to Receiver, to:	Federal Deposit Insurance Corporation as Receiver for Strategic Capital Bank Division of Resolutions and Receiverships
	550 17th Street, N.W.
	Washington, D.C. 20429
	Attention: Ralph Malami, Manager, Capital Markets
with a copy to:	Federal Deposit Insurance Corporation
	as Receiver for Strategic Capital Bank
	Room E7056
	3501 Fairfax Drive, Arlington, VA 2226
Attn:	Special Issues Unit
With respect to a notice under Section 3.5 of this Single Family Shared-Loss Agreement, copies of such notice shall be sent to:
	Federal Deposit Insurance Corporation
	Legal Division
	1601 Bryan St.
	Dallas, Texas 75201
	Attention: Regional Counsel
If to Assuming Bank, to:
Midland States Bank
133 W. Jefferson
Effingham, IL 62401

Such Persons and addresses may be changed from time to time by notice given pursuant to the provisions of this Article V. Any notice, demand or other communication delivered pursuant to the provisions of this Article IV shall be deemed to have been given on the date actually received.

ARTICLE VI — MISCELLANEOUS

6.1Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by a party hereto in connection with this Single Family Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2Successors and Assigns; Specific Performance. All terms and provisions of this Single Family Shared-Loss Agreement shall be binding upon and shall inure to the benefit of the parties hereto only; provided, however, that, Receiver may assign or otherwise transfer this Single Family Shared-Loss Agreement (in whole or in part) to the Federal Deposit Insurance

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Corporation in its corporate capacity without the consent of Assuming Bank. Notwithstanding anything to the contrary contained in this Single Family Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, Assuming Bank may not assign or otherwise transfer this Single Family Shared-Loss Agreement (in whole or in part) without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole discretion, and any attempted assignment or transfer in violation of this provision shall be void ab initio.

6.3Governing Law. This Single Family Shared-Loss Agreement shall be construed in accordance with federal law, or, if there is no applicable federal law, the laws of the State of New York, without regard to any rule of conflict of law that would result in the application of the substantive law of any jurisdiction other than the State of New York.

6.4WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

6.5Captions. All captions and headings contained in this Single Family Shared-Loss Agreement are for convenience of reference only and do not form a part of, and shall not affect the meaning or interpretation of, this Single Family Shared-Loss Agreement.

6.6Entire Agreement; Amendments. This Single Family Shared-Loss Agreement, including the Exhibits and any other documents delivered pursuant hereto, embody the entire agreement of the parties with respect to the subject matter hereof, and supersede all prior representations, warranties, offers, acceptances, agreements and understandings, written or oral, relating to the subject matter herein. This Single Family Shared-Loss Agreement may be amended or modified or any provision thereof waived only by a written instrument signed by both parties or their respective duly authorized agents.

6.7Severability. Whenever possible, each provision of this Single Family Shared-Loss Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Single Family Shared-Loss Agreement is held to be prohibited by or invalid, illegal or unenforceable under applicable law, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be prohibited, invalid, illegal or unenforceable, and the validity, legality and enforceability of the remainder of such provision and the remaining provisions of this Single Family Shared-Loss Agreement shall not in any way be affected or impaired thereby.

6.8No Third Party Beneficiary. This Single Family Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be construed to

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grant to any other Person any right, remedy or Claim under or in respect of this Single Family Shared-Loss Agreement or any provision hereof.

6.9Counterparts. This Single Family Shared-Loss Agreement may be executed separately by Receiver and Assuming Bank in any number of counterparts, each of which when executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument.

6.10Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

6.11Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Single Family Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

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EXHIBIT 4.15B

NON-SINGLE FAMILY SHARED-LOSS AGREEMENT

This agreement for reimbursement of loss sharing expenses on certain loans (the “Non-SF Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Shared-Loss Assets as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Non-SF Shared-Loss Agreement is attached as Exhibit 4.15B and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Non-SF Shared-Loss Agreement with respect to the subject matter of this Non-SF Shared-Loss Agreement, the terms of this Non-SF Shared-Loss Agreement shall control. References in this Non-SF Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Non-SF Shared-Loss Agreement unless the context indicates that a Section of the Purchase and Assumption Agreement is intended.

ARTICLE I — DEFINITIONS

Capitalized terms used in this Non-SF Shared-Loss Agreement that are not defined in this Non-SF Shared-Loss Agreement are defined in the Agreement. In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Non-SF Shared-Loss Agreement.

“AAA” means the American Arbitration Association as provided in Section 2.1(f)(iii) of this Non-SF Shared-Loss Agreement.

“Accrued Interest” means, with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance at any time, the amount of earned and unpaid interest, taxes, credit life and/or disability insurance premiums (if any) payable by the Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance, all as reflected on the Accounting Records of the Failed Bank or the Assuming Bank (as applicable); provided, that Accrued Interest shall not include any amount that accrues on or with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance after that Asset has been placed on non-accrual or non-performing status by either the Failed Bank or the Assuming Bank (as applicable).

“Additional ORE” means Shared-Loss Loans that become Other Real Estate after Bank Closing Date.

“Applicable Anniversary of the Commencement Date” means the fifth (5th) anniversary of the Commencement Date, provided, however, that for collateralized mortgage obligations, the “Applicable Anniversary of the Commencement Date” means the seventh (7th) anniversary of the Commencement Date.

“Calendar Quarter” means a quarterly period (a) for the first such period, beginning on the Commencement Date and ending on the last calendar day of either March,

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June, September or December, whichever is the first to occur after the Commencement Date, and (b) for quarterly periods thereafter, beginning on the first calendar day of the calendar month immediately after the month that ended the prior period and ending on the last calendar day of each successive three-calendar-month period thereafter (i.e., each March, June, September and December, starting in the applicable order depending on the ending date of first such period) of any year.

“Capitalized Expenditures” means those expenditures that (i) would be capitalized under generally accepted accounting principles, and (ii) are incurred with respect to Other Real Estate, Additional ORE or Subsidiary ORE. Capitalized Expenditures shall not include expenses related to environmental conditions including, but not limited to, remediation, storage or disposal of any hazardous or toxic substances or any pollutant or contaminant.

“Charge-Offs” means, with respect to any Shared-Loss Assets for any period, an amount equal to the aggregate amount of loans or portions of loans classified as “Loss” under the Examination Criteria, including reversals or charge-offs of Accrued Interest and charge-offs of the principal amount of such assets net of unearned interest (including write-downs associated with Other Real Estate, Additional ORE, Subsidiary ORE or loan modification(s)) effected by the Assuming Bank during such period in accordance with the Examination Criteria and reflected on the Accounting Records of the Assuming Bank; provided, that: (i) the aggregate amount of Accrued Interest (including any reversals thereof) for the period after Bank Closing that shall be included in determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed ninety (90) days’ Accrued Interest; (ii) no Charge-Off shall be taken with respect to any anticipated expenditure by the Assuming Bank until such expenditure is actually incurred; (iii) any financial statement adjustments made in connection with the purchase of any Assets pursuant to this Purchase and Assumption Agreement or any future purchase, merger, consolidation or other acquisition of the Assuming Bank shall not constitute “Charge-Offs”; and (iv) losses incurred on the sale or other disposition of Shared-Loss Assets to any Person (other than the sale or other disposition of Other Real Estate, Additional ORE or Subsidiary ORE to a Person other than an Affiliate of the Assuming Bank which is conducted in a commercially reasonable and prudent manner) shall not constitute Charge-Offs.

“Commencement Date” means the first calendar day following Bank Closing.

“Consumer Loans” means Loans to individuals for household, family and other personal expenditures (including United States and/or State-guaranteed student loans and extensions of credit pursuant to a credit card plan or debit card plan).

“Environmental Assessment” means an assessment of the presence, storage or release of any hazardous or toxic substance, pollutant or contaminant with respect to the collateral securing a Shared-Loss Loan that has been fully or partially charged off.

“Examination Criteria” means the loan classification criteria customarily employed by, or any applicable regulations of, the Assuming Bank’s Chartering Authority.

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“Failed Bank Charge-Offs/Write-Downs” means, with respect to any Asset, an amount equal to the aggregate amount of reversals or charge-offs of Accrued Interest and charge-offs and write-downs of principal effected by the Failed Bank with respect to that Asset as reflected on the Accounting Records of the Failed Bank.

“FDIC Party” has the meaning provided in Section 2.1(f)(ii) of this Non-SF Shared-Loss Agreement.

“Home Equity Loans” means Loans that constitute the funded portions of lines of credit secured by mortgages on one- to four-family residences or stock of cooperative housing associations.

“Net Charge-Offs” means, with respect to any period, an amount equal to the aggregate amount of Charge-Offs for such period less the amount of Recoveries for such period.

“Neutral Member” has the meaning provided in Section 2.1(f)(ii) of this Non-SF Shared-Loss Agreement.

“Non-Shared-Loss Loan Commitment” means any Commitment other than a Shared-Loss Loan Commitment.

“Notice of Dispute” has the meaning provided in Section 2.1(f)(iii) of this Non-SF Shared-Loss Agreement.

“ORE Subsidiary” means any Subsidiary of the Assuming Bank that engages solely in holding, servicing, managing or liquidating interests of a type described in clause (A) of the definition of “Other Real Estate,” which interests have arisen from the collection or settlement of a Shared-Loss Loan.

“Other Real Estate” means all of the following (including any of the following fully or partially charged off the books and records of the Failed Bank or the Assuming Bank) that (i) are owned by the Failed Bank as of Bank Closing and are purchased pursuant to the Agreement or (ii) have arisen subsequent to Bank Closing from the collection or settlement by the Assuming Bank of a Shared-Loss Loan:

(A)all interests in real estate (other than Bank Premises and Fixtures), including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights; and

(B)all other assets (whether real or personal property) acquired by foreclosure or in full or partial satisfaction of judgments or indebtedness.

“Permitted Advance” means an advance of funds by the Assuming Bank with respect to a Shared-Loss Loan, or the making of a legally binding commitment by the Assuming Bank to advance funds with respect to a Shared-Loss Loan, that (i) in the case of such an advance, is actually made, and, in the case of such a commitment, is made and all of the proceeds

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thereof actually advanced, within one (1) year after the Commencement Date, (ii) does not cause the sum of (A) the book value of such Shared-Loss Loan as reflected on the Accounting Records of the Assuming Bank after any such advance has been made by the Assuming Bank plus (B) the unfunded amount of any such commitment made by the Assuming Bank related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan, (iii) is not made with respect to a Shared-Loss Loan with respect to which (A) there exists a related Shared-Loss Loan Commitment or (B) the Assuming Bank has taken a Charge-Off and (iv) is made in good faith, is supported at the time it is made by documentation in the Credit Files and conforms to and is in accordance with the applicable requirements set forth in Article III of this Non-SF Shared-Loss Agreement and with the then effective written internal credit policy guidelines of the Assuming Bank; provided, that the limitations in subparagraphs (i), (ii) and (iii) of this definition shall not apply to any such action (other than to an advance or commitment related to the remediation, storage or final disposal of any hazardous or toxic substance, pollutant or contaminant) that is taken to preserve or secure the value of the collateral for such Shared-Loss Loan.

“Permitted Amendment” means, with respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment, modification, renewal or extension thereof, or any waiver of any term, right, or remedy thereunder, made by the Assuming Bank in good faith and otherwise in accordance with the applicable requirements set forth in Article III of this Non-SF Shared-Loss Agreement and the then effective written internal credit policy guidelines of the Assuming Bank; provided, that:

(i) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the amount of principal (A) then remaining available to be advanced by the Assuming Bank under the Shared-Loss Loan Commitment or (B) then outstanding under the Shared-Loss Loan;

(ii) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the maximum amount of principal authorized as of Bank Closing to be outstanding at any one time under the underlying revolving line of credit relationship with the debtor (regardless of the extent to which such revolving line of credit may have been funded as of Bank Closing or may subsequently have been funded and/or repaid); and

(iii) no such amendment, modification, renewal, extension or waiver shall extend the term of such Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment or Shared-Loss Loan as existed on Bank Closing was beyond the end of the final Shared-Loss Quarter, in which event no such amendment, modification, renewal, extension or waiver shall extend such term beyond the term as existed as of Bank Closing.

“Quarterly Certificate” has the meaning provided in Section 2.1(a)(i) of this Non-SF Shared-Loss Agreement.

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“Recoveries” (I)(A) In addition to any sums to be applied as Recoveries pursuant to subparagraph (II) below, “Recoveries” means, with respect to any period, the sum of (without duplication):

(i) the amount of collections during such period by the Assuming Bank on Charge-Offs of Shared-Loss Assets effected by the Assuming Bank prior to the end of the final Shared-Loss Quarter; plus

(ii) the amount of collections during such period by the Assuming Bank on Failed Bank Charge-Offs/Write-Downs; plus

(iii) the amount of gain on any sale or other disposition during such period by the Assuming Bank of Shared Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE (provided, that the amount of any such gain included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses); plus

(iv) the amount of collections during such period by the Assuming Bank of any Reimbursable Expenses or Recovery Expenses; plus

(v) the amount of any fee or other consideration received by the Assuming Bank during or prior to such period in connection with any amendment, modification, renewal, extension, refinance, restructure, commitment or other similar action taken by the Assuming Bank with respect to an Asset with respect to which there exists a Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been effected by the Assuming Bank during or prior to such period (provided, that the amount of any such fee or other consideration included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses).

(I)(B) For the purpose of determining the amounts to be applied as Recoveries pursuant to subparagraph (I)(A) above, the Assuming Bank shall apply amounts received on the Assets that are not otherwise applied to reduce the book value of principal of a Shared-Loss Loan (or, in the case of Other Real Estate, Additional ORE, Subsidiary ORE and Capitalized Expenditures, that are not otherwise applied to reduce the book value thereof) in the following order: first to Charge-Offs and Failed Bank Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses; then to interest income; and then to other expenses incurred by the Assuming Bank.

(II) If there occurs an amendment, modification, renewal, extension, refinance, restructure, commitment, sale or other similar action with respect to a Shared-Loss Loan as to which there exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been effected by the Assuming Bank during or prior to such period, and if, as a result of such occurrence, the Assuming Bank recognizes any interest income for financial accounting purposes on that Shared-Loss Loan, then “Recoveries” shall also include the portion of the total amount of any such interest income recognized by the Assuming Bank which is derived by multiplying:

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(A) the total amount of any such interest income recognized by the Assuming Bank during such period with respect to that Shared-Loss Loan as described above, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) immediately above was recognized, and the denominator of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

provided, however, that the amount of any interest income included as Recoveries for a particular Shared-Loss Loan shall not exceed the aggregate amount of (a) Failed Bank Charge-Offs/Write-Downs, (b) Charge-Offs effected by the Assuming Bank during or prior to the period in which the amount of Recoveries is being determined, plus (c) any Reimbursable Expenses and Recovery Expenses paid to the Assuming Bank pursuant to this Non-SF Shared-Loss Agreement during or prior to the period in which the amount of Recoveries is being determined, all with respect to that particular Shared-Loss Loan; and, provided, further, that any collections on any such Shared-Loss Loan that are not applied to reduce book value of principal or recognized as interest income shall be applied pursuant to subparagraph (I) above.

(III) Notwithstanding subparagraphs (I) and (II) above, the term “Recoveries” shall not include: (a) any amounts paid to the Assuming Bank by the Receiver pursuant to Section 2.1 of this Non-SF Shared-Loss Agreement, (b) amounts received with respect to Charge-Offs effected by the Assuming Bank after the final Shared-Loss Quarter, (c) after the final Shared-Loss Quarter, income received by the Assuming Bank from the operation of, and any gains recognized by the Assuming Bank on the disposition of, Other Real Estate, Additional ORE or Subsidiary ORE (such income and gains being hereinafter together referred to as “ORE Income”), except to the extent that aggregate ORE Income exceeds the aggregate expenses paid to third parties by the Assuming Bank after the final Shared-Loss Quarter to manage, operate and maintain Other Real Estate, Additional ORE or Subsidiary ORE (such expenses being hereinafter referred to as “ORE Expenses”). In determining the extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery Quarter as set forth immediately above in subparagraph (c), the Assuming Bank will subtract (i) ORE Expenses paid to third parties during such Recovery Quarter (provided, that, in the case of the final Recovery Quarter only, the Assuming Bank will subtract ORE Expenses paid to third parties from the beginning of the final Recovery Quarter up to the date the Assuming Bank is required to deliver the final Quarterly Certificate pursuant to this Non-SF Shared-Loss Agreement) from (ii) ORE Income received during such Recovery Quarter, to calculate net ORE income (“Net ORE Income”) for that Recovery Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter is positive, such amount shall be reported as Recoveries on the Quarterly Certificate for such Recovery Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter is negative (“Net ORE Loss Carryforward”), such

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amount shall be added to any ORE Expenses paid to third parties in the next succeeding Recovery Quarter, which sum shall then be subtracted from ORE Income for that next succeeding Recovery Quarter, for the purpose of determining the amount of Net ORE Income (or, if applicable, Net ORE Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the amount of the Net ORE Loss Carryforward that does not exceed the aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates for all Recovery Quarters may be included as a Recovery Expense on the Quarterly Certificate for the final Recovery Quarter.

“Recovery Amount” has the meaning provided in Section 2.1(b)(ii) of this Non-SF Shared-Loss Agreement.

“Recovery Expenses” means, for any Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures) paid to third parties (other than Affiliates of the Assuming Bank) by the Assuming Bank, as limited by Sections 3.2(c) and (d) of Article III to this Non-SF Shared-Loss Agreement, to recover amounts owed with respect to (i) any Shared-Loss Asset as to which a Charge-Off was effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset was reflected on the Accounting Records of the Assuming Bank), and (ii) Failed Bank Charge-Offs/Write-Downs (including, in each case, expenses related to an Environmental Assessment but excluding (A) any other expenses related to such environmental conditions including, but not limited to, the remediation, storage or final disposal of any such hazardous or toxic substance, or any such pollutant or contaminant and (B) expenses related to any lender liability claims or actions, including but not limited to, such claims or actions arising from environmental conditions); provided, that, so long as income with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in subsection (II) of the definition of “Recoveries”, the term “Recovery Expenses” shall not include that portion of any such expenses paid during such Recovery Quarter to recover any amounts owed on that Shared-Loss Loan that is derived by:

subtracting (1) the product derived by multiplying:

(A) the total amount of any such expenses paid by the Assuming Bank during such Recovery Quarter with respect to that Shared-Loss Loan, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) of the definition of “Recoveries” was recognized, and the denominator of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

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from (2) the total amount of any such expenses paid during that Recovery Quarter with respect to that Shared-Loss Loan.

“Recovery Quarter” has the meaning provided in Section 2.1(a)(ii) of this Non-SF Shared-Loss Agreement.

“Reimbursable Expenses” means, for any Shared-Loss Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures) paid to third parties (other than Affiliates of the Assuming Bank) by the Assuming Bank, as limited by Sections 3.2(c) and (d) of Article III of this Non-SF Shared-Loss Agreement, to:

(i) recover amounts owed with respect to any Shared-Loss Asset as to which a Charge-Off has been effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset was reflected on the Accounting Records of the Assuming Bank) and recover amounts owed with respect to Failed Bank Charge-Offs/Write-Downs (including, in each case, expenses related to an Environmental Assessment but excluding (A) any other expenses related to such environmental conditions including, but not limited to, the remediation, storage or final disposal of any such hazardous or toxic substance, or any such pollutant or contaminant and (B) expenses related to any lender liability claims or actions, including but not limited to, such claims or actions arising from environmental conditions); provided, that, so long as income with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in subsection (II) of the definition of “Recoveries”, the term “Reimbursable Expenses” shall not include that portion of any such expenses paid during such Shared-Loss Quarter to recover any amounts owed on that Shared-Loss Loan that is derived by:

subtracting (1) the product derived by multiplying:

(A) the total amount of any such expenses paid by the Assuming Bank during such Shared-Loss Quarter with respect to that Shared-Loss Loan, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) of the definition of “Recoveries” was recognized, and the denominator of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

from (2) the total amount of any such expenses paid during that Shared-Loss Quarter with respect to that Shared-Loss Loan; and

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(ii) manage, operate or maintain Other Real Estate, Additional ORE or Subsidiary ORE less the amount of any income received by the Assuming Bank during such Shared-Loss Quarter with respect to such Other Real Estate, Additional ORE or Subsidiary ORE (which resulting amount under this clause (ii) may be negative).

“Residential Mortgage Loans” means Loans, excluding advances made pursuant to Home Equity Loans, that are secured by mortgages on one- to four-family residences or stock of cooperative housing associations.

“Review Board” has the meaning provided in Section 2.1(f)(i) of this Non-SF Shared-Loss Agreement.

“Shared-Loss Amount” has the meaning provided in Section 2.1(b)(i) of this Non-SF Shared-Loss Agreement.

“Shared-Loss Asset Repurchase Price” means, with respect to any Shared-Loss Asset, which shall be determined by the Receiver, the principal amount thereof due from an Obligor (including, subject to the limitations discussed below, the amount of any Accrued Interest) stated on the Accounting Records of the Assuming Bank, as of the date as of which the Shared-Loss Asset Repurchase Price is being determined (regardless, in the case of a Shared-Loss Loan, of the Legal Balance thereof); provided, that (i) in the case of a Shared-Loss Loan there shall be excluded from such amount the amount of any Accrued Interest accrued on or with respect to such Shared-Loss Loan prior to the ninety (90)-day period ending on the day prior to the purchase date determined pursuant to Sections 2.1(e)(i) or 2.1(e)(iii) of this Non-SF Shared-Loss Agreement, except to the extent such Accrued Interest was included in the Book Value of such Shared-Loss Loan, and (ii) any collections on a Shared-Loss Loan received by the Assuming Bank after the purchase date applicable to such Shared-Loss Loan shall be applied (without duplication) to reduce the Shared-Loss Asset Repurchase Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of determining the amount of unpaid interest which accrued during a given period with respect to a variable-rate Shared-Loss Loan, all collections of interest shall be deemed to be applied to unpaid interest in the chronological order in which such interest accrued.

“Shared-Loss Assets” means Shared-Loss Loans, Other Real Estate purchased by the Assuming Bank, Additional ORE, Subsidiary ORE and Capitalized Expenditures.

“Shared-Loss Loan Commitment” means:

(i) any Commitment to make a further extension of credit or to make a further advance with respect to an existing Shared-Loss Loan; and

(ii) any Shared-Loss Loan Commitment (described in subparagraph (i) immediately preceding) with respect to which the Assuming Bank has made a Permitted Amendment.

“Shared-Loss Loan Commitment Advance” means an advance pursuant to a

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Shared-Loss Loan Commitment with respect to which the Assuming Bank has not made a Permitted Advance.

“Shared-Loss Loans” means:

(i)(A) Loans purchased by the Assuming Bank pursuant to the Agreement set forth on Exhibit 4.15(b) (B) New Shared-Loss Loans purchased by the Assuming Bank pursuant to the Agreement, (C) Permitted Advances and (D) Shared-Loss Loan Commitment Advances, if any; provided, that Shared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted Advances and Shared-Loss Loan Commitment Advances with respect to which an Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor; and

(ii) any Shared-Loss Loans (described in subparagraph (i) immediately preceding) with respect to which the Assuming Bank has made a Permitted Amendment.

“Shared-Loss Payment Trigger” means when the sum of the Cumulative Loss Amount under the Single Family Shared-Loss Agreement and the cumulative Net Charge-Offs under this Non-SF Shared-Loss Agreement, exceeds the First Loss Tranche.

“Shared-Loss Quarter” has the meaning provided in Section 2.1(a)(i) of this Non-SF Shared-Loss Agreement.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $167,000,000.00.

“Subsidiary ORE” means all assets owned by ORE Subsidiaries that would constitute Additional ORE if such assets were on the books of the Assuming Bank.

“Termination Date” means the seventh (7th) anniversary of the Commencement Date, provided, however, for collateralized mortgage obligations, the “Termination Date” means the tenth (10th) anniversary of the Commencement Date.

ARTICLE II — SHARED-LOSS ARRANGEMENT

2.1Shared-Loss Arrangement.

(a)Quarterly Certificates. (i) Not later than thirty (30) days after the end of each Calendar Quarter from and including the initial Calendar Quarter to and including the Calendar Quarter in which the Applicable Anniversary of the Commencement Date falls (each of such Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the Assuming Bank shall deliver to the Receiver a certificate, signed by the Assuming Bank’s chief executive officer and its chief financial officer, setting forth in such form and detail as the Receiver may specify (a “Quarterly Certificate”):

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(A)the amount of Charge-Offs, the amount of Recoveries and the amount of Net Charge-Offs (which amount may be negative) during such Shared-Loss Quarter with respect to the Shared-Loss Assets (and for Recoveries, with respect to the Assets for which a charge-off was effected by the Failed Bank prior to Bank Closing); and

(B)the aggregate amount of Reimbursable Expenses (which amount may be negative) during such Shared-Loss Quarter.

(ii)Not later than thirty (30) days after the end of each Calendar Quarter from and including the first Calendar Quarter following the final Shared-Loss Quarter to and including the Calendar Quarter in which the Termination Date falls (each of such Calendar Quarters being referred to herein as a “Recovery Quarter”), the Assuming Bank shall deliver to the Receiver a Quarterly Certificate setting forth, in such form and detail as the Receiver may specify, the amount of Recoveries and Recovery Expenses during such Recovery Quarter. On the Quarterly Certificate for the first Recovery Quarter only, the Assuming Bank may report as a separate item, in such form and detail as the Receiver may specify, the aggregate amount of any Reimbursable Expenses that: (a) were incurred prior to or during the final Shared-Loss Quarter, and (b) had not been included in any Quarterly Certificate for any Shared-Loss Quarter because they had not been actually paid by the Assuming Bank (in accordance with the terms of this Non-SF Shared-Loss Agreement) during any Shared-Loss Quarter and (c) were actually paid by the Assuming Bank (in accordance with the terms of this Non-SF Shared-Loss Agreement) during the first Recovery Quarter.

(b)Payments With Respect to Shared-Loss Assets.

(i)For purposes of this Section 2.1(b), the Assuming Bank shall record the Shared-Loss Assets on its Accounting Records at Book Value. If the amount of all Net Charge-Offs during any Shared-Loss Quarter plus Reimbursable Expenses during such Shared-Loss Quarter (the “Shared-Loss Amount”) is positive, then, except as provided in Sections 2.1(c) and (e) below, and subject to the provisions of Section 2.1(b)(vi) below, not later than fifteen (15) days after the date on which the Receiver receives the Quarterly Certificate with respect to such Shared-Loss Quarter, the Receiver shall pay to the Assuming Bank an amount equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount during any Shared-Loss Quarter is negative, the Assuming Bank shall pay to the Receiver an amount equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss Quarter, which payment shall be delivered to the Receiver together with the Quarterly Certificate for such Shared-Loss Quarter.

(ii)If the amount of gross Recoveries during any Recovery Quarter less Recovery Expenses during such Recovery Quarter (the “Recovery Amount”) is positive, then, simultaneously with its delivery of the Quarterly Certificate with respect to such Recovery Quarter, the Assuming Bank shall pay to the Receiver an amount equal to eighty percent (80%) of the Recovery Amount for such Recovery Quarter. If the Recovery Amount is negative, then such negative amount shall be subtracted from the amount of gross Recoveries during the next succeeding Recovery Quarter in determining the Recovery Amount in such next succeeding

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Recovery Quarter; provided, that this Section 2.1(b)(ii) shall operate successively in the event that the Recovery Amount (after giving effect to this Section 2.1(b)(ii)) in such next succeeding Recovery Quarter is negative. The Assuming Bank shall specify, in the Quarterly Certificate for the final Recovery Quarter, the aggregate amount for all Recovery Quarters only, as of the end of, and including, the final Recovery Quarter of (A) Recoveries (“Aggregate Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C) only those Recovery Expenses that have been actually “offset” against Aggregate Recovery Period Recoveries (including those so “offset” in that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in this sentence, the term “offset” means the amount that has been applied to reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set forth in this Section 2.1(b)(ii). If, at the end of the final Recovery Quarter the amount of Aggregate Recovery Expenses exceeds the amount of Aggregate Recovery Period Recoveries, the Receiver shall have no obligation to pay to the Assuming Bank all or any portion of such excess. Subsequent to the Assuming Bank’s calculation of the Recovery Amount (if any) for the final Recovery Quarter, the Assuming Bank shall also show on the Quarterly Certificate for the final Recovery Quarter the results of the following three mathematical calculations: (i) Aggregate Recovery Period Recoveries minus Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses minus Aggregate Offset Recovery Expenses; and (iii) the lesser of the two amounts calculated in (i) and (ii) immediately above (“Additional Recovery Expenses”) multiplied by 80% (the amount so calculated in (iii) being defined as the “Additional Recovery Expense Amount”). If the Additional Recovery Expense Amount is greater than zero, then the Assuming Bank may request in the Quarterly Certificate for the final Recovery Quarter that the Receiver reimburse the Assuming Bank the amount of the Additional Recovery Expense Amount and the Receiver shall pay to the Assuming Bank the Additional Recovery Expense Amount within fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate. On the Quarterly Certificate for the final Recovery Quarter only, the Assuming Bank may include, in addition to any Recovery Expenses for that Recovery Quarter that were paid by the Assuming Bank in that Recovery Quarter, those Recovery Expenses that: (a) were incurred prior to or during the final Recovery Quarter, and (b) had not been included in any Quarterly Certificate for any Recovery Quarter because they had not been actually paid by the Assuming Bank (in accordance with the terms of this Non-SF Shared-Loss Agreement) during any Recovery Quarter, and (c) were actually paid by the Assuming Bank (in accordance with the terms of this Non-SF Shared-Loss Agreement) prior to the date the Assuming Bank is required to deliver that final Quarterly Certificate to the Receiver under the terms of Section 2.1(a)(ii).

(iii)Concurrently with the delivery date of the Quarterly Certificate for the final Recovery Quarter as provided in Section 2.1(a)(ii), the Assuming Bank shall deliver to the Receiver a certificate, signed by the Assuming Bank’s chief executive officer and its chief financial officer, setting forth in such form and detail (including supporting schedules) as the Receiver may specify, the amount of any excess of (A) the aggregate amount of Net Charge-Offs for all Shared-Loss Quarters plus all Reimbursable Expenses and Aggregate Offset Recovery Expenses plus Additional Recovery Expenses minus the aggregate amount of gross Recoveries for all Recovery Quarters, over (B) the Stated Threshold. Not later than forty-five (45) days after the date on which the Receiver receives such certificate, the Receiver shall pay to the Assuming Bank an amount equal to fifteen percent (15%) of such excess.

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(iv)With respect to each Shared-Loss Quarter and Recovery Quarter, collections by the Assuming Bank on any charge-off effected by the Failed Bank prior to Bank Closing on an Asset other than a Shared-Loss Asset shall be reported as Recoveries under this Section 2.1 only to the extent such collections exceed the Book Value of such Asset, if any. For any Shared-Loss Quarter or Recovery Quarter in which collections by the Assuming Bank on such Asset are applied to both Book Value and to a charge-off effected by the Failed Bank prior to Bank Closing, the amount of expenditures incurred by the Assuming Bank attributable to the collection of any such Asset, that shall be considered a Reimbursable Expense or a Recovery Expense under this Section 2.1 will be limited to a proportion of such expenditures which is equal to the proportion derived by dividing (A) the amount of collections on such Asset applied to a charge-off effected by the Failed Bank prior to Bank Closing, by (B) the total collections on such Assets.

(v)If the Assuming Bank has duly specified an amount of Reimbursable Expenses on the Quarterly Certificate for the first Recovery Quarter as described above in the last sentence of Section 2.1(a)(ii), then, not later than fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate, the Receiver shall pay to the Assuming Bank an amount equal to eighty percent (80%) of the amount of such Reimbursable Expenses.

(vi)Receiver has no obligation to make payment for any Shared Loss Quarters until the Shared-Loss Payment Trigger is reached.

(c)Limitation on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to this Section 2.1 with respect to any Charge-Off of a Shared-Loss Asset that the Receiver or the Corporation determines, based upon the Examination Criteria, should not have been effected by the Assuming Bank. In the event that the Receiver does not make any payments with respect to any Charge-Off of a Shared-Loss Asset pursuant to this Section 2.1 or determines that a payment was improperly made, the Assuming Bank and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

(d)Sale of, or Additional Advances or Amendments with Respect to, Shared-Loss Loans. No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 (i) after the Assuming Bank makes any additional advance, commitment or increase in the amount of a commitment with respect to such Shared-Loss Loan that does not constitute a Permitted Advance or a Shared-Loss Loan Commitment Advance, (iii) after the Assuming Bank makes any amendment, modification, renewal or extension to such Shared-Loss Loan that does not constitute a Permitted Amendment, or (iv) after the Assuming Bank has managed, administered or collected any “Related Loan” (as such term is defined in Section 3.4 of Article III of this Exhibit) in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of such Shared-Loss Asset to which such loan is related; provided, that any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the taking of any action described in clause (i), (ii), or (iii) of this Section 2.1(d) by the Assuming Bank shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of treatment of Recoveries on such Charge-Offs until such time as the amount of Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.

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(e)Option to Purchase.

(i)In the event that the Assuming Bank determines that there is a substantial likelihood that continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of $500,000 or more on the Accounting Records of the Assuming Bank will result in an expenditure of funds by the Assuming Bank to a third party for a specified purpose (the expenditure of which, in its best judgment, will maximize collections), which do not constitute Reimbursable Expenses or Recovery Expenses, and such expenses will exceed ten percent (10%) of the then book value thereof as reflected on the Accounting Records of the Assuming Bank, the Assuming Bank shall (i) promptly so notify the Receiver and (ii) request that such expenditure be treated as a Reimbursable Expense or Recovery Expense for purposes of this Section 2.1. (Where the Assuming Bank determines that there is a substantial likelihood that the previously mentioned situation exists with respect to continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of less than $500,000 on the Accounting Records of the Assuming Bank, the Assuming Bank may so notify the Receiver and request that such expenditure be treated as a Reimbursable Expense or Recovery Expense.) Within thirty (30) days after its receipt of such a notice, the Receiver will advise the Assuming Bank of its consent or denial that such expenditures shall be treated as a Reimbursable Expense or Recovery Expense, as the case may be. Notwithstanding the failure of the Receiver to give its consent with respect to such expenditures, the Assuming Bank shall continue to administer such Shared-Loss Asset in accordance with Section 2.2, except that the Assuming Bank shall not be required to make such expenditures. At any time after its receipt of such a notice and on or prior to the Termination Date the Receiver shall have the right to purchase such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii), notwithstanding any consent by the Receiver with respect to such expenditure.

(ii)During the period prior to the Termination Date, the Assuming Bank shall notify the Receiver within fifteen (15) days after any of the following becomes fully or partially charged-off:

(A) a Shared-Loss Loan having a Legal Balance (or, in the case of more than one (1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance) of $500,000 or more in circumstances in which the legal claim against the relevant Obligor survives; or

(B) a Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R.  215.2(d), a “principal shareholder” as defined in 12 C.F.R.  215.2(l), or an Affiliate of the Assuming Bank.

(iii)If the Receiver determines in its sole discretion that the Assuming Bank is not diligently pursuing collection efforts with respect to any Shared-Loss Asset which has been fully or partially charged-off or written-down (including any Shared-Loss Asset which is identified or required to be identified in a notice pursuant to Section 2.1(e)(ii)) or any Asset for which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its option,

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exercisable at any time on or prior to the Termination Date, require the Assuming Bank to assign, transfer and convey such Shared-Loss Asset or Asset to and for the sole benefit of the Receiver for a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Shared-Loss Asset or Asset.

(iv)Not later than ten (10) days after the date upon which the Assuming Bank receives notice of the Receiver’s intention to purchase or require the assignment of any Shared-Loss Asset or Asset pursuant to Section 2.1(e)(i) or (iii), the Assuming Bank shall transfer to the Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto and shall take all such other actions as may be necessary and appropriate to adequately effect the transfer of such Shared-Loss Asset or Asset from the Assuming Bank to the Receiver. Not later than fifteen (15) days after the date upon which the Receiver receives such Shared-Loss Asset or Asset and any Credit Files relating thereto, the Receiver shall pay to the Assuming Bank an amount equal to the Repurchase Price of such Shared-Loss Asset or Asset less the Related Liability Amount.

(v)The Receiver shall assume all Related Liabilities with respect to any Shared-Loss Asset or Asset set forth in the notice described in Section 2.1(e)(iv).

(f)Dispute Resolution.

(i) (A) Any dispute as to whether a Charge-Off of a Shared-Loss Asset was made in accordance with Examination Criteria shall be resolved by the Assuming Bank’s Chartering Authority. (B) With respect to any other dispute arising under the terms of this this Non-SF Shared-Loss Agreement, at the discretion of the Corporation, to be exercised in each instance of such other dispute, and with the subsequent written consent of the Assuming Bank, such other dispute shall be resolved by determination of a review board (a “Review Board”) established pursuant to Section 2.1(f). Any Review Board under this Section 2.1(f) shall follow the provisions of the Federal Arbitration Act and shall follow the provisions of the Administrative Dispute Resolution Act of 1996 (“ADRA”), as amended. (C) Any determination by the Assuming Bank’s Chartering Authority or by a Review Board shall be conclusive and binding on the parties hereto and not subject to further dispute, and judgment may be entered on said determination in accordance with applicable arbitration law in any court having jurisdiction thereof.

(ii)A Review Board shall consist of three (3) members, each of whom shall have such expertise as the Corporation and the Assuming Bank agree is relevant. As appropriate, the receiver or the Corporation (the “FDIC Party”) will select one member, one member will be selected by the Assuming Bank and the third member (the “Neutral Member”) will be selected by the other two members. The member of the Review Board selected by a party may be removed at any time by such party upon two (2) days’ written notice to the other party of the selection of a replacement member. The Neutral Member may be removed by unanimous action of the members appointed by the FDIC Party and the Assuming Bank after two (2) days’ prior written notice to the FDIC Party and the Assuming Bank of the selection of a replacement Neutral Member. In addition, if a Neutral Member fails for any reason to serve or continue to serve on the Review Board, the other remaining members shall so notify the parties to the dispute and the Neutral Member in writing that such Neutral Member will be replaced, and the Neutral Member

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shall thereafter be replaced by the unanimous action of the other remaining members within twenty (20) business days of that notification.

(iii)No dispute may be submitted to a Review Board by any of the parties to this Non-SF Shared-Loss Agreement unless such party has provided to the other party a written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day period following the providing of a Notice of Dispute, the parties to the dispute will make every effort in good faith to resolve the dispute by mutual agreement. As part of these good faith efforts, the parties should consider the use of less formal dispute resolution techniques, as judged appropriate by each party in its sole discretion. Such techniques may include, but are not limited to, mediation, settlement conference, and early neutral evaluation. If the parties have not agreed to a resolution of the dispute by the end of such forty-five (45)-day period, then, subject to the discretion of the Corporation and the written consent of the Assuming Bank as set forth in Section 2.1(f)(i)(B) above, on the first day following the end of such period, the FDIC Party and the Assuming Bank shall notify each other of its selection of its member of the Review Board and such members shall be instructed to promptly select the Neutral Member of the Review Board. If the members appointed by the FDIC Party and the Assuming Bank are unable to promptly agree upon the initial selection of the Neutral Member, or a timely replacement Neutral Member as set forth in Section 2.1(f)(ii) above, the two appointed members shall apply to the American Arbitration Association (“AAA”), and such Neutral Member shall be appointed in accordance with the Commercial Arbitration Rules of the AAA.

(iv)The resolution of a dispute pursuant to this Section 2.1(f) shall be governed by the Commercial Arbitration Rules of the AAA to the extent that such rules are not inconsistent with this Section 2.1(f). The Review Board may modify the procedures set forth in such rules from time to time with the prior approval of the FDIC Party and the Assuming Bank.

(v)Within fifteen (15) days after the last to occur of the final written submissions of both parties, the presentation of witnesses, if any, and oral presentations, if any, the Review Board shall adopt the position of one of the parties and shall present to the parties a written award regarding the dispute. The determination of any two (2) members of a Review Board will constitute the determination of such Review Board.

(vi)The FDIC Party and the Assuming Bank will each pay the fees and expenses of the member of the Review Board selected by it. The FDIC Party and Assuming Bank will share equally the fees and expenses of the Neutral Member. No such fees or expenses incurred by the Assuming Bank shall be subject to reimbursement by the FDIC Party under this Non-SF Shared-Loss Agreement or otherwise.

(vii)Each party will bear all costs and expenses incurred by it in connection with the submission of any dispute to a Review Board. No such costs or expenses incurred by the Assuming Bank shall be subject to reimbursement by the FDIC Party under this Non-SF Shared-Loss Agreement or otherwise. The Review Board shall have no authority to award costs or expenses incurred by either party to these proceedings.

(viii)Any dispute resolution proceeding held pursuant to this Section 2.1(f)

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shall not be public. In addition, each party and each member of any Review Board shall strictly maintain the confidentiality of all issues, disputes, arguments, positions and interpretations of any such proceeding, as well as all information, attachments, enclosures, exhibits, summaries, compilations, studies, analyses, notes, documents, statements, schedules and other similar items associated therewith. Pursuant to ADRA, dispute resolution communications may not be disclosed either by the parties or by any member of the Review board unless:

(1) all parties to the dispute resolution proceeding agree in writing;

(2) the communication has already been made public;

(3) the communication is required by statute to be made public; or

(4) a court determines that such testimony or disclosure is necessary to prevent a manifest injustice, help establish a violation of the law or prevent harm to the public health or safety, or of sufficient magnitude in the particular case to outweigh the integrity of dispute resolution proceedings in general by reducing the confidence of parties in future cases that their communications will remain confidential.

(ix)Any dispute resolution proceeding pursuant to this Section 2.1(f) (whether as a matter of good faith negotiations, by resort to a Review Board, or otherwise) is a compromise negotiation for purposes of the Federal Rules of Evidence and state rules of evidence. The parties agree that all proceedings, including any statement made or document prepared by any party, attorney or other participants are privileged and shall not be disclosed in any subsequent proceeding or document or construed for any purpose as an admission against interest. Any document submitted and any statements made during any dispute resolution proceeding are for settlement purposes only. The parties further agree not to subpoena any of the members of the Review Board or any documents submitted to the Review Board. In no event will the Neutral Member voluntarily testify on behalf of any party.

(x)No decision, interpretation, determination, analysis, statement, award or other pronouncement of any Review Board shall constitute precedent as regards any subsequent proceeding (whether or not such proceeding involves dispute resolution under this Non-SF Shared-Loss Agreement) nor shall any Review Board be bound to follow any decision, interpretation, determination, analysis, statement, award or other pronouncement rendered by any previous Review Board or any other previous dispute resolution panel which may have convened in connection with a transaction involving other failed financial institutions or Federal assistance transactions.

(xi)The parties may extend any period of time in this Section 2.1(f) by mutual agreement. Notwithstanding anything above to the contrary, no dispute shall be submitted to a Review Board until each member of the Review Board, and any substitute member, if applicable, agrees to be bound by the provisions of this Section 2.1(f) as applicable to members of a Review Board. Prior to the commencement of the Review Board proceedings, or, in the case of a substitute Neutral Member, prior to the re-commencement of such proceedings subsequent to that substitution, the Neutral Member shall provide a written oath of impartiality.

2.2Administration of Shared-Loss Assets. The Assuming Bank shall at all times

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prior to the Termination Date comply with the Rules Regarding the Administration of Shared-Loss Assets as set forth in Article III of this Exhibit.

2.3Auditor Report; Right to Audit.

(a)Within ninety (90) days after the end of each calendar year from and including the calendar year during which Bank Closing falls to and including the calendar year during which the Termination Date falls, the Assuming Bank shall deliver to the Corporation and to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Non-SF Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Bank’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such calendar year by this Article II were not made by the Assuming Bank in accordance herewith. In the event that the Assuming Bank cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such year by this Article II were not made by the Assuming Bank in accordance herewith. In such event, the Assuming Bank and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

(b)The Assuming Bank shall perform on a semi-annual basis an internal audit of its compliance with the provisions of this Article II and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.

(c)The Receiver or the Corporation may perform an audit to determine the Assuming Bank’s compliance with the provisions of this Non-SF Shared-Loss Agreement, including this Article II, at any time. The scope and duration of any such audit shall be within the sole discretion of the Receiver or the Corporation, as the case may be. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit, the Assuming Bank and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.4Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Quarterly Certificate delivered pursuant to Section 2.1, if, in its sole judgment, there is a reasonable basis for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Bank detailing the grounds for withholding such payment. At such time as the Assuming Bank demonstrates to the satisfaction of the Receiver that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay

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the Assuming Bank the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days. In the event the Receiver or the Assuming Bank elects to submit the issue of the eligibility of the item for reimbursement or payment for determination under the dispute resolution procedures of Section 2.1(f), then (i) if the dispute is settled by the mutual agreement of the parties in accordance with Section 2.1(f)(iii), the Receiver shall pay the amount withheld (to the extent so agreed) within fifteen (15) Business Days from the date upon which the dispute is determined by the parties to be resolved by mutual agreement, and (ii) if the dispute is resolved by the determination of a Review Board, the Receiver shall pay the amount withheld (to the extent so determined) within fifteen (15) Business Days from the date upon which the Receiver is notified of the determination by the Review Board of its obligation to make such payment. Any payment by the Receiver pursuant to this Section 2.4 shall be made together with interest on the amount thereof from the date the payment was agreed or determined otherwise to be due, at the interest rate per annum determined by the Receiver to be equal to the coupon equivalent of the three (3)-month U.S. Treasury Bill Rate in effect as of the first Business Day of each Calendar Quarter during which such interest accrues as reported in the Federal Reserve Board’s Statistical Release for Selected Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not so reported for such day, for the next preceding Business Day for which such rate was so reported.

2.5Books and Records. The Assuming Bank shall at all times keep books and records which fairly present all dealings and transactions carried out in connection with its business and affairs. Except as otherwise provided for in the Purchase and Assumption Agreement or this Non-SF Shared-Loss Agreement, all financial books and records shall be kept in accordance with generally accepted accounting principles, consistently applied for the periods involved and in a manner such that information necessary to determine compliance with any requirement of the Purchase and Assumption Agreement or this Non-SF Shared-Loss Agreement will be readily obtainable, and in a manner such that the purposes of the Purchase and Assumption Agreement or this Non-SF Shared-Loss Agreement may be effectively accomplished. Without the prior written approval of the Corporation, the Assuming Bank shall not make any change in its accounting principles affecting the Shared-Loss Assets except as required by a change in generally accepted accounting principles. The Assuming Bank shall notify the Corporation of any change in its accounting principles affecting the Shared-Loss Assets which it believes are required by a change in generally accepted accounting principles.

2.6Information. The Assuming Bank shall promptly provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of the Agreement or otherwise relating to its business and affairs or this Exhibit, as the Corporation or the Receiver may request from time to time.

2.7Tax Ruling. The Assuming Bank shall not at any time, without the Corporation’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Corporation pursuant to the Agreement or this Exhibit.

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ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS

ASSETS

3.1          Agreement with Respect to Administration. The Assuming Bank shall (and shall cause any of its Affiliates to which the Assuming Bank transfers any Shared-Loss Assets to) manage, administer, and collect the Shared-Loss Assets while owned by the Assuming Bank or any Affiliate thereof during the term of the Agreement in accordance with the rules set forth in this Article III (“Rules”). The Assuming Bank shall be responsible to the Receiver and the Corporation in the performance of its duties hereunder and shall provide to the Receiver and the Corporation such reports as the Receiver or the Corporation deems advisable, including but not limited to the reports required by Section 3.3 hereof, and shall permit the Receiver and the Corporation at all times to monitor the Assuming Bank’s performance of its duties hereunder.

3.2          Duties of the Assuming Bank. (a) In performance of its duties under these Rules, the Assuming Bank shall:

(i) manage, administer, collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss Asset in a manner consistent with (A) usual and prudent business and banking practices; (B) the Assuming Bank’s practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Bank, with respect to the management, administration and collection of and taking of charge-offs and write-downs with respect to loans, other real estate and repossessed collateral that do not constitute Shared-Loss Assets;

(ii) exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss Assets;

(iii) use its best efforts to maximize collections with respect to Shared-Loss Assets and, if applicable for a particular Shared-Loss Asset, without regard to the effect of maximizing collections on assets held by the Assuming Bank or any of its Affiliates that are not Shared-Loss Assets;

(iv) adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Assets, as provided in Section 3.3 hereof;

(v) retain sufficient staff to perform its duties hereunder;

(vi) provide written notification in accordance with Article IV of this Exhibit immediately after the execution of any contract pursuant to which any third party (other than an Affiliate of the Assuming Bank) will manage, administer or collect any of the Shared-Loss Assets, together with a copy of that contract.

(b) Any transaction with or between any Affiliate of the Assuming Bank with respect to any Shared-Loss Asset including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Bank will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior

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written approval of the Receiver or the Corporation.

(c) The following categories of expenses shall not be deemed to be Reimbursable Expenses or Recovery Expenses:

(i) Federal, State, or local income taxes and expenses related thereto;

(ii) salaries or other compensation and related benefits of Assuming Bank employees and the employees of its Affiliates including, without limitation, any bonus, commission or severance arrangements, training, payroll taxes, dues, or travel- or relocation-related expenses;

(iii) the cost of space occupied by the Assuming Bank, any Affiliate thereof and their staff, the rental of and maintenance of furniture and equipment, and expenses for data processing including the purchase or enhancement of data processing systems;

(iv) except as otherwise provided herein, fees for accounting and other independent professional consultants (other than consultants retained to assess the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant with respect to the collateral securing a Shared-Loss Loan that has been fully or partially charged-off); provided, that for purposes of this Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary to assist in collections with respect to Shared-Loss Assets shall not be deemed to be fees of other independent consultants;

(v) allocated portions of any other overhead or general and administrative expense other than any fees relating to specific assets, such as appraisal fees or environmental audit fees, for services of a type the Assuming Bank does not normally perform internally;

(vi) any expense not incurred in good faith and with the same degree of care that the Assuming Bank normally would exercise in the collection of troubled assets in which it alone had an interest; and

(vii) any expense incurred for a product, service or activity that is of an extravagant nature or design.

(d) The Assuming Bank shall not contract with third parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Bank would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this Commercial Loss-Share Agreement.

3.3          Shared-Loss Asset Records and Reports. The Assuming Bank shall establish and maintain records on a separate general ledger, and on such subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets, in such form and detail as the Receiver or the Corporation may require, to enable the Assuming Bank to prepare and deliver to the Receiver or the Corporation such reports as the Receiver or the Corporation may from time to time request regarding the Shared-Loss Assets and the Quarterly Certificates required by Section 2.1 of this

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Exhibit.

3.4          Related Loans.

(a)           The Assuming Bank shall not manage, administer or collect any “Related Loan” in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Asset to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Bank at any time on or prior to the end of the final Recovery Quarter that is: (i) made to the same Obligor with respect to a Loan that is a Shared-Loss Asset or with respect to a Loan from which Other Real Estate, Additional ORE or Subsidiary ORE derived, or (ii) attributable to the same primary Obligor with respect to any Loan described in clause (i) under the rules of the Assuming Bank’s Chartering Authority concerning the legal lending limits of financial institutions organized under its jurisdiction as in effect on the Commencement Date, as applied to the Assuming Bank.

(b)           The Assuming Bank shall prepare and deliver to the Receiver with the Quarterly Certificates for the Calendar Quarters ending June 30 and December 31 for all Shared-Loss Quarters and Recovery Quarters, a schedule of all Related Loans which are commercial loans or commercial real estate loans with Legal Balances of $500,000 or more on the Accounting Records of the Assuming Bank as of the end of each such semi-annual period, and all other commercial loans or commercial real estate loans attributable to the same Obligor on such loans of $500,000 or more.

3.5          Legal Action; Utilization of Special Receivership Powers. The Assuming Bank shall notify the Receiver in writing (such notice to be given in accordance with Article IV below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Bank derives as a result of having acquired an asset from the Receiver, and the Assuming Bank shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Bank and the Assuming Bank shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Bank will advise the Receiver as to the status of any such legal action. The Assuming Bank shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

ARTICLE IV — LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR RECEIVER

As a supplement to the notice provisions contained in Section 13.7 of the Agreement, any notice, request, demand, consent, approval, or other communication (a “Notice”) given to the Corporation and/or the Receiver in the loss-sharing context shall be given as follows:

4.1          With respect to a Notice under Sections 2 and Sections 3.2, 3.3, and 3.4 of this Exhibit:

75

Federal Deposit Insurance Corporation

Division of Resolutions and Receiverships

550 17th Street, N.W.

Washington, D.C. 20429

Attention: Assistant Director, Franchise and Asset Marketing

4.2          With respect to a Notice under Section 3.5 of this Exhibit:

Federal Deposit Insurance Corporation

Legal Division

1601 Bryan Street

Dallas, Texas 75201

Attention: Regional Counsel

with a copy to:

Federal Deposit Insurance Corporation

Legal Division

550 17th Street, N.W.

Washington, D.C. 20429

Attention: Senior Counsel (Special Issues Group)

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EX-2.4

Exhibit 2.4

BRANCH SALE AGREEMENT

By and Among

AMCORE BANK, N.A.,

AMCORE INVESTMENT SERVICES, INC.

and

MIDLAND STATES BANK

December 31, 2009

Table of Contents

		Page
1.	Transfer of Assets, Liabilities and Deposits	1
2.	Closing and Closing Date	4
3.	Payment	4
4.	Transfer of Real Estate	6
5.	Seller’s Closing Documents	10
6.	Buyer’s Closing Documents	11
7.	Closing Documents of Seller and Buyer	12
8.	Seller’s Actions at Closing	12
9.	Transitional Matters	13
10.	Continued Employment of Employees of the Branches	17
11.	Record Retention and Access	18
12.	Taxes	18
13.	Seller’s and AISI’s Representations and Warranties	18
14.	Buyer’s Representations and Warranties	22
15.	Seller’s Covenants	23
16.	Buyer’s Covenants	25
17.	Further Assurances	26
18.	Best Efforts	26
19.	Confidentiality	27
20.	Conditions Precedent to Obligations of Buyer	27
21.	Conditions Precedent to Obligations of Seller	27
22.	Termination by the Parties	28
23.	Effect of Termination	28
24.	Survival of Representations and Warranties	28
25.	Indemnification	29
26.	Defense of Claims	30
27.	Exclusive Dealing	30
28.	Public Announcements.	30
29.	Exhibits	30
30.	Brokers	30
31.	Payment of Expenses	31
32.	Entire Agreement	31
33.	Amendments	31
34.	Assignment	31
35.	Addresses for Notice	31
36.	Counterparts	31
37.	Severability	32
38.	Governing Law	32

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Index of Exhibits*

Exhibit A -	Description of Real Estate
Exhibit B -	Description of Fixtures and Equipment
Exhibit C -	Assignment and Assumption Agreement
Exhibit D -	Loans
Exhibit E -	Excluded Loans and Qualified Excluded Loans
Exhibit F -	Trust Accounts
Exhibit G -	Deposits
Exhibit H -	Employee Disclosure Schedule
Exhibit I -	Letters of Credit
Exhibit J -	Asset Obligations
Exhibit K -	Tenant Leases
Exhibit L -	Disclosure Items
Exhibit M -	Secondary Loans
Exhibit N -	Loans and Qualified Loans Secured by Vehicles and Boats
Exhibit O -	Prorated Items
Exhibit P -	Branch Leases
Exhibit Q -	Trust Accounts Subject to Record-Keeping Services Agreement
Exhibit R -	Key Employees

*  Certain exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities and Exchange Act of 1934, as amended. The Company agrees to furnish a supplemental copy of any omitted exhibit to the SEC upon request.

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BRANCH SALE AGREEMENT

THIS BRANCH SALE AGREEMENT is made as of December         , 2009 (the “Agreement”), by and among AMCORE Bank, N.A., Rockford, Illinois (“Seller”), AMCORE Investment Services, Inc., Rockford, Illinois (“AISI”) and Midland States Bank, Effingham, Illinois (“Buyer”).

WITNESSETH:

WHEREAS, Seller desires to transfer certain assets and liabilities of the branch offices of Seller identified on Exhibit A attached hereto (individually, a “Branch,” and collectively, the “Branches”) to Buyer;

WHEREAS, Buyer desires to purchase such assets and assume such liabilities; and

WHEREAS, AISI is a wholly-owned subsidiary of Seller and is a party to this Agreement solely for the purpose of transferring to Buyer annuities, investment advisory and brokerage accounts attributable to sales agents and/or registered representatives of the Branches.

NOW, THEREFORE, in consideration of the mutual agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Seller and Buyer agree as follows:

1. Transfer of Assets, Liabilities and Deposits.  As of 12:01 a.m. on the day immediately following the Closing Date (as defined below)(the “Effective Time”), Seller will sell, assign and transfer (i) the Assets (as defined in Section 1(a)), (ii) Seller’s obligations, as set forth on Exhibit J, arising at or after the Effective Time with respect to the Assets (the “Asset Obligations”), (iii) Seller’s obligations with respect to the letters of credit as set forth on Exhibit I and the unfunded portions of outstanding lines of credit and loan commitments, as of the Effective Time (the “Unfunded Obligations”), and (iv) the Deposits (as defined in Section 1(b)) of the Branches as of the Effective Time  to Buyer free and clear of all liens and encumbrances of any kind except as disclosed in this Agreement or on the attached Exhibits, and Buyer will purchase the Assets and assume the Asset Obligations, the Unfunded Obligations and the Deposits.  If the Closing Date is a Friday, the Branches will not be open for business on the following day (Saturday), notwithstanding that the Branches may otherwise keep regular Saturday banking hours.

(a) Assets.  For purposes of this Agreement, “Assets” means all of Seller’s and AISI’s right, title and interest in and to (whether now or hereafter existing):

(1) the parcels of real property owned by Seller on which the Branches are located, together with the structures and other improvements located thereon (collectively, the “Owned Real Estate”) as set forth on Exhibit A;

(2) the lease agreements, as listed on Exhibit P (the “Branch Leases”), related to parcels of real property for Branches in which Seller has a leasehold interest, as set forth on Exhibit A, including the lessee’s interest with respect to all buildings, improvements,

and appurtenances to the properties that were constructed or installed by or for Seller (the “Leased Real Estate”) (collectively, the Owned Real Estate and the Leased Real Estate are referred to herein as the “Real Estate”);

(3) the furniture, fixtures, equipment, automated teller machines and other personal property, if any, owned or leased by Seller at the Branches, together with the leases and non-cancellable contracts relating to the operation and maintenance of the Real Estate, furniture, fixtures or equipment, automatic teller machines and other personal property of the Branches, all as identified on Exhibit B attached hereto, but excluding computer software, licensed goods, signs or other materials bearing the words “AMCORE Bank” or its associated logos, variations or derivatives and minute books and other records of Seller not related to the Assets, Deposits or Unfunded Obligations (the “Fixtures and Equipment”);

(4) the safe deposit boxes and related agreements located at the Branches;

(5) the loans shown on Seller’s books and records as being attributable to the Branches (the “Branch Loans”), as identified on Exhibit D attached hereto, but excluding:  (A) the Excluded Loans (as defined in Subsection 1(a)(6) below), (B) Seller’s credit card accounts, and (C) loans Seller agrees to retain, if any;

(6) the loans shown on Seller’s books and records as being attributable to the Branches that are Excluded Loans that Buyer in its sole discretion agrees to buy on the Closing Date, if any (the “Qualified Excluded Loans”).  Exhibit E identifies all loans that, as of the date or dates specified thereon (i) are delinquent by more than thirty (30) days with respect to a required payment of principal or interest, (ii) are in nonaccrual status, (iii) have been made to consumers in bankruptcy or to consumers that have reaffirmed their debts in bankruptcy, (iv) are designated as Special Mention, Substandard, Doubtful or Loss in the books and records of Seller, (v) are subject to further due diligence by the Buyer to assess the risks related to the purchase of such loans by Buyer, or (vi) were originated under Small Business Administration or the United States Department of Agriculture programs (all such loans on any given date, the “Excluded Loans”).  Exhibit E will be updated in accordance with Section 3(a), at which time Buyer will designate the Qualified Excluded Loans, if any.  All Excluded Loans that are not designated as Qualified Excluded Loans will be retained by Seller;

(7) the cash on hand at the Branches at the Effective Time;

(8) all files, books and records related to the business and operations of the Branches (the “Records”), including, without limitation, (A) all blueprints and schematics; and (B) all files, books and records relating to the Assets, the Asset Obligations, the Unfunded Obligations, and the Deposits, or (excluding medical records) the Transferring Employees (as defined in Section 10);

(9) all accounts shown on Seller’s books and records as being attributable to the Branches with respect to which the Seller acts as trustee, custodian, paying agent, investment manager, record-keeper or in a similar capacity (the “Trust Accounts”), as identified on Exhibit F attached hereto, and each agreement, certificate or instrument that, as of

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the Closing Date, designates the Seller as trustee, custodian, record-keeper, paying agent, investment manager or in other similar capacities with respect to the Trust Accounts (the “Trust Agreements”), but excluding (A) any Trust Accounts and related Trust Agreements in which the owner, beneficiary, sponsor or other representative under the Trust Account (“Trust Customer”) fails to provide a required consent in writing to the designation of the Buyer as a successor trustee, custodian, paying agent, record-keeper and/or investment manager pursuant to subsection (ii) of Section 9(i), (B) any Trust Accounts for customers of the Branches where one or more of Seller’s loans or other extensions of credit to that customer are Excluded Loans, and (C) any Trust Account for the excluded relationships identified on Exhibit Q attached hereto (collectively, the “Excluded Trust Accounts”);

(10) investment advisory and brokerage accounts attributable to registered representatives of AISI in the Branches (the “Brokerage Accounts “), but excluding any Brokerage Accounts in which the account owner fails to provide a required consent in writing to the transfer of the Brokerage Account to the Buyer pursuant to subsection Section 9(k) (collectively, the “Excluded Brokerage Accounts”);

(11) annuities attributable to sales agents of AISI in the Branches (“Annuities”);

(12) all repurchase agreement obligations at the Branches;

(13) the leases between the Seller, as lessor, and the tenants, as listed on Exhibit K hereto (the “Tenant Leases”); and

(14) Secondary Loans (as hereinafter defined), which together with the Branch Loans and any Qualified Excluded Loans, are in an aggregate amount equal to at least 90% of the Deposits assumed by Buyer (calculated as of the Initial Time, as hereinafter defined).  For purposes of this subparagraph (14) the term “Secondary Loans” shall mean loans which are not attributable to the Branches, but which Buyer subsequently agrees to purchase in conjunction with the Branch Loans; it being understood and agreed upon by the parties that such Secondary Loans will not include Excluded Loans and will have similar credit risk characteristics to the Branch Loans.  Buyer will designate the Secondary Loans to be purchased by Buyer and such Secondary Loans will be identified on Exhibit M no later than six (6) days prior to the Closing Date.  The Branch Loans and Secondary Loans are hereinafter referred to collectively as the “Loans.”

(b) Deposits.  For purposes of this Agreement, “Deposits” means the deposit liabilities shown on Seller’s books and records relating to the Branches, including accrued but unpaid interest, both collected and uncollected funds, funds held in sweep accounts, repurchase agreements and deposits held in Trust Accounts, together with Seller’s rights and responsibilities under any related customer agreement.  “Deposits” do not include:  (1) deposits securing loans or other extensions of credit by Seller or its affiliates if the loans or other extensions of credit are not included in the Loans; (2) deposits of customers of the Branches where one or more of Seller’s loans or other extensions of credit other than credit card accounts to that customer are not included in the Loans; (3) deposits held in any Excluded Trust Accounts or Excluded Brokerage Accounts; (4) deposits subject to legal process; (5) deposits which have been reported

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as abandoned property under the abandoned property laws of any jurisdiction; (6) deposits by Seller or any Seller affiliate; (7) funds maintained in brokerage accounts opened by Seller or any Seller affiliate; (8) any deposits that are prohibited by law or regulation (or with respect to deposits issued through CDARS, rules and regulations issued by the Promontory Interfinancial Network) from being transferred to Buyer; (9) any deposits that Buyer and Seller mutually agree that Seller will retain; (10) any deposits belonging to individuals employed by the Branches who are not a Transferred Employee; and (11) any deposit account for which an overdraft has been outstanding for a period of thirty (30) days or more as of the Closing Date. Exhibit G identifies the Deposits as of a date no more than thirty (30) days prior to the date of this Agreement and such Exhibit shall be updated by Seller at Closing.

2. Closing and Closing Date.  The closing of the transaction contemplated by this Agreement (the “Sale” and the “Closing”) will take place at the offices of the Seller located in Rockford, Illinois, or as Seller and Buyer otherwise agree.  The Closing will take place as soon as practicable after (a) the conditions set forth in Sections 20 and 21 have been satisfied, (b) Buyer and Seller shall have agreed upon and completed mutually and reasonably satisfactory arrangements for the conversion and transfer of data and data processing software and systems relating to data  and data processing for the Branches and the Assets (the “Closing Date”).  Buyer and Seller will work in good faith and use reasonable efforts to effect the Closing on or about March 26, 2010.

3. Payment.  The purchase price for the Sale will be payable in an initial and final payment pursuant to subsections 3(a) and (b), respectively, plus the Trust Account Premium (as defined in subsection (c) below).

(a) Initial Payment.  As soon as practicable following the first opening of business after the Effective Time, Seller will transfer to Buyer or Buyer will transfer to Seller, as the case may be, an amount (the “Initial Payment”) which constitutes an estimate of the purchase price for the Sale, calculated by using information available to the parties as of the close of business no more than six (6) business days prior to the Effective Time (the “Initial Time”).  Seller will deliver to Buyer on or before the Closing Date updated supporting information regarding the items used to calculate the Initial Payment which describes these items as of the date the Initial Payment is calculated.  The Initial Payment will be in cash or other immediately available funds and will be in an amount equal to the aggregate book value of the Deposits, as shown on the Seller’s books and records as of the Initial Time as shown on Exhibit G,  less  the sum of the following:

(1) An amount equal to the aggregate book value for the Real Estate (including any leasehold improvements owned by Seller on the Leased Real Estate) and Fixtures and Equipment, as reflected on Seller’s books and records as of the last day of the month prior to the month in which the Effective Time falls;

(2) the aggregate book value of the Loans plus accrued interest and fees, as shown on Seller’s books and records as of the Initial Time (no reserves or unamortized fees (such as FAS91 fees) will be applied against the aggregate book value of the Loans);

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(3) the price agreed upon between Buyer and Seller for the Qualified Excluded Loans, as shown on Seller’s books and records as of the Initial Time;

(4) a deposit premium of 1.5% of the Deposits transferred to Buyer at Closing (the “Deposit Premium”); and

(5) the cash on hand at the Branches as of the Initial Time.

If the amount calculated above results in a number that is greater than zero, then Seller will transfer the resulting amount to Buyer; however, if the amount calculated above results in a number that is less than zero, then Buyer will transfer the resulting amount to Seller.

(b) Final Payment.  Within thirty (30) days after the Effective Time (the “Settlement Date”), Seller will transfer to Buyer or Buyer will transfer to Seller, as the case may be, an amount (the “Final Payment”) which constitutes the difference between the actual purchase price for the Sale, calculated by using information as of the Effective Time, and the Initial Payment.  Seller will deliver to Buyer on or before the Settlement Date updated supporting information regarding the items used to calculate the Final Payment that describes these items as of the Effective Time.  The Final Payment will be in cash or other immediately available funds and will be in an amount equal to the aggregate book value of the Deposits, as shown on Seller’s books and records as of the Effective Time,  less  the sum of the following:

(1) An amount equal to the aggregate book value for the Real Estate (including any leasehold improvements owned by Seller on the Leased Real Estate) and Fixtures and Equipment, as reflected on Seller’s books and records as of the last day of the month prior to the month in which the Effective Time falls;

(2) the aggregate book value of the Loans plus accrued interest and fees, as shown on Seller’s books and records as of the Effective Time (no reserves or unamortized fees (such as FAS91 fees) will be applied against the aggregate book value of the Loans);

(3) the price agreed upon between Buyer and Seller for the Qualified Excluded Loans, as shown on Seller’s books and records as of the Effective Time;

(4) the Deposit Premium;

(5) the cash on hand at the Branches as of the Effective Time;

(6) amounts for the items listed in subsection (d) below, prorated as of the Effective Time; less (or  plus  in the event Buyer made the Initial Payment to Seller); and

(7) the amount of the Initial Payment paid in accordance with subsection 3(a).

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If the amount calculated above results in a number that is greater than zero, then Seller will transfer the resulting amount to Buyer; however, if the amount calculated above results in a number that is less than zero, then Buyer will transfer the resulting amount to Seller.

The amount constituting the difference between the Initial Payment and the Final Payment will bear interest from the Initial Payment date to the Final Payment date at a rate equal to the weighted average of the rates on overnight federal funds transactions as determined by the Federal Reserve Bank of Chicago.

(c) Trust Account Premium.  In addition to the foregoing, on the Effective Time, Buyer will pay to Seller a Trust Account Premium equal to $1,500,000.00 (the “Trust Account Premium”).

(d) Prorated Items.  As appropriate, special assessments on the Real Estate, safe deposit box rentals, wages, salaries and earned benefits of the Branch employees, rents, real and personal property taxes (based on the actual amount due for the prior year), and other charges or amounts due under the contracts assigned to and assumed by Buyer, employment taxes relating to the employees, state or federal taxes collected but not remitted, workers compensation payments for employees, FDIC premiums relating to the Deposits and any other expenses, accruals and payments relating to the Assets or the Deposits will be prorated as of the Effective Time, all as set forth on Exhibit O attached hereto.  Seller will receive a proportionate monetary adjustment to the extent an item has been prepaid by Seller for a period extending beyond the Effective Time, and Buyer will receive a proportionate monetary adjustment to the extent that an item has been deferred by Seller to a time extending beyond the Effective Time and Buyer has paid the item.  Any items which would appropriately be subject to proration but which cannot be prorated by the Settlement Date will be prorated as soon as the requisite information is available and will be paid promptly by the appropriate party after this time.  Seller will deliver to Buyer on or before the Settlement Date updated supporting information regarding the items which will be prorated or otherwise subject to this Section 3(d) as of the Effective Time.

4. Transfer of Real Estate.  The Real Estate of the Branches will be conveyed under the following terms and conditions:

(a) Inspection.

(1) For a period of thirty (30) days following the date of this Agreement, Buyer, at its expense, may conduct reasonable investigations and inspections of the Real Estate as Buyer deems appropriate (excluding environmental studies, which are addressed below) to determine that the Real Estate is fit for Buyer’s purposes and in the condition required by Buyer.  In the event Buyer determines the Real Estate is not fit for Buyer’s purposes or in the condition required by Buyer, Buyer will have the option to: (A) terminate this Agreement by giving written notice of termination to Seller within thirty (30) days following the date of this Agreement (time being of the essence); or (B) accept the Real Estate in its condition at the time with no reduction in the price allocated to the Real Estate, in which case this contingency will be deemed waived.  In the event Buyer fails to make a timely objection under this section, this contingency will be deemed waived.

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(2) Buyer and its representatives, agents, contractors or consultants (“Buyer’s Consultants”) will have the right to enter the Real Estate and conduct the inspections and investigations described in subsection (1) during normal business hours and upon at least two (2) business days’ advance notice to Seller.  Buyer’s and Buyer’s Consultants’ activities on the Real Estate will not include invasive tests without Seller’s prior written consent, which shall not be unreasonably withheld or delayed.  Buyer will not unreasonably interfere with the business activities being conducted on the Real Estate during the times of access and Buyer, at its expense, will fully repair and restore all damage to the Real Estate caused by Buyer or Buyer’s Consultants in performing such inspections and investigations.

(b) Environmental Matters.

(1) As used in this section:

“Environmental Condition” means:  (A) an above ground storage tank, underground storage tank, subsurface structure or container, and its associated piping, which is present at the Real Estate and which violates an Environmental Law; (B) a Hazardous Substance present in soil and/or groundwater at the Real Estate which violates an Environmental Law; (C) a discharge, emission or release of a Hazardous Substance related to the Real Estate which violates an Environmental Law; (D) an event or condition that likely has occurred or exists with respect to the Real Estate which constitutes a violation of an Environmental Law; or (E) an event or condition related to the Real Estate which requires cleanup, remedy, abatement or restoration of contaminated surface water, groundwater, soil or natural resource under an Environmental Law.

“Environmental Law” means any federal, state or local law, regulation or common law rule applied by a federal, state or local court or agency that governs:  (A) health, safety and sanitation; (B) the protection of the environment or human health, welfare or safety; (C) the presence, investigation, correction, abatement, remedy, restoration or cleanup of a Hazardous Substance; (D) the closure of a treatment, storage or disposal facility; (E) the use, storage, treatment, generation, transportation, processing, handling, production or disposal of a Hazardous Substance; (F) the protection of the environment from spilled, released, discharged or deposited Hazardous Substances; or (G) the reimbursement or contribution for the costs of responding to the presence of a Hazardous Substance.

“Hazardous Substance” means a substance, contaminant, pollutant, chemical, material or waste which is considered to be hazardous or toxic under an Environmental Law.

(2) Within thirty (30) days following the date of this Agreement, Buyer may complete, at its expense, a Phase I environmental assessment (the “Environmental Survey”) of the Real Estate.  Upon receipt, Buyer promptly will provide Seller with the results of the Environmental Survey, including copies of all written reports, analytical data, correspondence, notices or other written material.  In the event the Environmental Survey identifies an Environmental Condition, Buyer will give Seller written notice of the Environmental Condition within five (5) business days of receipt of the Environmental Survey (together with all information it possesses relating to the Environmental Condition).  Within forty-five (45) days of receipt of the notice from Buyer, Seller may complete a physical

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examination and investigation of the Environmental Condition revealed in the Environmental Survey (the “Phase II Survey”).  The subject, scope, manner and method of the Phase II Survey will be subject to Buyer’s prior review and reasonable approval.  During the Phase II Survey, Buyer will have access to all field data, analytical data and analytical results.  Upon Seller’s receipt of a final written report of the Phase II Survey, Seller promptly will deliver to Buyer copies of the Phase II Survey report, all written reports, analytical data, correspondence, notices or other written materials relating thereto (which collectively constitutes the “Phase II Survey”).

(3) In the event Seller elects not to conduct a Phase II Survey, or if Seller elects to conduct a Phase II Survey and it confirms the presence of an Environmental Condition related to the Real Estate, Buyer will have a period of fifteen (15) days from Seller’s election to not conduct a Phase II Survey or from receipt of the Phase II Survey, as the case may be, to either accept the Real Estate “as is,” enter into an agreement with Seller regarding the abatement of the Environmental Condition or notify Seller in writing that Buyer has elected to terminate this Agreement.  In the event Buyer fails to make a timely objection under this section this contingency will be deemed waived.  If a Phase II Survey is conducted but does not confirm the presence of any Environmental Condition related to the Real Estate, Buyer will be obligated to complete the Sale within thirty (30) days of receipt of the Phase II Survey or the satisfaction of the conditions set forth in Sections 20 and 21, whichever is later.

(4) In the event Seller conducts a Phase II Survey and following its completion Buyer purchases the Real Estate, Buyer will reimburse Seller for one-half of the cost of the Phase II Survey.  If any of the Real Estate is not purchased by Buyer, Seller will have no further responsibility or obligation to Buyer with respect to the retained Real Estate.

(c) Title.

(1) Within thirty (30) days after the date of this Agreement, Seller will provide Buyer with a commitment (the “Title Commitment”) from a national title insurance company licensed in Illinois to issue title insurance reasonably acceptable to Buyer (the “Title Insurer”) for an amount equal to the greater of the fair market value of the Owned Real Estate as shown on the most recent tax bill or for the estimated amount of the price attributable to the Owned Real Estate in this Agreement upon the recording of proper documents and payment of the applicable premium to the Title Company (the “Title Commitment”), together with legible copies of all recorded exceptions referred to therein.  The Title Commitment will show title to the Owned Real Estate as of a date no more than twenty-five (25) days before the Title Commitment is provided to Buyer. At the Effective Time, the Seller, at its expense, will cause the Title Company to issue an ALTA title policy with extended coverage (“Title Policy”) sufficient to insure good and marketable fee simple record title to the Owned Real Estate except for municipal and zoning ordinances and agreements entered under them, general taxes levied in the year in which the Effective Time falls, and only such matters not objected to by the Buyer under subsection (3) below (collectively, the “Permitted Exceptions”).  The Title Policy shall also include a GAP Endorsement  and a 3.1 zoning endorsement with parking (at Seller’s expense) that the Buyer’s use of the Owned Real Estate as a bank with, if applicable, drive-ups, tellers or automated teller machines is a permitted use.  All general and standard exceptions shall be deleted from the Title Policy pursuant to an Owner’s Affidavit from Seller and a review of a survey, which Title Policy shall be delivered to Buyer at Closing.

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(2) Within thirty (30) days after the date of this Agreement, Seller will provide Buyer with a current ALTA Survey of the Owned Real Estate, with such Table A items as are requested by Buyer (the “ALTA Survey”) in sufficient form so that the Title Company deletes all standard survey exceptions.  The ALTA Survey shall show all easements, improvements, any encroachments and all applicable set-backs. The Survey shall be certified to Buyer and the Title Company.  The cost of the ALTA Survey shall be borne equally by Seller and Buyer.

(3) Upon receipt of all of the Title Commitment and its related documents and the ALTA Survey, Buyer will have twenty (20) days to examine the Title Commitment and the ALTA Survey and notify Seller in writing of Buyer’s objections thereto which would adversely affect Buyer’s intended use of the Owned Real Estate.  Seller will then have until the earlier of twenty (20) days after the Buyer’s notice or the Closing Date to cure the objections (the “Objections Cure Deadline”).  If Seller elects not to cure the objections or fails to cure the objections by the Objections Cure Deadline, Buyer will have the option to: (A) terminate this Agreement by giving written notice of termination to Seller; or (B) accept title to the Owned Real Estate subject to the objections with no reduction in the price allocated to the Owned Real Estate, in which case such objections will be deemed “Permitted Exceptions.”

(4) Seller will pay the cost of the Title Commitment and Title Policy and the endorsements set forth in Section 4(c)(1) above, half of the cost of the ALTA Survey, and the cost of any transfer tax imposed by the State of Illinois and the applicable counties on the conveyance of the Owned Real Estate.  Buyer will pay the cost of any investigation of the Owned Real Estate desired by Buyer and the cost of any additional title coverage or special endorsements not required to be provided by the Seller under Section 4(c)(1) above.

(d) Condition of Real Estate.  Prior to the expiration of the inspection and review periods in this Section, Buyer acknowledges that it will have the right to inspect and review the Real Estate.  The waiver or deemed waiver of Buyer’s option to terminate the Sale and the completion of the Closing shall each constitute conclusive evidence that Buyer is satisfied with the condition of and title to the Real Estate, provided that Buyer shall be entitled to rely on the representations and warranties set forth in this Agreement.  Except for the representations and warranties set forth in this Agreement and the documents to be delivered to Buyer by Seller at Closing, Seller has made no express or implied representation or warranty regarding the condition of the Real Estate (whether environmental or otherwise) and Buyer will accept the Real Estate in its “as-is / where-is” condition.  Following the Effective Time, Seller will be released from all claims or liabilities relating to the condition of or title to the Real Estate, except to the extent such claims and liabilities are related to a breach of the representations and warranties set forth in this Agreement or the warranties, covenants and obligations in the Special Warranty Deed and other Closing Documents.

(e)           Leased Real Estate.

(1)           Within forty-five (45) days of the date of this Agreement, Seller shall use their commercially reasonable efforts (which shall not require any Seller to pay any money or other type of consideration to any person or to initiate any claim or proceeding against any person) to (i) cause every landlord of a Branch Lease to execute and deliver to Buyer an

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estoppel certificate in a form reasonably acceptable to Buyer (each, an “Estoppel Certificate”) and (ii) cause every landlord of a Branch Lease, the consent of which is required under the terms of the applicable Branch Lease to the assignment of such Branch Lease to Buyer, to execute in favor of Buyer a landlord consent (each, a “Landlord Consent”).

(2)           Notwithstanding anything to the contrary contained in this Agreement, if Seller fails to obtain a Landlord Consent from a landlord under a Branch Lease despite its commercially reasonable efforts, Buyer shall not be entitled to terminate this Agreement and Buyer shall remain obligated to perform all of its obligations hereunder with respect to the applicable Branch location, including without limitation, the assumption of the Deposits relating thereto and the payment of the purchase price, which shall be reduced by the net book value of the Fixtures and Equipment attributable to such Leased Real Estate, but excluding only Buyer’s obligation to assume such Branch Lease.

(3)           If, despite Seller’s commercially reasonable efforts, a Landlord Consent to assignment of a Branch Lease cannot be obtained, or cannot be obtained without the payment of an assignment fee or similar lump sum or rent increase, Seller shall, if permitted without the consent of the landlord under the Branch Lease, sublease the Branch to Buyer pursuant to a sublease agreement which shall be for the remainder of the existing term of the Branch Lease, and which shall provide for Buyer to perform all of the obligations of Seller under such Branch Lease (except with respect to any obligations of Seller arising as a result of any defaults of Seller thereunder existing as of Closing, which shall all be cured by Seller as of Closing) and which otherwise shall contain mutually agreeable terms (a “Sublease Agreement”).

(4)           If Seller shall be unable to deliver (i) a Landlord Consent with respect to a Branch Lease or (ii) a Sublease Agreement, then, if permitted without the consent of the landlord under the Branch Lease, Sellers shall use commercially reasonable efforts to make available to Buyer the space necessary for the operations of the applicable Branch pursuant to a Use and Occupancy Agreement in a form to be agreed upon by Buyer and Seller.

(f)           Conveyance of Real Estate.  At the Effective Time, Seller will convey each parcel of the Owned Real Estate by Special Warranty Deed, free and clear of all liens and encumbrances except the Permitted Exceptions, and assign to Buyer all of Seller’s leasehold interests under the Branch Leases, free and clear of all liens and encumbrances except the Permitted Exceptions.  The Seller shall pay prior to the Effective Time, special assessments for work actually commenced or levied prior to the Effective Time.  The Seller shall cause all mortgages and liens to be paid off and released of record as to the Real Estate, except for general taxes for the year of Closing, which shall be prorated.

5. Seller’s Closing Documents.  At the Closing, Seller will provide Buyer with the following duly executed (to the extent applicable) documents dated as of the Effective Time:

(a) Special Warranty Deed..  A Special Warranty Deed (WB Form 6 or an equivalent form as approved by the Buyer) conveying to Buyer marketable fee simple title to the Owned Real Estate, free and clear of liens and encroachments, subject only to the Permitted Exceptions.

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(b) Seller’s Affidavit.  A customary seller’s affidavit as to liens and possession and other matters customarily required by the Title Company in the form required by the Title Company.

(c) Bill of Sale.  A bill of sale conveying the Assets (excluding the Real Estate) to Buyer free and clear of liens and encumbrances.

(d) Certified Resolutions.  A certified copy of the resolutions adopted by the Seller’s Board of Directors approving the Agreement.

(e) Certificate of Compliance.  A certificate executed by an executive officer of Seller certifying that conditions (a) and (b) of Section 20 have been satisfied and that its representations and warranties are true.

(f) Updated Exhibits.  All exhibits to this Agreement updated to a date no more than six (6) business days before the Closing Date.

(g) Real Estate Transfer Receipt.  A receipt for the electronic filing of the Illinois Real Estate Transfer Return.

(h) Certificate of Code Compliance.  A Certificate of Code Compliance required by the applicable municipalities where the Real Estate is located if required in order to transfer the Real Estate.

(i) Tenant Lease Assignments.  Agreements in a form to be mutually agreed upon by Buyer and Seller, pursuant to which Seller’s interest in the Tenant Leases are assigned to and assumed by Buyer (“Tenant Lease Assignments”) together with any security deposits related thereto, unless any of the Tenant Leases are otherwise terminated prior to the Closing Date.

(j) Branch Lease Assignments.  Agreements in a form to be mutually agreed upon by Buyer and Seller, pursuant to which Seller’s interest in the Branch Leases are assigned to and assumed by Buyer (“Branch Lease Assignments”).

(k) Landlord Matters.  The Estoppel Certificates and, subject to the provisions of Section 4(e), any required Landlord Consents.

(l)  Other Documents.  Other documents as are reasonably required by Buyer or the Title Insurer.

6. Buyer’s Closing Documents.  At the Closing, Buyer will provide Seller with the following duly executed (to the extent applicable) documents dated as of the Effective Time:

(a) Certified Resolutions.  A certified copy of the resolutions adopted by Buyer’s Board of Directors approving the Agreement.

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(b) Certificate of Compliance.  A certificate executed by an executive officer of Buyer certifying that conditions (a) and (b) of Section 21 have been satisfied and that its representations and warranties are true.

(c) Regulatory Approvals.  A copy of each regulatory approval required in conjunction with the Sale.

(d)  Tenant Lease Assignments.  Tenant Lease Assignments for the Tenant Leases, unless any of the Tenant Leases are otherwise terminated prior to the Closing Date.

(e)  Branch Lease Assignments.  The Branch Lease Assignments for the Branch Leases, and such other instruments and documents as Seller or any landlord under a Branch Lease may reasonably require as necessary or desirable for providing for the assignment to and assumption by Buyer of such Branch Lease, as applicable, each such instrument and document in the form and substance reasonably satisfactory to the parties hereto and dated as of the Closing Date.

(f)  Other Documents.  Other documents as are reasonably required by Seller.

7. Closing Documents of Seller and Buyer.  At the Closing, Seller and Buyer will provide the following documents dated as of the Effective Time:

(a) Settlement Statement.  A settlement statement showing the amounts paid by Buyer and Seller in connection with the Sale with schedules supporting the amounts paid for or with respect to Deposits, Trust Accounts, Loans and Qualified Excluded Loans.

(b) Assignment and Assumption Agreement.  An assignment and assumption agreement whereby Seller assigns all of its right, title and interest in and to the Assets to Buyer and thereby Buyer assumes the Asset Obligations, the Unfunded Obligations, and the Deposits (a form of which is attached as Exhibit C).  This agreement will reflect that the transfers are without recourse to Seller except as required by applicable law or otherwise provided in this Agreement.

8. Seller’s Actions at Closing.  At or before the Effective Time, Seller will take the following actions with respect to the transfer of the Assets, the Asset Obligations, the Unfunded Obligations, and the Deposits:

(a) Delivery of Possession.  Seller will deliver possession and control of the Assets to the Buyer.

(b) Loan Documentation.  Seller will deliver to Buyer originals of all loan documents and related materials, including all correspondence and memoranda (which shall include e-mails and other electronic records maintained in Seller’s loan files) and underwriting documentation (consisting of the approved loan presentation) contained in Seller’s files with respect to each Loan and Qualified Excluded Loan, including, without limitation, all original promissory notes or other evidence of indebtedness for each Loan or Qualified Excluded Loan properly endorsed by Seller to the order of Buyer.

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(c) Assignment Forms.  Except as otherwise agreed, Seller will evidence the transfer of the Loans and Qualified Excluded Loans to Buyer by providing the following documentation:  (1) for each Loan and Qualified Excluded Loan secured by real estate, Seller will provide a standard assignment form in recordable form (the recording fee for which will be paid by Buyer); (2) for each Loan and Qualified Excluded  Loan secured by collateral described in Uniform Commercial Code filings, Seller will file the standard Uniform Commercial Code assignment form electronically through UCC Direct (the filing fee for which will be paid by Buyer); and (3) for Loans and Qualified Excluded Loans secured by vehicles and boats as identified on Exhibit N attached hereto, at its option, Seller will provide either an appropriate assignment form or a limited power of attorney authorizing Buyer to sign appropriate documentation which evidences the transfer of the loans to Buyer on the records of the appropriate state regulatory agency or department.

(d) Other Matters.  Seller will cooperate with Buyer for other matters relating to the assignment and transfer of the Assets, the Asset Obligations, the Unfunded Obligations and the Deposits, including, if requested, the establishment of a schedule of charges with respect to future services which may be required by Buyer.

9. Transitional Matters.

(a) Orderly Transfer.  Before and after the Closing, Seller and Buyer will cooperate in good faith to ensure the orderly and efficient transfer and conversion of the Assets and Deposits.  To this end and to the extent not otherwise provided in this Agreement, Seller and Buyer will meet and agree upon appropriate procedures for notification of customers, employees and suppliers, for conversion of data processing and check clearing systems, and for notification respecting customer inquiries.

(b) Notices.  Buyer will, at its expense, give all required notices to customers of the Branches, including any transfer notices required by Regulation DD issued by the Federal Reserve Board and the Real Estate Settlement Procedures Act and Regulation X issued thereunder, and any notices required in connection with the transfer of the Trust Accounts and the related Trust Agreements.  Buyer will, at its expense and without charge to the customers of the Branches, promptly notify the customers of Buyer’s assumption of the Deposits by letter, in a form reasonably acceptable to the Seller, and furnish each customer that holds demand deposits or NOW accounts with checks on Buyer’s forms and with instructions to utilize Buyer’s checks and destroy unused checks of Seller.  Buyer will notify the customers of the date after which it will no longer honor checks, drafts and withdrawal orders on forms provided by Seller and carrying Seller’s imprint, which shall be ninety (90) days after the Effective Time.

(c) Payment of Items.  For a period of ninety (90) days after the Effective Time, Buyer will pay in accordance with law and customary banking practices all properly drawn and presented checks, drafts and withdrawal orders presented to Buyer drawn on the checks, drafts or withdrawal order forms provided by Seller and in all other respects discharge, in the usual course of the banking business, the duties and obligations of Seller with respect to the Deposits.

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(d) Settlement of Items.  Prior to the Effective Time, Seller and Buyer will develop appropriate procedures and arrangements (which shall include establishment by Buyer of a settlement account with Seller) to provide for settlement by Buyer of checks, drafts, withdrawal orders, returns and other items that are drawn on or chargeable against Deposits after the Effective Time.  Seller will cooperate with Buyer and take reasonable steps requested by Buyer to ensure that, for the period of time after the Effective Time as the parties may agree, each check, draft or withdrawal order drawn against Deposits encoded for presentment to Seller or to any bank for the account of Seller is delivered to Buyer in a timely manner and in accordance with applicable law and clearinghouse rule or agreement.

(e) Stop Payment Items.  Buyer will honor stop payment orders initiated prior to the Effective Time and reflected in appropriate stop payment documents delivered to Buyer.  If following receipt of appropriate stop order documentation, Buyer makes a payment in violation of an order, Buyer will be solely liable for the payment.

(f) Returned Items.  Buyer will pay promptly to Seller an amount equal to the amount of any checks, drafts or withdrawal orders credited to the Deposits on or before the Effective Time which are returned to Seller or Buyer after the Effective Time as uncollectible, less the Deposit Premium percentage times the amount of returned item.

(g) Post-Closing Payments.  Seller will, within three (3) business days, remit to Buyer all payments on Loans and amounts intended as Deposits or otherwise relating to the Loans or Deposits that are received by Seller after the Effective Time.  If the balance due on any Loan has been reduced by Seller as a result of a payment by check or other instrument received prior to the Effective Time and if the paying instrument is returned to Seller after the Effective Time as uncollectible, an amount equal to the reduction will be paid by Buyer to Seller and Seller will assign all right, title and interest in the uncollectible item to Buyer.

(h) Government Checks.  Upon a request after the Effective Time from a state or federal agency to reclaim funds relating to forged social security checks, unemployment checks or welfare checks credited by Seller prior to the Effective Time from a Deposit transferred to and assumed by Buyer, Buyer will honor the request and pay the amount requested, up to the amount of collected funds in the account relating to the request as of the date of such request.  Seller will remain liable for remitting any deficiency.

(i) Transfer of Trust Accounts.  The parties intend that the Seller shall, to the extent not prohibited by applicable law or the applicable trust documents, transfer and assign to the Buyer the Trust Accounts and the related Trust Agreements in accordance with the following procedures:

(i) Where the Seller determines that a Trust Agreement and applicable law does not require the affirmative written consent of the Trust Customer to the transfer or assignment of the Trust Account or Trust Agreement, the Seller shall (i) assign to the Buyer all rights, duties and responsibilities of the Seller relating to the Trust Account and Trust Agreement and the Buyer will be deemed the successor trustee, custodian, record-keeper, paying agent, or investment manager, as applicable, under such Trust Agreement, effective as of the Closing Date, and (ii) promptly deliver to the Trust Customer a notice of the foregoing, which will,

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among other things, notify the Trust Customer that the Trust Agreement will be assigned and transferred by the Seller to the Buyer on the Closing Date, and (iii) request that the Trust Customer accept the appointment of Buyer as successor trustee, custodian, record-keeper, paying agent, and/or investment manager and release and indemnify Seller against any and all losses, expenses, damages or other claims relating to Seller’s duties and responsibilities on or prior to the Closing Date; it being understood that such acceptance, release and indemnity shall not be required to effectuate the transfer of such Trust Accounts and the related Trust Agreements.

(ii) Where the Seller determines that a particular Trust Agreement or applicable law requires the affirmative written consent of the Trust Customer to the transfer or assignment of the Trust Account or Trust Agreement, (i) as soon as is practicable following the receipt of the necessary regulatory approvals, the Buyer and the Seller shall request the Trust Customer’s written consent to the transfer or assignment of the Trust Agreement, (ii) the Buyer and the Seller shall promptly notify the Trust Customer that the Trust Agreement will, if the Trust Customer consents in writing, be assigned and transferred by the Seller to the Buyer on the Closing Date, and (iii) request that the Trust Customer release and indemnify Seller against any and losses, expenses, damages or other claims relating to Seller’s duties and responsibilities on or prior to the Closing Date; it being understood that such release and indemnity shall not be required to effectuate the transfer of such Trust Accounts and the related Trust Agreements.  If the Trust Customer does not consent to the transfer and assignment of the Trust Agreement, the related Trust Account(s) shall be retained by Seller and such account shall be deemed an Excluded Trust Account and the Trust Account and the related Trust Agreement shall not be transferred and assigned by the Seller to the Buyer hereunder.  In the alternative, if the Trust Customer objects in writing to the appointment of the Buyer as successor trustee, custodian, paying agent, and/or investment manager on or before the Closing Date, and is entitled to, and does, in fact, name a successor trustee, custodian, record-keeper, paying agent and/or investment manager other than Buyer, then the related Trust Account shall be deemed to be Excluded Trust Accounts and the Trust Account and the related Trust Agreement shall not be transferred and assigned by the Seller to the Buyer hereunder.  In the event Seller receives an affirmative consent to the transfer of any Trust Account within ninety (90) days following the Closing Date, Seller shall transfer and assign the Trust Account and related Trust Agreement to Buyer.

(iii) Buyer shall have the right, for a period of ninety (90) days following the Closing Date, to solicit the affirmative written consent of any Trust Customer to the transfer or assignment of the Trust Account or Trust Agreement that has not provided such consent on or before the Closing Date.  In the event Buyer obtains any such consent within such ninety (90) day period, Seller shall transfer and assign the Trust Account and the related Trust Agreement to Buyer.

(iv) Notwithstanding the foregoing, the parties understand and agree that the transfer of the irrevocable Trust Agreements and the related Trust Accounts shall occur in accordance with applicable law, including, but not limited to, the Illinois Trust and Trustees Act (760 ILCS 5/1 — 5/21).

(j) Transfer of Annuities.  The parties will work together in good faith to effect the transfer of the Annuities on the Closing Date, by expeditiously taking all such actions as may be reasonably necessary in any party’s good faith and reasonable discretion, including

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without limitation, each of the following actions: (i) identifying the Annuities, (ii) obtaining necessary service or other agreements from the insurance companies offering the Annuities, (iii) sending necessary joint notices to each insurance company or carrier regarding the transfer of the Annuities, (iv) sending necessary notices to customers owning Annuities explaining the transfer of the Annuities, and (v) terminating the appointment by AISI as of the Closing Date of the sales agents in the Branches who accept offers of employment from the Buyer.  In order to effect the transfer of the Annuities, the parties understand and agree that AISI and Buyer shall jointly mail a notice to each insurance company or carrier offering Annuities no later than 21 days prior to the Closing Date.  The notice will, among other things, direct each such insurance company or carrier to change the agent of record from AISI to Buyer with respect to the Annuities as soon as possible, and in no event later than the Closing Date, and that all Annuities for which such change is made will be transferred to Buyer effective as of the Closing Date.

(k) Transfer of Brokerage Accounts.  The parties will work together in good faith to effect the transfer of the Brokerage Accounts on the Closing Date, by expeditiously taking all such actions as may be reasonably necessary in any party’s good faith and reasonable discretion, including without limitation, each of the following actions: (i) identifying the Accounts through AISI’s clearing broker/mutual fund custodian; (ii) delivering a notice from AISI to its clearing broker/mutual fund custodian explaining the Sale and the transfer of the Brokerage Accounts and instructing the clearing broker/mutual fund custodian to provide the Buyer with requested information respecting the Brokerage Accounts; (iii) sending necessary notices to customers holding Brokerage Accounts explaining the Sale and the transfer of the Brokerage Accounts; (iv) entering into a conversion agreement with the current custodian of the Individual Retirement Accounts held by customers with Brokerage Accounts; (v) obtaining Forms U-5 for each registered representative at the Branches prior to termination of their employment from AISI; and (vi) terminating the appointment by AISI as of the Closing Date of the registered representatives in the Branches who accept offers of employment from the Buyer.  In order to effect the transfer of the Brokerage Accounts, the parties understand and agree that the Buyer shall mail all notices to Brokerage Account customers no later than 21 days prior to the Closing Date.  The notice will, among other things, inform a Brokerage Account customer that the Brokerage Account will not be included in the Sale unless the Buyer obtains the customer’s affirmative consent to the transfer of the Brokerage Account and that all Brokerage Accounts for which the Buyer timely obtains such consents will be transferred to the Buyer, effective as the Closing Date.   In the event Seller receives an affirmative consent to the transfer of any Brokerage Account within ninety (90) days following the Closing Date, Buyer and Seller agree to use commercially reasonable best efforts to negotiate an agreement effecting the transfer of any such Brokerage Account by Seller to Buyer.

(l) Agreement Governing Record-Keeping Services. Buyer and Seller shall enter into an agreement pursuant to which Seller shall provide record-keeping services with respect to the Trust Accounts set forth on Exhibit Q attached hereto and assumed by Buyer for which Seller provided record-keeping services for an employee benefit plan (the “Services Agreement”).  The Services Agreement shall contain such terms and conditions as are reasonably acceptable to Buyer and Seller.  Buyer and Seller agree to use commercially reasonable efforts to negotiate and enter into the  Services Agreement on or within a reasonable period following the

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Closing Date so as to avoid any disruptions in the services provided to the holders and/or beneficiaries of such Trust Accounts.

10. Continued Employment of Employees of the Branches.

(a) Offer of Employment to Employees.

(i) At and as of the Effective Time, Buyer will offer employment to substantially all of Seller’s Branch employees (the “Employees”), as identified on the Employee Disclosure Schedule attached hereto as Exhibit H, subject to Buyer’s normal hiring and background investigation processes and standards and any requirements of applicable laws and regulations.  In addition to the foregoing, Buyer intends to negotiate and enter into an employment agreement with the key employees identified on Exhibit R attached hereto (the “Key Employees”).

(ii) Unless mutually agreed to in writing by the parties hereto, for a period of one year from the Effective Time, Seller will not offer, and will instruct its affiliates not to offer, employment to any Employees who are hired by Buyer pursuant to this Agreement, or (prior to the Effective Time), any employees who are offered employment by Buyer.  Notwithstanding the foregoing, for a period of three (3) years from the Effective Time, Seller will not offer, and will instruct its affiliates not to offer, employment to the Key Employees hired by Buyer pursuant to this Agreement and the employment agreement between Buyer and the Key Employees.

(b) Seller’s Duties.  Immediately prior to the Effective Time, Seller shall terminate the employment of the Employees, including the Key Employees, and Seller shall make all payments to such Employees, including the Key Employees, for wages, incentive compensation, commissions, bonuses, and vacations owing to or accruing by such employees prior to the Effective Time.  Buyer shall not be obligated to Seller or any other party for any compensation, employee benefit plan or labor-related obligations, liabilities or claims arising out of any person’s employment with the Seller, and Seller agrees to satisfy all such obligations and/or liabilities and defend at its own expense all such claims.

(c) Employee Disclosure Schedule.  The Employee Disclosure Schedule, which is attached hereto as Exhibit H: (i) lists each Employee’s base salary and other compensation (including incentives, bonuses, commissions, stock based awards, perquisites, etc.) during the preceding 12 month period and increases in base salary during the preceding 12 month period; (ii) lists each Employee’s, including the Key Employees’, service date, and (iii) identifies the normal work schedule for each Employee, including the Key Employees.

(d) Transferring Employees’ Benefits.  To the extent permitted by applicable law and the terms and eligibility rules of the respective plans, each Employee, including the Key Employees, who accepts such offer of employment from Buyer (a “Transferring Employee”) will be immediately eligible to participate in all employee welfare benefit plans and other fringe benefits and perquisites extended to employees holding comparable positions with Buyer as reasonably determined by Buyer, and will be given immediate credit under all employee benefit plans covering employees of Buyer in existence at the Effective Time for length of service with

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Seller or any of Seller’s affiliates.  Subject to the plans’ requirements and provisions, Transferring Employees shall not be subject to exclusions for pre-existing medical conditions nor subject to any waiting periods for medical or dental plan coverage.  Transferring Employees will be given credit for their respective years of service with Seller or any of Seller’s affiliates for purposes of determining their participation and vesting (but not for funding and/or accrual of benefits) in the retirement and other benefit plans of Buyer.  Buyer will admit participating Transferring Employees to its retirement plan as soon as practical following the Effective Time and will permit them to roll any payments from the retirement plan of Seller or Seller’s affiliates, as permitted by IRS regulations.

(e) Employee Information.  In addition to the other information specifically provided for herein, Seller and Buyer shall furnish to each other such employee information and such descriptions of personnel policies, procedures, and benefit plans applicable to Transferring Employees as either party may reasonably request, both prior to and after the Closing Date, including (without limitation) years of service to be counted for eligibility and vesting purposes under any employee benefit plans.

(f) Severance.  If any Employee is not hired by Buyer, Buyer will provide severance benefits to such employee in accordance with Seller’s Severance Policy, a true and complete copy of which has previously been delivered to Buyer.

11. Record Retention and Access.  Buyer will preserve and safely keep, for so long as may be required under applicable law, the records transferred to Buyer under this Agreement.  Upon not less than three (3) business days’ prior notice, Buyer will permit Seller, at its expense, to inspect, make extracts from or copies of the records as Seller requests, provided that Seller’s activities will not unreasonably interfere with Buyer’s business operations and Seller’s inspection and/or extraction will not require Buyer to breach any obligation of confidentiality, violate any law, regulation or order regarding disclosure of information or reveal any proprietary information, trade secrets or marketing or strategic plans.  Seller will treat this information as confidential.

12. Taxes.  Except as provided in this Agreement, all sales taxes, transfer taxes, ad valorem taxes and recordation fees or similar taxes or fees which are payable or arise as a result of this Agreement or consummation of the Sale will be paid by the party upon whom such taxes are imposed.  Sales taxes on the Assets, if any, will be paid by Buyer.

13. Seller’s and AISI’s Representations and Warranties.  Seller and AISI (unless the context otherwise provides), individually represent and warrant to Buyer as follows:

(a) Corporate Status.  Seller is duly organized, validly existing and in good standing under the national banking laws of the United States of America.  AISI is a corporation duly organized, validly existing and in good standing under the laws of the state of Illinois.

(b) Corporate and Other Authority.  Seller has full corporate power and authority to carry on the business of the Branches as presently conducted, own the Owned Real Estate, lease the Leased Real Estate and consummate the Sale.  AISI has full power and authority to carry on its business as presently conducted and to enter into and perform this Agreement and

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any other documents executed pursuant hereto.  The execution and delivery of this Agreement and the consummation of the Sale have been duly authorized by all necessary corporate action.  No other approvals or consents are required to execute and deliver this Agreement and to consummate the Sale other than the appropriate regulatory approvals and third party consents for the assignment of contractual obligations, where required; all such third party consent requirements (other than any consent requirements under the Trust Accounts and the Brokerage Accounts) are noted on Exhibit J.

(c) Absence of Conflict, Breach or Violation.  Neither the execution and delivery of this Agreement nor the consummation of the Sale, will:  (1) result in a breach of AISI’s or Seller’s Charter or By-Laws (2) result in a material breach of any term, condition or provision of, give rise to any right of termination, cancellation or acceleration with respect to or result in the creation of any material lien, charge or encumbrance upon any property or asset of AISI or Seller used in connection with the business of the Branches, pursuant to any note, bond, mortgage, indenture, license, agreement or other written instrument or obligation to which AISI or Seller is a party; or (3) subject to the receipt of the appropriate regulatory approvals, violate any statute, law, writ, injunction, decree, regulation or order of any governmental or regulatory authority applicable to AISI or Seller, as the case may be.

(d) Binding Obligation.  This Agreement constitutes the legal, valid and binding obligation of AISI and Seller (subject to receipt of the appropriate regulatory approvals) enforceable in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, conservatorship, receivership or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law).

(e) Condition of Assets/Real Estate.  The Seller is the owner of fee simple title to the Owned Real Estate and the Owned Real Estate is free and clear of liens and encumbrances except as set forth in the Title Commitment.  There are no leases of any part of the Owned Real Estate except for the Tenant Leases.  Exhibit K and Exhibit P includes a true, correct and complete copy of all Tenant Leases and Branch Leases, respectively, together with all amendments and modifications thereof.  Neither the landlord nor the tenant is in default in any material respect of their respective obligations under the Tenant Leases.  The Tenant Leases are in full force and effect and are binding and enforceable against the parties.  Each Branch Lease is in full force and effect, and to the knowledge of Seller, the Seller is not in default under any of its obligations thereunder, except for such defaults which would not have a material adverse effect on the Sale.  Except for the Branches located on the Leased Real Estate, none of the Branches are located on leased land.  There is no condemnation or similar proceeding pending or to the Seller’s knowledge threatened with respect to the Real Estate.  There is no legal, administrative, arbitral or other proceeding, claim, action, cause of action or governmental investigation pending or, to the best knowledge of Seller, threatened which seeks to impose on Seller in connection with the Branches or the Real Estate any liability arising under an Environmental Law.  Seller is not subject to any agreement, order, judgment, decree or memorandum by or with any court, governmental authority, regulatory agency or third party imposing liability with respect to the Real Estate. Except as otherwise set forth in Exhibit L, Seller has not received written notification that there are any violations of any laws, ordinances, codes or regulations affecting

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the Real Estate.  Except as otherwise set forth in Exhibit L, Seller has no written notice or actual knowledge of: (1) planned or commenced public improvements which may result in special assessments or otherwise materially affect the Real Estate or the present use thereof; (2) completed or pending reassessment of the Real Estate for property tax purposes; (3) any land division involving the Real Estate for which requested state or local approvals were not obtained during such time has Seller has owned the Real Estate; or (4) any construction or improvements for which required state or local permits had not been obtained. All property taxes that have become due and payable with respect to the Real Estate have been paid in full as of the Effective Time.

(f) Deposit Insurance.  The Deposits are insured to the maximum extent permitted by the FDIC.  Seller has filed all reports and paid all premiums required under the Federal Deposit Insurance Act, as amended, with respect to the maintenance of deposit insurance.

(g) No Violation of Laws.  AISI and Seller are each in compliance in all material respects with all statutes and regulations applicable to the conduct of its banking, trust, brokerage and investment businesses at the Branches and has not received written notification from any agency or department of federal, state or local government asserting a violation of any such statute or regulation, threatening to revoke any license, franchise, permit or government authorization material to the conduct of the banking, trust and investment businesses at the Branches or restricting the operation of banking, trust and investment businesses at the Branches.

(h) Certain Labor and Employment Matters.  Seller has provided or made available to Buyer Exhibit H, which contains a complete list of all employees employed at the Branches.  There are no labor controversies pending, or to the best knowledge of Seller, threatened against Seller with respect to the operation of the Branches. Neither Seller nor any affiliate of Seller contributes to, ever has contributed to, or ever has been required to contribute to a multiemployer plan (as defined in ERISA Section 3(37)(a)), and neither Seller nor any affiliate of Seller has any liability (including withdrawal liability) under or with respect to any multiemployer plan.

(i) No Defaults.  Seller is not in material default under any material agreement, commitment, arrangement, insurance policy or other instrument relating to the Branches and to the best knowledge of Seller there has not occurred any event that, with the lapse of time or giving of notice or both, would constitute such a default.

(j) Status of Loans and Deposits.  The information with respect to the Loans and Deposits provided to Buyer on the date of this Agreement and in connection with the Closing Date and Settlement Date is true, correct and complete as of the dates indicated on the information, and none of the Loans contained in the information are Excluded Loans, except as expressly provided in the information.  The terms of the Loans and the Qualified Excluded Loans, the Loan documentation for the Loans and the Qualified Excluded Loans, and the manner in which the Loans and the Qualified Excluded Loans have been entered into, administered and serviced do not violate applicable federal or state law, rule or regulation.  Seller is in possession of a materially complete file with respect to each Loan and Qualified Excluded Loan containing all of the requisite material documents and instruments, and is in compliance, in all material

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respects, with all applicable banking laws and regulations.  Seller has complied, in all material respects, with all of its obligations under the Loans, and, to the knowledge of Seller, each Loan represents the valid and binding obligation of the obligor(s) thereunder, enforceable by the holder thereof in accordance with its terms, except to the extent enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law).  Each Loan that is secured by collateral is secured by a valid, perfected and enforceable mortgage or security interest in the collateral in favor of Seller as mortgagee or secured party.  No such collateral has been released from any security interest or lien granted to Seller, unless approved by Seller and documented in files provided to Buyer prior to the date hereof.  Except as set forth on Exhibit I, as of the date hereof, Seller has not issued any letters of credit included in, or in respect of, any Loans.  Seller has previously provided to Buyer a true and complete copy of its loan grading scale.  Seller shall update Exhibit I no later than three (3) days prior to Closing.

(k) Tax Matters.

(i) Seller has filed all income, payroll, withholding, property, sales, use or transfer tax returns required to be filed relating to the ownership and operation of the Assets or the business conducted at the Branches.  All such tax returns were correct and complete in all material respects.  All income, payroll, withholding, property, sales, use or transfer taxes, including without limitation all interest, penalties and additions to tax, whether disputed or not (“Taxes”), required to be paid (whether or not shown on any Tax return) relating to the ownership and operation of the Assets or the business conducted at the Branches have been paid.  Seller is not the beneficiary of any extension of time within which to file any income, payroll, withholding, property, sales, use or transfer tax return relating to the ownership and operation of the Assets or the business conducted at the Branches. Buyer shall not by reason of the Sale  become liable for any Taxes relating to the ownership and operation of the Assets or the business conducted at the Branches for any period prior to the Effective Time.

(ii) Seller has withheld and paid all Taxes relating to the ownership and operation of the Assets or the business conducted at the Branches required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, stockholder or other third party through the Effective Time, and all Forms W-2 and 1099 required to be filed with respect thereto have been properly completed and timely filed..

(iii) There is no dispute or claim concerning any income, payroll, withholding, property, sales, use or transfer tax liability of Seller relating to the ownership and operation of the Assets or the business conducted at the Branches.  Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time within which Taxes may be assessed or a claim for Taxes may be made.

(iv) Seller shall cooperate with Buyer, and shall deliver to Buyer all instruments and certificates, as may be reasonably necessary in order for Buyer to timely make all filings, returns, reports and forms of Taxes required to be made by Buyer relating to the ownership and operation of the Assets or the business conducted at the Branches, or relating to

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Taxes which are payable by or imposed upon Buyer as a result of this Agreement or consummation of the Sale.

(v) The purchase price for the Sale (together with any liabilities assumed by Buyer) and any other consideration received by Seller in connection with the transactions contemplated herein shall be allocated among the assets sold to Buyer in accordance with Section 1060 of the Internal Revenue Code and the Treasury Regulations promulgated thereunder (the “Purchase Price Allocation”).

(l) No Adverse Litigation.  Except as otherwise disclosed on Exhibit L, there is no investigation, action, arbitration, suit, proceeding or claim or governmental proceeding pending or, to the best knowledge of Seller or AISI, threatened against Seller or AISI which would materially and adversely affect the Sale or the business or prospects of the Branches.

(m) Books, Records and Documentation.  The books and records being transferred to Buyer pursuant to this Agreement are complete, correct and accurate in all material respects, have been maintained in a consistent and a customary manner and are in material compliance with all applicable federal and state laws and regulations and customary banking practices.  The deposit- and lending-related forms, notices, statements and related documentation, as well as Seller’s policies, procedures and practices with respect thereto, used in connection with the Branches’ business comply, in all material respects, with federal and state laws and regulations which are applicable to Seller; it being understood that any errors or omissions which may be cured without extraordinary effort or costs or which otherwise do not affect the enforceability or collectability of such instruments will not be deemed material.  Any such errors or omissions of which Seller is aware prior to Closing shall be cured by Seller.

(n) Absence of Certain Changes.  Since March 31, 2009, with respect to the business conducted at the Branches, (i) there has been no material change in the business conducted at the Branches, (ii) there has been no material damage, destruction or loss (whether or not covered by insurance) affecting the Assets or the Real Estate, (iii) there has not been any failure, in a material respect, to follow Seller’s normal and customary practices and procedures regarding loan pricing, underwriting and recognition of charge-offs in a manner consistent with past practice and (iv) the Loans have been made in a manner consistent with past practice and in accordance, in all material respects, with the normal and customary credit standard and policies of Seller.

(o) Regulatory Approvals.  Seller is aware of no condition, circumstance or event that would preclude or materially delay receipt of all necessary regulatory approvals.

14. Buyer’s Representations and Warranties.  Buyer represents and warrants to Seller as follows:

(a) Corporate Status.  Buyer is duly organized, validly existing and in good standing under the laws of the State of Illinois.

(b) Corporate Authority.  Buyer has full corporate power and authority to consummate the Sale.  The execution and delivery of this Agreement and the consummation of

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the Sale will have been duly authorized by all necessary corporate action. No other approvals or consents are required to consummate the Sale other than the appropriate regulatory approvals.

(c) Absence of Conflict or Breach.  Neither the execution and delivery of this Agreement nor the consummation of the Sale will:  (1) result in a breach of Buyer’s Charter or By-Laws; (2) result in a material breach of any term, condition or provision of, give rise to any right of termination, material cancellation or acceleration with respect to or result in the creation of any material lien, charge or encumbrance upon any property or asset of Buyer, pursuant to any note, bond, mortgage, indenture, license, agreement or other written instrument or obligation to which Buyer is a party; or (3) subject to the receipt of the appropriate regulatory approvals, violate or conflict with any statute, law, decree, regulation or order of any governmental or regulatory authority applicable to Buyer.

(d) Binding Obligation.  This Agreement constitutes the legal, valid and binding obligation of Buyer (subject to receipt of the appropriate regulatory approvals) enforceable in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, conservatorship, receivership or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law).

(e) Regulatory Approvals.  Buyer is aware of no condition, circumstance or event that would preclude or materially delay receipt of all necessary regulatory approvals.

15. Seller’s Covenants.  Seller covenants as follows:

(a) Activity in the Ordinary Course.  From the date of this Agreement until the Effective Time, Seller will conduct the business of the Branches substantially in the same manner as previously conducted, maintain the Records substantially in the same manner as previously maintained, repair and maintain the Assets, the structures and improvements and the Real Estate in good condition and in substantially the same manner as previously maintained, comply with and perform its obligations under the Tenant Leases and maintain the Branches in the ordinary and usual manner.  Further, from the date of this Agreement until the Effective Time, Seller shall use its reasonable best efforts to keep available to the Branches substantially all of the employees of the Branches listed on Exhibit H (it being understood that this shall not require the payment of a retention bonus or any additional compensation).  Without the prior consent of Buyer, Seller will not engage in the following between the date of this Agreement and the Effective Time:

(1) Cause the transfer of Deposits from or to the Branches in an aggregate amount exceeding $100,000, except upon the unsolicited request of a Branch customer in the ordinary course of business and except for Deposits relating to trust or other fiduciary accounts;

(2) Make any loan or loan commitment which will constitute a Loan to be transferred to Buyer, except extensions, renewals, modifications or amendments of existing Loans, or loans and commitments in an amount of not more than $1,000,000 made in the

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ordinary course of business and consistent with past practices and safe and sound banking practices;

(3) Acquire or dispose of any furniture, fixtures or equipment for the Branches other than pursuant to commitments made on or before the date of this Agreement in an amount of not more than $50,000 and except for replacement of furniture, fixtures and equipment and normal maintenance and refurbishing in the ordinary course of business;

(4) Increase or agree to increase the salary, remuneration or compensation of persons employed at the Branches other than with the consent of the Buyer, and in accordance with Seller’s customary policies and/or bank-wide changes consistent with past practices, or pay or agree to pay any uncommitted bonus to the employees other than regular bonuses based on historical practice;

(5) Enter into, amend or renew, extend or terminate any employment contract;

(6) Change any accounting procedures or practices that would have a material effect on the Branches or the Assets, except as otherwise required in accordance with generally accepted accounting principles or regulatory accounting principles; or

(7) Take, or instruct or permit its affiliates to take, any action (A) impairing Buyer’s rights in, or permitting any lien upon, any Deposit or Asset; (B) impairing in any way the ability of Buyer to collect upon any Loan or Qualified Excluded Loan; (C) except in the ordinary course of servicing, waive any material right, whether in equity or at law, that it has with respect to any Loan or Qualified Excluded Loan; or (D) in respect of any Asset or Deposit, that would fail to follow Seller’s normal and customary practices and procedures regarding loan, trust or deposit product pricing, underwriting or scoring in a manner consistent with its policies disclosed to Buyer and with past practice, or that would be inconsistent with current competitive market practices and procedures regarding loan, trust or deposit product pricing, underwriting or scoring, or (E) that could have a material adverse effect on the business or prospects of the Branches, the continued accuracy of any of Seller’s representations or warranties hereunder or on the consummation of the Sale; or

(8) Make or enter into an agreement or other arrangement, whether written or oral, involving the Real Estate, including but not limited to any proposed public improvement projects set forth in Exhibit L.

(b) Access to Information and Equipment.  Seller will give Buyer access during normal business hours to the properties, equipment, documents, contracts and records relating to the Branches as Buyer from time to time may reasonably request to enable Buyer to investigate the business and properties of the Branches in accordance with this Agreement and prepare for an orderly transition following the Effective Time, and to prepare applications for the appropriate regulatory approvals.  Seller will not be required to breach any obligation of confidentiality or violate any law, regulation or order regarding disclosure of information or to reveal any proprietary information, trade secrets or marketing or strategic plans.  Seller shall

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identify the Secondary Loans to Buyer as contemplated by Section 1(a)(14), and Seller shall promptly provide any information with respect to the Secondary Loans as Buyer reasonably requests.

(c) Non-Solicitation of Business.  For a period of one (1) year following the Effective Time, Seller will not solicit the customers of the Branches for Deposit, Loan or Trust Account products or services.  Nothing in this subsection will prevent Seller or any of its affiliates from contacting or soliciting former customers of the Branches who have deposit, loan or trust relationships that are retained by Seller pursuant to Section 1(a)(5), Section 1(a)(9), and Section 1(b) (“Retained Customers”), or from general advertising and marketing not specifically directed to Branch customers, or specifically from forwarding to Branch customers notices of the Sale required by any governmental agency or by any law, rule or regulation, provided that Seller will notify Buyer prior to delivering these notices.

(d) Insurance and Maintenance of Property.  Until the Effective Time, Seller will insure the Branch property owned or leased by it against all ordinary insurable risks and will operate, maintain and repair this property in a manner consistent with past practice.

(e) Compliance with Laws.  Seller will comply with applicable laws, statutes, ordinances, rules, regulations, guidelines, orders, arbitration awards, judgments and decrees applicable to or binding on Seller or its business or properties.

(f) Fulfill Conditions.  Seller will use its best efforts to fulfill each of the closing conditions on or prior to the Effective Time.

16. Buyer’s Covenants.  Buyer covenants as follows:

(a) Buyer’s Applications for Approval.  As soon as practicable following the execution of this Agreement, but in no event later than thirty (30) days following the date of this Agreement, Buyer will file applications as may be required by the appropriate federal and state regulatory authorities for approval to consummate the Sale.  Buyer promptly will furnish Seller with copies of written communications filed with or received from any governmental agency in connection with the Sale.

(b) Fulfill Conditions.  Buyer will use its best efforts to fulfill each of the closing conditions on or prior to the Effective Time.

(b) Non-Solicitation of Business.  Except as expressly permitted by subparagraph (iii) of Section 9(i), for a period of one year following the Effective Time, Buyer will not solicit the Retained Customers (unless a portion of such customers’ business is retained by Buyer, in which case Buyer may solicit such customers only in connection with the specific business retained by Buyer).  Nothing in this subsection will prevent Buyer or any of its affiliates from general advertising and marketing not specifically directed to the Retained Customers or from responding to requests for information or services from the Retained Customers.

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(d)Letters of Credit.

(1)           Buyer hereby agrees to assume all risks, undertakings, obligations and liabilities arising or accruing after the Effective Time with respect to the letters of credit relating to the Branches listed on Exhibit I attached hereto (the “Letters of Credit”).  Buyer agrees to use its commercially reasonable efforts to issue within three (3) months after the Closing Date replacement letters of credit for those Letters of Credit which are standby Letters of Credit.

(2)           Seller agrees that it will provide notice to Buyer within twenty-four (24) hours after making a disbursement in connection with a request by a beneficiary for a draw under or payment of a Letter of Credit, (a “Letter of Credit Disbursement”), and will provide Buyer with copies of the documents submitted by the beneficiary in support of a Letter of Credit Disbursement.

(3)           In the event Seller notifies Buyer that a Letter of Credit Disbursement has been made, then, Buyer agrees to pay to Seller on the day so notified by Seller, an amount equal to the Letter of Credit Disbursement; provided, however, if such notice was not given by Seller to Buyer prior to 2 p.m. on such day, then such amount shall be paid by Buyer not later than 10:00 a.m. on the next Business Day.  Buyer agrees to pay Seller any amounts due under this Agreement by wire transfer of immediately available funds to an account previously designated by Seller, or if mutually agreed upon by the parties, a line of credit account will be established by Buyer at Seller, and Buyer may draw against this line of credit account for any amounts due under this Agreement.

(4)           Buyer also agrees to pay Seller (i) interest on any and all amounts unpaid by Buyer when due from the date such amounts become due until payment in full, such interest being payable on demand and accruing at the interest rate set forth in Section 3(b) of the Agreement, (ii) Seller’s usual and customary fees as disclosed from time to time in connection with processing a Letter of Credit Disbursement, and (iii) any and all costs and expenses (including, without limitation, reasonable attorneys’ fees) reasonably incurred by Seller in exercising or enforcing any rights or performing any obligations under this Agreement.  So long as Buyer is not in default of its obligations under this Agreement, Seller shall promptly remit to Buyer any amounts subsequently received by Seller from customers in respect of all Letter of Credit Disbursements.

17. Further Assurances.  Seller will deliver to Buyer other written documents, instruments, releases or otherwise as Buyer reasonably may require to effectuate the provisions of this Agreement, including effectuating the proper transfer of the Assets and Deposits.  Seller will bear the cost of preparing any such transfer documents and Buyer will bear all other costs with respect these documents, including filing costs, recording fees and transfer fees.

18. Best Efforts.  Buyer and Seller will act in good faith and use their best efforts:  (a) furnish information as may be required in connection with the preparation of the applications with and notifications to federal and state regulatory authorities; (b) ensure that prior to and following the Effective Time the Sale is completed in an orderly and efficient manner; and (c) take all action necessary or desirable to permit consummation of the Sale at the earliest possible date, including satisfying any conditions imposed by regulatory authorities in connection with

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the approval of the Sale.  Neither Buyer nor Seller will take any action that would or would be reasonably expected to substantially impair the prospects of completing the Sale.

19. Confidentiality.  Neither Buyer nor Seller will use any information obtained pursuant to this Agreement for any purpose unrelated to this Agreement.  Both parties will hold in confidence all information and documents obtained pursuant to this Agreement and will request confidential treatment before any information or documents are submitted in connection with any application for regulatory approval, unless the information otherwise becomes publicly available other than through the actions of the other party or if a party determines that the information or document is required by law to be disclosed, in which case that party will notify the other of the impending disclosure.  In the event the Sale is for any reason not consummated, all confidential information received by Buyer or Seller promptly will be returned to the other party without retaining any copies.

20. Conditions Precedent to Obligations of Buyer.  The obligation of Buyer to consummate the Sale will be subject to the satisfaction, on or before the Closing Date, of each of the following conditions (all or any of which may be waived by Buyer in whole or in part):

(a) Performance of Covenants.  Each of the acts and undertakings of Seller and of AISI to be performed or complied with at or prior to the Effective Time have been performed in all material respects.

(b) Representations True at Closing.  The representations and warranties made by Seller and AISI are true and correct in all material respects on the Closing Date with the same force and effect as though they were made on and as of that time (except to the extent that they may become untrue or incorrect as a result of actions or transactions of Seller made with the written consent of Buyer).

(c) Regulatory Approvals and Other Consents.  Buyer and Seller have received all necessary federal and state regulatory approvals for the Sale, and any applicable waiting periods in the approvals have elapsed without challenge.  All other necessary consents and approvals, the absence of which have an adverse effect on the Buyer’s rights under this Agreement, which result in the termination or loss of any right material to the business of Seller or which are required for the transfer of any Records, including but not limited to the consents listed on Exhibit J have been received by the Buyer.

(d) No Injunction.  No court or governmental agency of competent jurisdiction has enjoined, restrained or prohibited the consummation of the Sale.

(e) Employment Agreement with Key Employees.  Buyer and the Key Employees shall have entered into an employment agreement on terms reasonably acceptable to Buyer.

21. Conditions Precedent to Obligations of Seller.  The obligation of Seller to consummate the Sale will be subject to the satisfaction, on or before the Closing Date, of each of the following conditions (all or any of which may be waived by Seller in whole or in part):

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(a) Performance of Covenants.  Each of the acts and undertakings of Buyer to be performed or complied with at or prior to the Effective Time have been performed in all material respects.

(b) Representations True at Closing.  The representations and warranties made by Buyer are true and correct in all material respects on the Closing Date with the same force and effect as though they were made on and as of that time (except to the extent that they may become untrue or incorrect as a result of actions or transactions of Buyer made with the written consent of Seller).

(c) Regulatory Approvals and Other Consents.  Buyer and Seller have received all necessary federal and state regulatory approvals for the Sale, and any applicable waiting periods in the approvals have elapsed without challenge.  All other necessary consents and approvals, the absence of which have an adverse effect on the Buyer’s rights under this Agreement or which result in the termination or loss of any right material to the business of Seller, have been received by Buyer.

(d) No Injunction.  No court or governmental agency of competent jurisdiction has enjoined, restrained or prohibited the consummation of the Sale.

(e) Loans.  Buyer agrees to purchase Loans (Branch Loans and Secondary Loans) in an aggregate amount equal to at least 90% of the Deposits assumed by Buyer.

22. Termination by the Parties.  This Agreement may be terminated by the parties in any of the following ways:  (a) at any time on or prior to the Closing Date by the mutual written consent of Buyer and Seller; (b) by Buyer in writing if any of the conditions in Section 20 have not been satisfied or waived in writing by Buyer as of the Closing Date; (c) by Seller in writing if any of the conditions in Section 21 have not been satisfied or waived in writing by Seller as of the Closing Date; (d) by Seller or Buyer in writing at any time after any regulatory authority has denied any application of Seller or Buyer for approval of the Sale or establishment of a branch by Buyer and any appeals have been exhausted; (e) by Seller or Buyer in writing if the Sale has not been consummated at least six (6) months from the date of this Agreement; or (f) by Buyer in accordance with Sections 4(a), 4(b) or 4(c) of this Agreement.

23. Effect of Termination.  If this Agreement is terminated, it will become void and neither party will have any further liability or obligation with respect to this Agreement or the Sale, except as otherwise provided in this Agreement or except and to the extent termination results from the breach by a party of any of its representations, warranties or covenants and except that neither party will be relieved of its obligations under Sections 19, 24, 25, and 26.

24. Survival of Representations and Warranties.  The representations and warranties in this Agreement will survive the Closing Date as follows: (a) in the case of a fraudulent breach of a representation or warranty, indefinitely; (b) in the case of a claim based upon a breach of a representation or warranty pertaining to taxes, for a period equal to the applicable statute of limitations; and (c) in the case of all other claims, including those based upon the inaccuracy or breach of a representation or warranty as they relate to the Assets and the Deposits, for a period commencing at the Effective Time and ending eighteen (18) months after

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the Effective Time.  Nothing in this Section limits the right of either Buyer or Seller to assert a claim for contribution or indemnification against the other party as a result of a claim brought by a third party against Buyer or Seller, provided that any claim for contribution or indemnification will be brought within one year from the date the third party’s action is commenced.

25. Indemnification.

(a) Seller. Each of Seller and AISI will indemnify and hold Buyer harmless from and against any loss, cost, expense or other damage (including attorney fees) resulting from, arising out of, or incurred with respect to: (1) the breach of a representation or warranty made by Seller or AISI in this Agreement or in any document delivered pursuant to this Agreement; (2) the breach of a covenant made by Seller or AISI in this Agreement; (3) any debts, obligations, contracts and liabilities of Seller or AISI not assumed by Buyer (including without limitation any Taxes relating to the ownership and operation of the Assets or the business conducted at the Branches for any period prior to the Effective Time); or (4) claims asserted against Buyer by a third party as a result of any acts or omissions of Seller or AISI prior to the Effective Time or as a result of an obligation retained by Seller or AISI pursuant to this Agreement.

(c) Buyer. Buyer will indemnify and hold Seller and AISI harmless from and against any loss, cost, expense or other damage (including attorney fees) resulting from, arising out of, or incurred with respect to:  (1) the breach of a representation or warranty made by Buyer in this Agreement or in any document delivered pursuant to this Agreement; (2) the breach of a covenant made by Buyer in this Agreement; or (3) the Deposits; (4) the Asset Obligations, or (5) claims related to the Assets, the Asset Obligations, the Unfunded Obligations or the Deposits asserted against Seller or AISI by a third party as a result of any acts or omissions of Buyer on or after the Effective Time, unless the loss, cost, expense or other damage occurred as a result of an act or omission which occurred prior to the Effective Time or as a result of an obligation retained by Seller or AISI pursuant to this Agreement.

(d) Claims.  Any claim for indemnification under this Section must be asserted within the applicable survival period, and if not asserted within that period the right to assert the claim will lapse.  Except for claims asserted by or liabilities to a third party, the indemnifying party will not have any liability for a claim until the aggregate amount of the liability for the claim exceeds $10,000, at which time that party will have liability for the full amount of the claim.  In no event will Seller’s liability for indemnification exceed the sum of the amounts listed in Subsections 3(b)(1-6) plus the Trust Account Premium (which items are collectively considered the “purchase price” for the Branches).

(e) Exclusive Remedy.  In the absence of fraud and except as otherwise provided in this Agreement, the indemnification provided by this Section is the sole and exclusive remedy with respect to any claim of any party to this Agreement against any other party to this Agreement in connection with the Sale, and the remedy provided in this Section will be in lieu of any other claims or actions that might otherwise have been available at law or in equity.

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26. Defense of Claims.  If any third party asserts a claim against either party (“Indemnified Party”) which, if successful, would entitle Indemnified Party to indemnification under this Agreement, Indemnified Party will give notice of the claim to the other party (“Indemnifying Party”) and Indemnifying Party will have the right to assume the defense of the claim at its expense with counsel reasonably satisfactory to Indemnified Party, provided Indemnifying Party diligently pursues the defense of the claim.  If Indemnifying Party does assume the defense, it will indemnify and hold Indemnified Party harmless from and against any and all losses, damages and liabilities caused by or arising out of any settlement or judgment of such claim.  In addition, Indemnified Party will have the right to participate in the defense of the claim at its expense, in which case Indemnifying Party will cooperate in providing information to and consulting with Indemnified Party about the claim and Indemnifying Party will not consent to the entry of judgment or enter into any settlement without the prior written consent of Indemnified Party.  If Indemnifying Party does not assume the defense of the claim, Indemnified Party may defend against and/or settle the claim in the manner and on the terms as it in good faith deems appropriate and will be indemnified for the amount of any judgment or settlement and for all losses or expenses, legal or otherwise, incurred in connection with the defense and/or settlement of the claim.  Failure by Indemnifying Party to give written notice to Indemnified Party of its election to defend the claim within thirty (30) days after written notice of the claim is given to Indemnifying Party by Indemnified Party will be deemed a waiver of Indemnifying Party’s right to defend the claim.

27. Exclusive Dealing. In view of the substantial expenditures of time, effort and expense to be undertaken by the Buyer in connection with its due diligence investigation and the preparation of this Agreement, Seller hereby agrees that it will not directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept, or consider any proposal of any other person or entity relating to the acquisition of the Branches, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation or otherwise, except as may be required to comply with the fiduciary duties of the Board of Directors of Seller or any other legal obligations.  Seller will immediately notify Buyer of any such bona fide offer or proposal received from any other person or entity.  Such notice shall include the name of the other person or entity and the terms of such offer or proposal and shall be updated from time to time as applicable;  provided ,  however , that no such notification shall be required if Seller intends to and does in fact promptly reject such offer or proposal, unless the offeror expresses an intention to, or in fact does, subsequently modify the offer or proposal, in which case immediate notice to the Buyer shall be provided in the manner required hereby.

28. Public Announcements.  Seller and Buyer will agree as to the timing, form and substance of any press release relating to the Sale, provided that nothing will prohibit either party from making any disclosure which it deems necessary to comply with applicable law.

29. Exhibits.  On or before the date of this Agreement, Seller will provide Buyer with certain information related to the business of the Branches, attached to this Agreement as exhibits and incorporated in this Agreement by reference.

30. Brokers.  Except for the engagement of Keefe, Bruyette & Woods, Inc. by Seller (whose fees will be paid by Seller), Buyer and Seller each represent and warrant that all

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negotiations relative to the Sale have been carried on without the intervention of any third parties, and neither party owes any other broker’s sales or other similar fees.

31. Payment of Expenses.  Except as otherwise expressly provided in this Agreement, each party will bear and pay all costs and expenses incurred by it or on its behalf in connection with the Sale, including expenses incurred in connection with regulatory approvals or for any notices to customers of the Branches.

32. Entire Agreement.  This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all negotiations, preliminary agreements and all prior or contemporaneous discussions and understandings of the parties.

33. Amendments.  No amendment, change, modification or waiver of any of the terms of this Agreement are effective unless made in writing and executed by both parties.

34. Assignment.  This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by either party without the prior written consent of the other.

35. Addresses for Notice. All communications provided for under this Agreement must be in writing and will be deemed given when delivered personally, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) to the other party at the following address (or such other address as specified in writing):

If to Seller:	with a copy to:
AMCORE Bank, N.A.	Thomas R. Homberg
c/o General Counsel	Godfrey & Kahn, S.C.
501 Seventh Street	780 North Water Street
Rockford, IL 61104	Milwaukee, WI  53202
Fax:  (815) 490-6884	Fax:  (414) 273-5198
If to Buyer:	with a copy to:
Midland States Bank	Douglas J. Tucker
c/o President	Quarles & Brady LLP
133 W. Jefferson Street	300 N. LaSalle, Suite 4000
Effingham, IL 62401	Chicago, IL 60654
Fax: (815) 490-6884	Fax: (312) 715-5155

36. Counterparts.  This Agreement and all other documents executed in connection with this Agreement and the Sale may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

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37. Severability.  If any provision contained in this Agreement becomes illegal, null or void or against public policy, the remaining provisions will not be affected.

38. Governing Law.  This Agreement will be governed by and construed in accordance with the laws of Illinois without giving effect to its conflicts of law principles.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first written above.

SELLER		BUYER
AMCORE BANK, N.A.		MIDLAND STATES BANK
By:	/s/ Douglas D. Howe	By:	/s/ Leon Holschbach
Name:	Douglas D. Howe	Name:	Leon Holschbach
Its:	Senior Vice President	Its:	President
AISI
AMCORE INVESTMENT SERVICES, INC.
By:	/s/ Douglas D. Howe
Name:	Douglas D. Howe
Its:	Authorized Officer

INDEX OF EXHIBITS

Exhibit A -	Description of Real Estate
Exhibit B -	Description of Fixtures and Equipment
Exhibit C -	Assignment and Assumption Agreement
Exhibit D -	Loans
Exhibit E -	Excluded Loans and Qualified Excluded Loans
Exhibit F -	Trust Accounts
Exhibit G -	Deposits
Exhibit H -	Employee Disclosure Schedule
Exhibit I -	Letters of Credit
Exhibit J -	Asset Obligations
Exhibit K -	Tenant Leases
Exhibit L -	Disclosure Items
Exhibit M -	Secondary Loans
Exhibit N -	Loans and Qualified Loans Secured by Vehicles and Boats
Exhibit O -	Prorated Items
Exhibit P -	Branch Leases
Exhibit Q -	Trust Accounts Subject to Record-Keeping Services Agreement
Exhibit R -	Key Employees

EX-2.5

Exhibit 2.5

PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

AMONG

FEDERAL DEPOSIT INSURANCE CORPORATION,

RECEIVER OF WESTBRIDGE BANK & TRUST COMPANY,

CHESTERFIELD, MISSOURI

FEDERAL DEPOSIT INSURANCE CORPORATION

and

MIDLAND STATES BANK,

EFFINGHAM, ILLINOIS

DATED AS OF

OCTOBER 15, 2010

TABLE OF CONTENTS

ARTICLE I		DEFINITIONS	2
ARTICLE II		ASSUMPTION OF LIABILITIES	9
	2.1	Liabilities Assumed by Assuming Institution	9
	2.2	Interest on Deposit Liabilities	10
	2.3	Unclaimed Deposits	10
	2.4	Employee Plans	11
ARTICLE III		PURCHASE OF ASSETS	11
	3.1	Assets Purchased by Assuming Institution	11
	3.2	Asset Purchase Price	11
	3.3	Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.	12
	3.4	Puts of Assets to the Receiver	12
	3.5	Assets Not Purchased by Assuming Institution	15
	3.6	Assets Essential to Receiver	16
	3.7	Receiver's Offer to Sell Withheld Loan	17
ARTICLE IV		ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS	17
	4.1	Continuation of Banking Business	17
	4.2	Agreement with Respect to Credit Card Business	18
	4.3	Agreement with Respect to Safe Deposit Business	18
	4.4	Agreement with Respect to Safekeeping Business	18
	4.5	Agreement with Respect to Trust Business	18
	4.6	Agreement with Respect to Bank Premises	19
	4.7	Agreement with Respect to Data Processing Equipment and Leases	23
	4.8	Agreement with Respect to Certain Existing Agreements	23
	4.9	Informational Tax Reporting	24
	4.10	Insurance	24
	4.11	Office Space for Receiver and Corporation	25
	4.12	Agreement with Respect to Continuation of Group
		Health Plan Coverage for Former Employees	25
	4.13	Agreement with Respect to Interim Asset Servicing	26
	4.14	Reserved	27
	4.15	Agreement with Respect to Loss Sharing	27

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ARTICLE V		DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK	27
	5.1	Payment of Checks, Drafts and Orders	27
	5.2	Certain Agreements Related to Deposits	27
	5.3	Notice to Depositors	27
ARTICLE VI		RECORDS	28
	6.1	Transfer of Records	28
	6.2	Delivery of Assigned Records	28
	6.3	Preservation of Records	28
	6.4	Access to Records; Copies	28
ARTICLE VII		BID; INITIAL PAYMENT	26
ARTICLE VIII		ADJUSTMENTS	29
	8.1	Pro Forma Statement	29
	8.2	Correction of Errors and Omissions; Other Liabilities
	8.3	Payments	30
	8.4	Interest	30
	8.5	Subsequent Adjustments	30
ARTICLE IX		CONTINUING COOPERATION	31
	9.1	General Matters	31
	9.2	Additional Title Documents	31
	9.3	Claims and Suits	31
	9.4	Payment of Deposits	31
	9.5	Withheld Payments	32
	9.6	Proceedings with Respect to Certain Assets and Liabilities	32
	9.7	Information	33
ARTICLE X		CONDITION PRECEDENT	33
ARTICLE XI		REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION	33
ARTICLE XII		INDEMNIFICATION	35
	12.1	Indemnification of Indemnitees	35
	12.2	Conditions Precedent to Indemnification	38
	12.3	No Additional Warranty	38
	12.4	Indemnification of Corporation and Receiver	39

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	12.5	Obligations Supplemental	39
	12.6	Criminal Claims	39
	12.7	Limited Guaranty of the Corporation	39
	12.8	Subrogation	40
ARTICLE XIII		MISCELLANEOUS	40
	13.1	Entire Agreement	40
	13.2	Headings	40
	13.3	Counterparts	40
	13.4	Governing Law	40
	13.5	Successors	40
	13.6	Modification; Assignment	41
	13.7	Notice	41
	13.8	Manner of Payment	42
	13.9	Costs, Fees and Expenses	42
	13.10	Waiver	42
	13.11	Severability	42
	13.12	Term of Agreement	42
	13.13	Survival of Covenants, Etc.	43
SCHEDULES*
	2.1(a)	Excluded Deposit Liability Accounts
	3.2	Purchase Price of Assets or Assets
	3.5(l)	Excluded Securities
	4.15A	Single Family Shared-Loss Loans
	4.15B	Commercial Shared-Loss Loans
	4.15C	Shared-Loss Securities
	4.15D	Shared-Loss Subsidiaries
	6.3	Data Retention Catalog
	7	Calculation of Deposit Premium
EXHIBITS*
	2.3A	Final Notice Letter
	2.3B	Affidavit of Mailing
	3.2(c)	Valuation of Certain Qualified Financial Contracts
	4.13	Interim Asset Servicing Arrangement
	4.15A	Single Family Shared-Loss Agreement
	4.15B	Commercial Shared-Loss Agreement

*  Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities and Exchange Act of 1934, as amended. The Company agrees to furnish a supplemental copy of any omitted exhibit or schedule to the SEC upon request.

iv

PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

THIS AGREEMENT, made and entered into as of the 15th day of October, 2010, by and among the FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF WESTBRIDGE BANK & TRUST COMPANY, CHESTERFIELD, MO (the "Receiver"), MIDLAND STATES BANK, organized under the laws of the state of Illinois, and having its principal place of business in Effingham, Illinois (the "Assuming Institution"), and the FEDERAL DEPOSIT INSURANCE CORPORATION, organized under the laws of the United States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the "Corporation").

WITNESSETH:

WHEREAS, on Bank Closing, the Chartering Authority closed Westbridge Bank & Trust Company(the "Failed Bank") pursuant to applicable law and the Corporation was appointed Receiver thereof; and

WHEREAS, the Assuming Institution desires to purchase certain assets and assume certain deposit and other liabilities of the Failed Bank on the terms and conditions set forth in this Agreement; and

WHEREAS, pursuant to 12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to the Assuming Institution to facilitate the transactions contemplated by this Agreement, which assistance may include indemnification pursuant to Article XII; and

WHEREAS, the Board of Directors of the Corporation (the "Board") has determined to provide assistance to the Assuming Institution on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, the Board has determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such assistance is necessary to meet the obligation of the Corporation to provide insurance coverage for the insured deposits in the Failed Bank.

NOW THEREFORE, in consideration of the mutual promises herein set forth and other valuable consideration, the parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings set forth in this Article I, or elsewhere in this Agreement. As used herein, words imparting the singular include the plural and vice versa.

"Accounting Records" means the general ledger and subsidiary ledgers and supporting schedules which support the general ledger balances.

"Acquired Subsidiaries" means Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.

"Affiliate" of any Person means any director, officer, or employee of that Person and any other Person (i) who is directly or indirectly controlling, or controlled by, or under direct or indirect common control with, such Person, or (ii) who is an affiliate of such Person as the term "affiliate" is defined in Section 2 of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.

"Agreement" means this Purchase and Assumption Agreement by and among the Assuming Institution, the Corporation and the Receiver, as amended or otherwise modified from time to time.

"Assets" means all assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned by Subsidiaries of the Failed Bank are not "Assets" within the meaning of this definition.

"Assumed Deposits" means Deposits.

"Bank Closing" means the close of business of the Failed Bank on the date on which the Chartering Authority closed such institution.

"Bank Premises" means the banking houses, drive-in banking facilities, and teller facilities (staffed or automated) together with adjacent parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, and unimproved land that are owned or leased by the Failed Bank and that have formerly been utilized, are currently utilized, or are intended to be utilized in the future by the Failed Bank as shown on the Accounting Record of the Failed Bank as of Bank Closing.

"Bid Amount" has the meaning provided in Article VII.

"Bid Valuation Date" means August 3, 2010.

"Book Value" means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Receiver for

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differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections and for setoffs, whether voluntary or involuntary. The Book Value of a Subsidiary of the Failed Bank acquired by the Assuming Institution shall be determined from the investment in subsidiary and related accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting. Without limiting the generality of the foregoing, (i) the Book Value of a Liability Assumed shall include all accrued and unpaid interest thereon as of Bank Closing, and (ii) the Book Value of a Loan shall reflect adjustments for earned interest, or unearned interest (as it relates to the "rule of 78s" or add-on-interest loans, as applicable), if any, as of Bank Closing, adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, if any, attributable to the Failed Bank as of Bank Closing, and adjustments for Failed Bank Advances, if any, in each case as determined for financial reporting purposes. The Book Value of an Asset shall not include any adjustment for loan premiums, discounts or any related deferred income, fees or expenses, or general or specific reserves on the Accounting Records of the Failed Bank.  For Shared-Loss Securities, Book Value means the value of the security provided in the Information Package.

"Business Day" means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws of the State where the Failed Bank is located, or a day on which the principal office of the Corporation is closed.

"Chartering Authority" means (i) with respect to a national bank, the Office of the Comptroller of the Currency, (ii) with respect to a Federal savings association or savings bank, the Office of Thrift Supervision, (iii) with respect to a bank or savings institution chartered by a State, the agency of such State charged with primary responsibility for regulating and/or closing banks or savings institutions, as the case may be, (iv) the Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to self appointment, or (v) the appropriate Federal banking agency in accordance with 12 U.S.C. 1821(c)(9).

"Commitment" means the unfunded portion of a line of credit or other commitment reflected on the books and records of the Failed Bank to make an extension of credit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of Bank Closing, other than extensions of credit pursuant to the credit card business and overdraft protection plans of the Failed Bank, if any.

"Credit Documents" mean the agreements, instruments, certificates or other documents at any time evidencing or otherwise relating to, governing or executed in connection with or as security for, a Loan, including without limitation notes, bonds, loan agreements, letter of credit applications, lease financing contracts, banker's acceptances, drafts, interest protection agreements, currency exchange agreements, repurchase agreements, reverse repurchase agreements, guarantees, deeds of trust, mortgages, assignments, security agreements, pledges, subordination or priority agreements, lien priority agreements, undertakings, security instruments, certificates, documents, legal opinions, participation agreements and intercreditor agreements, and all amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.

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"Credit File" means all Credit Documents and all other credit, collateral, or insurance documents in the possession or custody of the Assuming Institution, or any of its Subsidiaries or Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies of any thereof.

"Data Processing Equipment" means any equipment, computer hardware, or computer software (and the lease or licensing agreements related thereto) other than Personal Computers, owned or leased by the Failed Bank at Bank Closing, which is, was, or could have been used by the Failed Bank in connection with data processing activities.

"Deposit" means a deposit as defined in 12 U.S.C. Section 1813(l), including without limitation, outstanding cashier's checks and other official checks and all uncollected items included in the depositors' balances and credited on the books and records of the Failed Bank; provided, that the term "Deposit" shall not include all or any portion of those deposit balances which, in the discretion of the Receiver or the Corporation, (i) may be required to satisfy it for any liquidated or contingent liability of any depositor arising from an unauthorized or unlawful transaction, or (ii) may be needed to provide payment of any liability of any depositor to the Failed Bank or the Receiver, including the liability of any depositor as a director or officer of the Failed Bank, whether or not the amount of the liability is or can be determined as of Bank Closing.

"Deposit Secured Loan" means a loan in which the only collateral securing the loan is Assumed Deposits or deposits at other insured depository institutions

"Electronically Stored Information" means any system backup tapes, any electronic mail (whether on an exchange or other similar system), any data on personal computers and any data on server hard drives.

"Failed Bank Advances" means the total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay ad valorem taxes and hazard insurance, and (iii) pay credit life insurance, accident and health insurance, and vendor's single interest insurance.

"Fair Market Value" means (i)(a) "Market Value" as defined in the regulation prescribing the standards for real estate appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and accordingly shall mean the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and

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(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale;

as determined as of Bank Closing by an appraiser chosen by the Assuming Institution from a list of acceptable appraisers provided by the Receiver; any costs and fees associated with such determination shall be shared equally by the Receiver and the Assuming Institution, and (b) which, with respect to Bank Premises (to the extent, if any, that Bank Premises are purchased utilizing this valuation method), shall be determined not later than sixty (60) days after Bank Closing by an appraiser selected by the Receiver and the Assuming Institution within seven (7) days after Bank Closing; or (ii) with respect to property other than Bank Premises purchased utilizing this valuation method, the price therefore as established by the Receiver and agreed to by the Assuming Institution, or in the absence of such agreement, as determined in accordance with clause (i)(a) above.

"Fixtures" means those leasehold improvements, additions, alterations and installations constituting all or a part of Bank Premises and which were acquired, added, built, installed or purchased at the expense of the Failed Bank, regardless of the holder of legal title thereto as of Bank Closing.

"Furniture and Equipment" means the furniture and equipment (other than Safe Deposit Boxes, motor vehicles, Personal Computers, and Data Processing Equipment), leased or owned by the Failed Bank and reflected on the books of the Failed Bank as of Bank Closing and located on or at Bank Premises, including without limitation automated teller machines, carpeting, furniture, office machinery, shelving, office supplies, telephone, surveillance and security systems, ancillary equipment, and artwork. Furniture and equipment located at a storage facility not adjacent to a Bank Premises are excluded from this definition.

"Indemnitees" means, except as provided in paragraph (11) of Section 12.1(b), (i) the Assuming Institution, (ii) the Subsidiaries and Affiliates of the Assuming Institution other than any Subsidiaries or Affiliates of the Failed Bank that are or become Subsidiaries or Affiliates of the Assuming Institution, and (iii) the directors, officers, employees and agents of the Assuming Institution and its Subsidiaries and Affiliates who are not also present or former directors, officers, employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank.

"Information Package" means the most recent compilation of financial and other data with respect to the Failed Bank, including any amendments or supplements thereto, provided to the Assuming Institution by the Corporation on the web site used by the Corporation to market the Failed Bank to potential acquirers.

"Initial Payment" means the payment made pursuant to Article VII (based on the best information available as of the Bank Closing Date), the amount of which shall be either (i) if the Bid Amount is positive, the aggregate Book Value of the Liabilities Assumed minus the sum of the aggregate purchase price of the Assets and assets purchased and the positive Bid Amount, or (ii) if the Bid Amount is negative, the sum of the aggregate Book Value of the Liabilities

5

Assumed and the negative Bid Amount minus the aggregate purchase price of the Assets and assets purchased.  The Initial Payment shall be payable by the Corporation to the Assuming Institution if (i) the Liabilities Assumed are greater than the sum of the positive Bid Amount and the Assets and assets purchased, or if (ii) the sum of the Liabilities Assumed and the negative Bid Amount are greater than the Assets and assets purchased. The Initial Payment shall be payable by the Assuming Institution to the Corporation if (i) the Liabilities Assumed are less than the sum of the positive Bid Amount and the Assets and assets purchased, or if (ii) the sum of the Liabilities Assumed and the negative Bid Amount is less than the Assets and assets purchased. Such Initial Payment shall be subject to adjustment as provided in Article VIII.

"Legal Balance" means the amount of indebtedness legally owed by an Obligor with respect to a Loan, including principal and accrued and unpaid interest, late fees, attorneys' fees and expenses, taxes, insurance premiums, and similar charges, if any.

"Liabilities Assumed" has the meaning provided in Section 2.1.

"Lien" means any mortgage, lien, pledge, charge, assignment for security purposes, security interest, or encumbrance of any kind with respect to an Asset, including any conditional sale agreement or capital lease or other title retention agreement relating to such Asset.

"Loans" means all of the following owed to or held by the Failed Bank as ofBank Closing:

(i) loans (including loans which have been charged off the Accounting Records of the Failed Bank in whole or in part prior to and including the Bid Valuation Date), participation agreements, interests in participations, overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a deposit account), revolving commercial lines of credit, home equity lines of credit, Commitments, United States and/or State-guaranteed student loans, and lease financing contracts;

(ii) all Liens, rights (including rights of set-off), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (i) above, including but not limited to those arising under or based upon Credit Documents, casualty insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds at any time and from time to time existing with respect to any of the obligations or instruments referred to in clause (i) above; and

(iii) all amendments, modifications, renewals, extensions, refinancings, and refundings of or for any of the foregoing.

"Obligor" means each Person liable for the full or partial payment or performance of any Loan, whether such Person is obligated directly, indirectly, primarily, secondarily, jointly, or severally.

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"Other Real Estate" means all interests in real estate (other than Bank Premises and Fixtures), including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights that are owned by the Failed Bank.

"Payment Date" means the first Business Day after the Bank Closing Date.

"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof, excluding the Corporation.

"Personal Computer(s)" means computers based on a microprocessor generally designed to be used by one person at a time and which usually store informational data on that computer's internal hard drive or attached peripheral.  A personal computer can be found in various configurations such as laptops, net books, and desktops.

"Primary Indemnitor" means any Person (other than the Assuming Institution or any of its Affiliates) who is obligated to indemnify or insure, or otherwise make payments (including payments on account of claims made against) to or on behalf of any Person in connection with the claims covered under Article XII, including without limitation any insurer issuing any directors and officers liability policy or any Person issuing a financial institution bond or banker's blanket bond.

"Pro forma" means producing a balance sheet that reflects a reasonably accurate financial statement of the Failed bank through the date of closing. The pro forma financial statements serve as a basis for the opening entries of both the Assuming Institution and the Receiver.

"Put Date" has the meaning provided in Section 3.4.

"Put Notice" has the meaning provided in Section 3.4.

"Qualified Financial Contract" means a qualified financial contract as defined in 12 U.S.C. Section 1821(e)(8)(D).

"Record" means any document, microfiche, microfilm and Electronically Stored Information (including but not limited to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank generated or maintained by the Failed Bank that is owned by or in the possession of the Receiver at Bank Closing.

"Related Liability" with respect to any Asset means any liability existing and reflected on the Accounting Records of the Failed Bank as of Bank Closing for (i) indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting such Asset, (ii) ad valorem taxes applicable to such Asset, and (iii) any other obligation determined by the Receiver to be directly related to such Asset.

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"Related Liability Amount" with respect to any Related Liability on the books of the Assuming Institution, means the amount of such Related Liability as stated on the Accounting Records of the Assuming Institution (as maintained in accordance with generally accepted accounting principles) as of the date as of which the Related Liability Amount is being determined. With respect to a liability that relates to more than one asset, the amount of such Related Liability shall be allocated among such assets for the purpose of determining the Related Liability Amount with respect to any one of such assets. Such allocation shall be made by specific allocation, where determinable, and otherwise shall be pro rata based upon the dollar amount of such assets stated on the Accounting Records of the entity that owns such asset.

"Repurchase Price" means, with respect to any Loan, first taking the Book Value of the Asset at Bank Closing and either subtracting the Asset discount or adding the Asset premium, and subsequently adjusting that total by (i) adding any advances and interest on such Loan after Bank Closing, (ii) subtracting the total amount received by the Assuming Institution for such Loan after Bank Closing, regardless of how applied, and (iii) adding total disbursements of principal made by Receiver not otherwise included in the Book Value.

"Safe Deposit Boxes" means the safe deposit boxes of the Failed Bank, if any, including the removable safe deposit boxes and safe deposit stacks in the Failed Bank's vault(s), all rights and benefits under rental agreements with respect to such safe deposit boxes, and all keys and combinations thereto.

"Settlement Date" means the first Business Day immediately prior to the day which is three hundred sixty-five (365) days after Bank Closing, or such other date prior thereto as may be agreed upon by the Receiver and the Assuming Institution. The Receiver, in its discretion, may extend the Settlement Date.

"Settlement Interest Rate" means, for the first calendar quarter or portion thereof during which interest accrues, the rate determined by the Receiver to be equal to the Investment Rate on twenty-six (26)-week United States Treasury Bills as published the week of Bank Closing by the United States Treasury on the TreasuryDirect.gov website; provided, that if no such Investment Rate is published the week of Bank Closing, the Investment Rate for such Treasury Bills most recently published by the United States Treasury on TreasuryDirect.gov prior to Bank Closing shall be used. Thereafter, the rate shall be adjusted to the rate determined by the Receiver to be equal to the Investment Rate on such Treasury Bills in effect as of the first day of each succeeding calendar quarter during which interest accrues as published by The United States Treasury on the TreasuryDirect.gov website.

"Shared-Loss Securities" means those securities and other assets listed on Schedule 4.15C.

"Subsidiary" has the meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(w)(4), as amended.

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ARTICLE II

ASSUMPTION OF LIABILITIES

2.1Liabilities Assumed by Assuming Institution. The Assuming Institution expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge all of the following liabilities of the Failed Bank as of Bank Closing, except as otherwise provided in this Agreement (such liabilities referred to as "Liabilities Assumed"):

(a)Assumed Deposits, except those Deposits specifically listed on Schedule 2.1(a); provided, that as to any Deposits of public money which are Assumed Deposits, the Assuming Institution agrees to properly secure such Deposits with such Assets as appropriate which, prior to Bank Closing, were pledged as security by the Failed Bank, or with assets of the Assuming Institution, if such securing Assets, if any, are insufficient to properly secure such Deposits;

(b)liabilities for indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting any Assets, if any; provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(c)borrowings from Federal Reserve Banks and Federal Home Loan Banks, if any, provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the assets securing such liability as determined by the Receiver; and overdrafts, debit balances, service charges, reclamations, and adjustments to accounts with the Federal Reserve Banks as reflected on the books and records of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if any;

(d)ad valorem taxes applicable to any Asset, if any; provided, that the assumption of any ad valorem taxes pursuant to this paragraph shall be limited to an amount equal to the market value of the Asset to which such taxes apply as determined by the Receiver;

(e)liabilities, if any, for federal funds purchased, repurchase agreements and overdrafts in accounts maintained with other depository institutions (including any accrued and unpaid interest thereon computed to and including Bank Closing); provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(f)United States Treasury tax and loan note option accounts, if any;

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(g)liabilities for any acceptance or commercial letter of credit provided, that the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(h)liabilities for any "standby letters of credit" as defined in 12 C.F.R. Section 337.2(a) issued on the behalf of any Obligor of a Loan acquired hereunder by the Assuming Institution, but excluding any other standby letters of credit;

(i)duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank's Records, credit card business, debit card business, stored value and gift card business, overdraft protection plans, safe deposit business, safekeeping business, or trust business, if any; and

(j)liabilities, if any, for Commitments;

(k)liabilities, if any, for amounts owed to any Subsidiary of the Failed Bank acquired under Section 3.1;

(l)liabilities, if any, with respect to Qualified Financial Contracts;

(m)liabilities, if any, under any contract pursuant to which mortgage servicing is provided to the Failed Bank by others; and

(n)all asset-related offensive litigation liabilities and all asset-related defensive litigation liabilities, but only to the extent such liabilities relate to assets subject to a shared-loss agreement, and provided that all other defensive litigation and any class actions with respect to credit card business are retained by the Receiver. 

2.2Interest on Deposit Liabilities. The Assuming Institution agrees that, from and after Bank Closing, it will accrue and pay interest on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it shall determine; provided, that for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Institution to its depositors for non-transaction deposit accounts. The Assuming Institution shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor's Deposit, whether or not the Assuming Institution elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, that if such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Institution shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay and of such withdrawal rights.

2.3Unclaimed Deposits. Fifteen (15) months following the Bank Closing Date, the Assuming Institution will provide the Receiver a listing of all deposit accounts, including the type of account, not claimed by the depositor. The Receiver will review the list and authorize

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the Assuming Institution to act on behalf of the Receiver to send a "Final Legal Notice" in a form substantially similar to Exhibit 2.3A to the owner(s) of the unclaimed deposits reminding them of the need to claim or arrange to continue their account(s) with the Assuming Institution. The Assuming Institution will send the "Final Legal Notice" to the depositors within thirty (30) days following notification of the Receiver's authorization.  The Assuming Institution will prepare an Affidavit of Mailing and will forward the Affidavit of Mailing to the Receiver after mailing out the "Final Legal Notice" in a form substantially similar to Exhibit 2.3B to the owner(s) of unclaimed deposit accounts.

If, within eighteen (18) months after Bank Closing, any depositor of the Failed Bank does not claim or arrange to continue such depositor's Deposit assumed pursuant to Section 2.1 at the Assuming Institution, the Assuming Institution shall, within fifteen (15) Business Days after the end of such eighteen (18) month period, (i) refund to the Receiver the full amount of each such deposit (without reduction for service charges), (ii) provide to the Receiver a schedule of all such refunded Deposits in such form as may be prescribed by the Receiver, and (iii) assign, transfer, convey, and deliver to the Receiver, all right, title, and interest of the Assuming Institution in and to the Records previously transferred to the Assuming Institution and other records generated or maintained by the Assuming Institution pertaining to such Deposits. During such eighteen (18) month period, at the request of the Receiver, the Assuming Institution promptly shall provide to the Receiver schedules of unclaimed deposits in such form as may be prescribed by the Receiver.

2.4Employee Plans. Except as provided in Section 4.12, the Assuming Institution shall have no liabilities, obligations or responsibilities under the Failed Bank's health care, bonus, vacation, pension, profit sharing, deferred compensation, 401K or stock purchase plans or similar plans, if any, unless the Receiver and the Assuming Institution agree otherwise subsequent to the date of this Agreement.

ARTICLE III

PURCHASE OF ASSETS

3.1Assets Purchased by Assuming Institution. With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Institution hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Institution, all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Assets are purchased hereunder by the Assuming Institution subject to all liabilities for indebtedness collateralized by Liens affecting such Assets to the extent provided in Section 2.1.

3.2Asset Purchase Price.

(a)All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Institution shall be purchased for the amount, or the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be

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provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank before the Bid Valuation Date shall be purchased at a price of zero.

(b)The purchase price for securities (other than the capital stock of any Acquired Subsidiary, Shared-Loss Securities, and FHLB stock) purchased under Section 3.1 by the Assuming Institution shall be the market value thereof as of Bank Closing, which market value shall be (i) the market price for each such security quoted at the close of the trading day effective on Bank Closing as published electronically by Bloomberg, L.P., or alternatively, at the discretion of the Receiver, IDC/Financial Times (FT) Interactive Data; (ii) provided, that if such market price is not available for any such security, the Assuming Institution will submit a bid for each such security within three days of notification/bid request by the Receiver (unless a different time period is agreed to by the Assuming Institution and the Receiver) and the Receiver, in its sole discretion will accept or reject each such bid; and (iii) further provided in the absence of an acceptable bid from the Assuming Institution, each such security shall not pass to the Assuming Institution and shall be deemed to be an excluded asset hereunder.

(c)Qualified Financial Contracts shall be purchased at market value determined in accordance with the terms of Exhibit 3.2(c). Any costs associated with such valuation shall be shared equally by the Receiver and the Assuming Institution.

3.3Manner of Conveyance; Limited Warranty; Nonrecourse; Etc.THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING INSTITUTION UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER'S DEED OR RECEIVER'S BILL OF SALE, "AS IS", "WHERE IS", WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.

3.4Puts of Assets to the Receiver.

(a)Puts Within 30 Days After Bank Closing. During the thirty (30)-day period following Bank Closing and only during such period (which thirty (30)-day period may be extended in writing in the sole absolute discretion of the Receiver for any Loan), in accordance with this Section 3.4, the Assuming Institution shall be entitled to require the Receiver to purchase any Deposit Secured Loan transferred to the Assuming Institution pursuant to Section 3.1 which is not fully secured by Assumed Deposits or deposits at other insured depository institutions due to either insufficient Assumed Deposit or deposit collateral or deficient documentation regarding such collateral;  provided with regard to any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be required until any Deposit setoff determination, whether voluntary or involuntary, has been made; and,

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at the end of the thirty (30)-day period following Bank Closing and at that time only, in accordance with this Section 3.4, the Assuming Institution shall be entitled to require the Receiver to purchase any remaining overdraft transferred to the Assuming Institution pursuant to 3.1 which both was made after the Bid Valuation Date and was not made pursuant to an overdraft protection plan or similar extension of credit.

Notwithstanding the foregoing, the Assuming Institution shall not have the right to require the Receiver to purchase any Loan if (i) the Obligor with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming Institution has:

(A)made any advance in accordance with the terms of a Commitment or otherwise with respect to such Loan;

(B)taken any action that increased the amount of a Related Liability with respect to such Loan over the amount of such liability immediately prior to the time of such action;

(C)created or permitted to be created any Lien on such Loan which secures indebtedness for money borrowed or which constitutes a conditional sales agreement, capital lease or other title retention agreement;

(D)entered into, agreed to make, grant or permit, or made, granted or permitted any modification or amendment to, any waiver or extension with respect to, or any renewal, refinancing or refunding of, such Loan or related Credit Documents or collateral, including, without limitation, any act or omission which diminished such collateral; or

(E)sold, assigned or transferred all or a portion of such Loan to a third party (whether with or without recourse).

The Assuming Institution shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset, as provided in Section 12.4.

(b)Puts Prior to the Settlement Date. During the period from the Bank Closing Date to and including the Business Day immediately preceding the Settlement Date, the Assuming Institution shall be entitled to require the Receiver to purchase any Asset which the Assuming Institution can establish is evidenced by forged or stolen instruments as of the Bank Closing Date; provided, that, the Assuming Institution shall not have the right to require the Receiver to purchase any such Asset with respect to which the Assuming Institution has taken any action referred to in Section 3.4(a)(ii) with respect to such Asset. The Assuming Institution shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset, as provided in Section 12.4.

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(c)Notices to the Receiver. In the event that the Assuming Institution elects to require the Receiver to purchase one or more Assets, the Assuming Institution shall deliver to the Receiver a notice (a "Put Notice") which shall include:

(i)a list of all Assets that the Assuming Institution requires the Receiver to purchase;

(ii)a list of all Related Liabilities with respect to the Assets identified pursuant to (i) above; and

(iii)a statement of the estimated Repurchase Price of each Asset identified pursuant to (i) above as of the applicable Put Date.

Such notice shall be in the form prescribed by the Receiver or such other form to which the Receiver shall consent. As provided in Section 9.6, the Assuming Institution shall deliver to the Receiver such documents, Credit Files and such additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide to the Receiver full access to all other relevant books and records.

(d)Purchase by Receiver. The Receiver shall purchase Assets that are specified in the Put Notice and shall assume Related Liabilities with respect to such Assets, and the transfer of such Assets and Related Liabilities shall be effective as of a date determined by the Receiver which date shall not be later than thirty (30) days after receipt by the Receiver of the Put Notice (the "Put Date").

(e)Purchase Price and Payment Date.  Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Asset less the Related Liability Amount applicable to such Asset, in each case determined as of the applicable Put Date. If the difference between such Repurchase Price and such Related Liability Amount is positive, then the Receiver shall pay to the Assuming Institution the amount of such difference; if the difference between such amounts is negative, then the Assuming Institution shall pay to the Receiver the amount of such difference. The Assuming Institution or the Receiver, as the case may be, shall pay the purchase price determined pursuant to this Section 3.4(d) not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including the day preceding the date upon which payment is made.

(f)Servicing. The Assuming Institution shall administer and manage any Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until such time as such Asset is purchased by the Receiver.

(g)Reversals. In the event that the Receiver purchases an Asset (and assumes the Related Liability) that it is not required to purchase pursuant to this Section 3.4, the Assuming Institution shall repurchase such Asset (and assume such Related Liability) from the Receiver at

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a price computed so as to achieve the same economic result as would apply if the Receiver had never purchased such Asset pursuant to this Section 3.4.

3.5Assets Not Purchased by Assuming Institution. The Assuming Institution does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:

(a)any financial institution bonds, banker’s blanket bonds, or public liability, fire, extended coverage insurance policy, bank owned life insurance or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;

(b)any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to Bank Closing arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds, banker’s blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss resulting from such Person’s failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank; provided, that for the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have occurred on or before Bank Closing, regardless of when any such claim is discovered and regardless of whether any such claim is made with respect to a financial institution bond, banker’s blanket bond, or any other insurance policy of the Failed Bank in force as of Bank Closing;

(c)prepaid regulatory assessments of the Failed Bank, if any;

(d)legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;

(e)amounts reflected on the Accounting Records of the Failed Bank as of Bank Closing as a general or specific loss reserve or contingency account, if any;

(f)leased or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures and Data Processing Equipment located on leased or owned Bank Premises, if any; provided,  that the Assuming Institution does obtain an option under Section 4.6,  Section 4.7  or Section 4.8,  as the case may be, with respect thereto;

(g)owned Bank Premises which the Receiver, in its discretion, determines may contain environmentally hazardous substances;

(h)any “goodwill,” as such term is defined in the instructions to the report of condition prepared by banks examined by the Corporation in accordance with 12 C.F.R.  Section 304.3,  and other intangibles (other than intellectual property);

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(i)any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j)reserved;

(k)assets essential to the Receiver in accordance with Section 3.6;

(l)the securities listed on the attached Schedule 3.5(l);

(m)reserved;

(n)prepaid accounts associated with any contract or agreement that the Assuming Institution either does not directly assume pursuant to the terms of this Agreement nor has an option to assume under Section 4.8; and

(o)any contract pursuant to which the Failed Bank provides mortgage servicing for others.

3.6 Retention or Repurchase of Assets Essential to Receiver.

(a)The Receiver may refuse to sell to the Assuming Institution, or the Assuming Institution agrees, at the request of the Receiver set forth in a written notice to the Assuming Institution, to assign, transfer, convey, and deliver to the Receiver all of the Assuming Institution’s right, title and interest in and to, any Asset or asset essential to the Receiver as determined by the Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Asset or asset that the Receiver determines to be:

(i)made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;

(ii)the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;

(iii)made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;

(iv)secured by collateral which also secures any asset owned by the Receiver; or

(v)related to any asset of the Failed Bank not purchased by the Assuming Institution under this Article III or any liability of the Failed Bank not assumed by the Assuming Institution under Article II.

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(b)Each such Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Asset or asset, in each case determined as of the date of the notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming Institution not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the date of receipt of such documents to and including the day preceding the day on which payment is made. The Assuming Institution agrees to administer and manage each such Asset or asset in accordance with usual and prudent banking standards and business practices until each such Asset or asset is purchased by the Receiver. All transfers with respect to Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Institution shall transfer all such Asset or assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset or asset, as provided in Section 12.4.

3.7Receiver’s Offer to Sell Withheld Loans.  For the period of 30 days commencing the day after the Bank Closing Date, the Receiver may sell, in its sole discretion, and the Assuming Institution, may purchase, in its sole discretion, at Book Value as of the Bank Closing Date, any Loans initially withheld from sale to the Assuming Institution pursuant to Sections 3.5 or 3.6 of this Agreement. Except for the sales price, Loans sold under this section will be treated as if initially sold under Section 3.1 of this Agreement, and will be subject to all relevant terms of this Agreement as similarly situated Loans sold and transferred pursuant to this Agreement, provided that, no Loan shall be a Shared Loss Loan pursuant to the Shared Loss Agreements as defined in Section 4.15 hereof if it does not meet the definition of Shared Loss Loan in the applicable Shared Loss Agreement. Payment for Loans sold under this section will be handled through the Settlement process.

ARTICLE IV

ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS

The Assuming Institution agrees with the Receiver and the Corporation as follows:

4.1Continuation of Banking Business. For the period commencing the first banking Business Day after Bank Closing and ending no earlier than the first anniversary of Bank Closing, the Assuming Institution will provide full service banking in the trade area of the Failed Bank. Thereafter, the Assuming Institution may cease providing such banking services in the trade area of the Failed Bank, provided the Assuming Institution has received all necessary regulatory approvals. At the option of the Assuming Institution, such banking services may be provided at any or all of the Bank Premises, or at other premises within such trade area. The trade area shall be determined by the Receiver. For the avoidance of doubt, the foregoing shall not restrict the Assuming Institution from opening, closing or selling branches upon receipt of the necessary regulatory approvals, if the Assuming Institution or its successors continue to provide banking services in the trade area. Assuming Institution will pay to the Receiver, upon the sale of a branch or branches within the year following the date of this agreement, fifty

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percent (50%) of any franchise premium in excess of the franchise premium paid by the Assuming Institution with respect to such branch or branches.

4.2Agreement with Respect to Credit Card Business. The Assuming Institution agrees to honor and perform, from and after Bank Closing, all duties and obligations with respect to the Failed Bank’s credit card business (including issuer or merchant acquirer) debit card business, stored value and gift card business, and/or processing related to credit cards, if any, and assumes all outstanding extensions of credit or balances with respect to these lines of business.

4.3Agreement with Respect to Safe Deposit Business. The Assuming Institution assumes and agrees to discharge, from and after Bank Closing, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefore paid to the Failed Bank, subject to the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes; provided, that the Assuming Institution may relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Institution located in the trade area of the Failed Bank. The Safe Deposit Boxes shall be located and maintained in the trade area of the Failed Bank for a minimum of one year from Bank Closing. The trade area shall be determined by the Receiver. Fees related to the safe deposit business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Institution.

4.4Agreement with Respect to Safekeeping Business. The Receiver transfers, conveys and delivers to the Assuming Institution and the Assuming Institution accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of Bank Closing. The Assuming Institution assumes and agrees to honor and discharge, from and after Bank Closing, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Institution shall be entitled to all rights and benefits heretofore accrued or hereafter accruing with respect thereto. The Assuming Institution shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The assets held for safekeeping by the Failed Bank shall be held and maintained by the Assuming Institution in the trade area of the Failed Bank for a minimum of one year from Bank Closing. At the option of the Assuming Institution, the safekeeping business may be provided at any or all of the Bank Premises, or at other premises within such trade area. The trade area shall be determined by the Receiver. Fees related to the safekeeping business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Institution.

4.5Agreement with Respect to Trust Business.

(a)The Assuming Institution shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all

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to the same extent as though the Assuming Institution had assumed the same from the Failed Bank prior to Bank Closing; provided, that any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business is not assumed hereunder.

(b)The Assuming Institution shall, to the full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills, whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.

(c)In the event additional proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Institution agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use reasonable efforts to assist the Assuming Institution in accomplishing such transfer.

(d)The Assuming Institution shall provide to the Receiver written verification of the assets held in connection with the Failed Bank’s trust business within sixty (60) days after Bank Closing.

4.6Agreement with Respect to Bank Premises.

(a)Option to Purchase. Subject to Section 3.5, the Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to purchase any or all owned Bank Premises, including all Fixtures, Furniture and Equipment located on the Bank Premises. The Assuming Institution shall give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such premises shall be effective as of the date of Bank Closing and such purchase shall be consummated as soon as practicable thereafter, and in no event later than the Settlement Date. If the Assuming Institution gives notice of its election not to purchase one or more of the owned Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs or fees associated with appraisals for such Bank Premises and associated Fixtures, Furniture and Equipment.

(b)Option to Lease. The Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to cause the Receiver to assign to the Assuming Institution any or all leases for leased Bank Premises, if any, which have been continuously occupied by the Assuming Institution from Bank Closing to the date it elects to accept an assignment of the leases with respect thereto to the extent such leases can be assigned; provided, that the exercise of this option with respect to any lease must be as to all premises or other property subject to the lease. If an assignment cannot be made of any such leases, the Receiver may, in its discretion, enter into subleases with the Assuming Institution containing the same terms and conditions provided under such existing leases for such leased Bank Premises or other property. The Assuming Institution shall give notice to the Receiver within the option period of its election to accept or not to accept an

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assignment of any or all leases (or enter into subleases or new leases in lieu thereof). The Assuming Institution agrees to assume all leases assigned (or enter into subleases or new leases in lieu thereof) pursuant to this Section 4.6. If the Assuming Institution gives notice of its election not to accept an assignment of a lease for one or more of the leased Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs or fees associated with appraisals for the Fixtures, Furniture and Equipment located on such leased Bank Premises.

(c)Facilitation. The Receiver agrees to facilitate the assumption, assignment or sublease of leases or the negotiation of new leases by the Assuming Institution; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d)Occupancy. The Assuming Institution shall give the Receiver fifteen (15) days’ prior written notice of its intention to vacate prior to vacating any leased Bank Premises with respect to which the Assuming Institution has not exercised the option provided in Section 4.6(b) . Any such notice shall be deemed to terminate the Assuming Institution’s option with respect to such leased Bank Premises.

(e)Occupancy Costs.

(i)The Assuming Institution agrees to pay to the Receiver, or to appropriate third parties at the direction of the Receiver, during and for the period of any occupancy by it of (x) owned Bank Premises the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (y) leased Bank Premises, all operating costs with respect thereto and to comply with all relevant terms of applicable leases entered into by the Failed Bank, including without limitation the timely payment of all rent. Operating costs include, without limitation all taxes, fees, charges, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Institution elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid (and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Institution assumes liability) by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.

(ii)The Assuming Institution agrees during the period of occupancy by it of owned or leased Bank Premises, to pay to the Receiver rent for the use of all owned or leased Furniture and Equipment and all owned or leased Fixtures located on such Bank Premises for the period of such occupancy. Rent for such property owned by the Failed Bank shall be the market rental value thereof, as determined by the Receiver within sixty (60) days after Bank Closing. Rent for such leased property shall be an amount equal to any and all rent and other amounts which the Receiver incurs or accrues as an obligation or is obligated to pay for such period of occupancy pursuant to all leases and contracts with respect to such property. If the Assuming Institution purchases any owned Furniture and Equipment or owned Fixtures in accordance with

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Section 4.6(f) or 4.6(h), the amount of any rents paid by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.

(f)Certain Requirements as to Fixtures, Furniture and Equipment. If the Assuming Institution purchases owned Bank Premises or accepts an assignment of the lease (or enters into a sublease or a new lease in lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the Assuming Institution does not exercise such option but within twelve (12) months following Bank Closing obtains the right to occupy such premises (whether by assignment, lease, sublease, purchase or otherwise), other than in accordance with Section 4.6(a) or (b), the Assuming Institution shall (i) effective as of the date of Bank Closing, purchase from the Receiver all Fixtures, Furniture and Equipment owned by the Failed Bank at Fair Market Value and located thereon as of Bank Closing, (ii) accept an assignment or a sublease of the leases or negotiate new leases for all Fixtures, Furniture and Equipment leased by the Failed Bank and located thereon, and (iii) if applicable, accept an assignment or a sublease of any ground lease or negotiate a new ground lease with respect to any land on which such Bank Premises are located; provided, that the Receiver shall not have disposed of such Fixtures, Furniture and Equipment or repudiated the leases specified in clause (ii) or (iii).

(g)Vacating Premises.

(i)If the Assuming Institution elects not to purchase any owned Bank Premises, the notice of such election in accordance with Section 4.6(a) shall specify the date upon which the Assuming Institution’s occupancy of such premises shall terminate, which date shall not be later than ninety (90) days after the date of the Assuming Institution’s notice not to exercise such option. The Assuming Institution shall promptly be responsible for relinquishing and releasing to the Receiver such premises and the Fixtures, Furniture and Equipment located thereon which existed at the time of Bank Closing, in the same condition as at Bank Closing and at the premises where it was inventoried at Bank Closing, normal wear and tear excepted. Any of the aforementioned which is missing will be charged to the Assuming Institution at the item’s Fair Market Value as set out in accordance with this Agreement.  By occupying any such premises after the expiration of such ninety (90)-day period, the Assuming Institution shall, at the Receiver’s option, (x) be deemed to have agreed to purchase such Bank Premises, and to assume all leases, obligations and liabilities with respect to leased Furniture and Equipment and leased Fixtures located thereon and any ground lease with respect to the land on which such premises are located, and (y) be required to purchase all Fixtures, Furniture and Equipment owned by the Failed Bank and located on such premises as of Bank Closing.

(ii)If the Assuming Institution elects not to accept an assignment of the lease or sublease any leased Bank Premises, the notice of such election in accordance with Section 4.6(b) shall specify the date upon which the Assuming Institution’s occupancy of such leased Bank Premises shall terminate, which date shall not be later than ninety (90) days after the date of the Assuming Institution’s notice not to exercise such option. Upon vacating such premises, the Assuming Institution shall be liable for relinquishing and releasing to the Receiver such premises and the Fixtures, Furniture and Equipment located thereon which existed at the time of Bank Closing, in the same condition as at Bank Closing, and at the premises where it was inventoried at Bank closing, normal wear and tear excepted. Any of the aforementioned which is

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missing will be charged to the Assuming Institution at the item’s Fair Market Value as set out in accordance with this Agreement.  By failing to provide notice of its intention to vacate such premises prior to the expiration of the option period specified in Section 4.6(b), or by occupying such premises after the one hundred eighty (180)-day period specified above in this paragraph (ii), the Assuming Institution shall, at the Receiver’s option, (x) be deemed to have assumed all leases, obligations and liabilities with respect to such premises (including any ground lease with respect to the land on which premises are located), and leased Furniture and Equipment and leased Fixtures located thereon in accordance with this Section 4.6 (unless the Receiver previously repudiated any such lease), and (y) be required to purchase all Fixtures, Furniture and Equipment owned by the Failed Bank at Fair Market Value and located on such premises as of Bank Closing.

(h)Furniture and Equipment and Certain Other Equipment. The Receiver hereby grants to the Assuming Institution an option to purchase all Furniture and Equipment and/or all telecommunications and check processing equipment owned by the Failed Bank at Fair Market Value and located at any leased Bank Premises that the Assuming Institution elects to vacate or which it could have, but did not occupy, pursuant to this Section 4.6; provided, that, the Assuming Institution shall give the Receiver notice of its election to purchase such property at the time it gives notice of its intention to vacate such Bank Premises or within ten (10) days after Bank Closing for Bank Premises it could have, but did not, occupy.

(i)Option to Put Bank Premises and Related Fixtures, Furniture and Equipment.

(i)For a period of ninety (90) days following Bank Closing, the Assuming Institution shall be entitled to require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an Acquired Subsidiary and the purchase price paid by the Receiver shall be the Fair Market Value of the Bank Premises.

(ii)If the Assuming Institution elects to require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an Acquired Subsidiary, the Assuming Institution shall also have the option, exercisable within the same ninety (90) day time period, to require the Receiver to purchase any Fixtures, Furniture and Equipment that is owned, directly or indirectly, by an Acquired Subsidiary and which is located on such Bank Premises.  The purchase price paid by the Receiver shall be the Fair Market Value of the Fixtures, Furniture and Equipment.

(iii)In the event the Assuming Institution elects to exercise its option under this subparagraph, the Assuming Institution shall pay to the Receiver occupancy costs in accordance with Section 4.6(e) and shall vacate the Bank Premises in accordance with Section 4.6(g)(i).

(iv)Regardless of whether the Assuming Institution exercises any of its option under this subparagraph, the purchase price for the Acquired Subsidiary shall be adjusted by the difference between the Fair Market Value of the Bank Premises and Fixtures, Furniture and Equipment and their respective Book Value as reflected of the books and records of the Acquired

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Subsidiary. Such adjustment shall be made in accordance with Article VIII of this Agreement.

4.7Agreement with Respect to Data Processing Equipment and Leases

(a)The Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to: (i) accept an assignment from the Receiver of all leased Data Processing Equipment and (ii) purchase at Fair Market Value from the Receiver all owned Data Processing Equipment.  The Assuming Institution’s election under this option applies to both owned and leased Data Processing Equipment.

(b)The Assuming Institution shall (i) give written notice to the Receiver within the option period specified in Section 4.7(a) of its intent to accept or decline an assignment or sublease of all leased Data Processing Equipment and promptly accept an assignment or sublease of such Data Processing Equipment, (ii) give written notice to the appropriate lessor(s) that it has accepted an assignment or sublease of any such Data Processing Equipment that is subject to a lease, and (iii) give written notice to the Receiver within the option period specified in Section 4.7(a) of its intent to purchase all owned Data Processing Equipment and promptly pay the Receiver for the purchase of such Data Processing Equipment.

(c)The Receiver agrees to facilitate the assignment or sublease of Data Processing Leases or the negotiation of new leases or license agreements by the Assuming Institution; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation or make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation.

(d)The Assuming Institution agrees, during its period of use of any Data Processing Equipment, to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of any existing data processing leases entered into by the Failed Bank, including without limitation the timely payment of all rent, taxes, fees, charges, utilities, insurance and assessments.

(e)The Assuming Institution shall, not later than fifty (50) days after giving the notice provided in Section 4.7(b), (i) relinquish and release to the Receiver all Data Processing Equipment, in the same condition as at Bank Closing, normal wear and tear excepted, or (ii) accept an assignment or a sublease of any existing data processing lease or negotiate a new lease or license agreement under this Section 4.7 with respect to leased Data Processing Equipment, and (iii) accept ownership of all Data Processing Equipment purchased from the Receiver.

4.8Agreement with Respect to Certain Existing Agreements.

(a)Subject to the provisions of Section 4.8(b), with respect to agreements existing as of Bank Closing which provide for the rendering of services by or to the Failed Bank, within thirty (30) days after Bank Closing, the Assuming Institution shall give the Receiver written notice specifying whether it elects to assume or not to assume each such agreement. Except as may be otherwise provided in this Article IV, the Assuming Institution agrees to comply with the

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terms of each such agreement for a period commencing on the day after Bank Closing and ending on: (i) in the case of an agreement that provides for the rendering of services by the Failed Bank, the date which is ninety (90) days after Bank Closing, and (ii) in the case of an agreement that provides for the rendering of services to the Failed Bank, the date which is thirty (30) days after the Assuming Institution has given notice to the Receiver of its election not to assume such agreement; provided, that the Receiver can reasonably make such service agreements available to the Assuming Institution. The Assuming Institution shall be deemed by the Receiver to have assumed agreements for which no notification is timely given. The Receiver agrees to assign, transfer, convey, and deliver to the Assuming Institution all right, title and interest of the Receiver, if any, in and to agreements the Assuming Institution assumes hereunder. In the event the Assuming Institution elects not to accept an assignment of any lease (or sublease) or negotiate a new lease for leased Bank Premises under Section 4.6 and does not otherwise occupy such premises, the provisions of this Section 4.8(a) shall not apply to service agreements related to such premises. The Assuming Institution agrees, during the period it has the use or benefit of any such agreement, promptly to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of such agreement.

(b)The provisions of Section 4.8(a) regarding the Assuming Institution’s election to assume or not assume certain agreements shall not apply to (i) agreements pursuant to which the Failed Bank provides mortgage servicing for others or mortgage servicing is provided to the Failed Bank by others, (ii) agreements that are subject to Sections 4.1 through 4.7 and any insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, and (iii) consulting, management or employment agreements, if any, between the Failed Bank and its employees or other Persons. Except as otherwise expressly set forth elsewhere in this Agreement, the Assuming Institution does not assume any liabilities or acquire any rights under any of the agreements described in this Section 4.8(b) .

4.9Informational Tax Reporting. The Assuming Institution agrees to perform all obligations of the Failed Bank with respect to Federal and State income tax informational reporting related to (i) the Assets and the Liabilities Assumed, (ii) deposit accounts that were closed and loans that were paid off or collateral obtained with respect thereto prior to Bank Closing, (iii) miscellaneous payments made to vendors of the Failed Bank, and (iv) any other asset or liability of the Failed Bank, including, without limitation, loans not purchased and Deposits not assumed by the Assuming Institution, as may be required by the Receiver.

4.10Insurance. The Assuming Institution agrees to obtain insurance coverage effective from and after Bank Closing, including public liability, fire and extended coverage insurance acceptable to the Receiver with respect to owned or leased Bank Premises that it occupies, and all owned or leased Furniture and Equipment and Fixtures and leased data processing equipment (including hardware and software) located thereon, in the event such insurance coverage is not already in force and effect with respect to the Assuming Institution as the insured as of Bank Closing. All such insurance shall, where appropriate (as determined by the Receiver), name the Receiver as an additional insured.

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4.11Office Space for Receiver and Corporation.

(a) Office Space for Receiver and Corporation.

(i) For the period commencing on the day following Bank Closing and ending on the one hundred eightieth (180th) day following Bank Closing, the Assuming Institution will provide to the Receiver and the Corporation, without charge, adequate and suitable office space (including parking facilities and vault space), furniture, equipment (including photocopying and telecopying machines), email accounts, network access and technology resources (such as shared drive), and utilities (including local telephone service and fax machines) (collectively, “FDIC Office Space”) at the Bank Premises occupied by the Assuming Institution for the Receiver use in the discharge of their respective functions with respect to the Failed Bank.

(ii) Upon written notice by the Receiver or the Corporation, for the period commencing on the one hundred eighty first (181st) day following Bank Closing and ending no later than the three hundred and sixty-fifth (365th) day following Bank Closing, the Assuming Institution will continue to provide to the Receiver and the Corporation FDIC Office Space at the Bank Premises. During the period from the 181st day following Bank Closing until the day the FDIC and the Corporation vacate FDIC Office Space, the Receiver and the Corporation will pay to the Assuming Institution their respective pro rata share (based on square footage occupied) of (A) the market rental value for the applicable owned Bank Premises or (B) actual rent paid for applicable leased Bank Premises.

(iii) If the Receiver or the Corporation determine that the space provided by the Assuming Institution is inadequate or unsuitable, the Receiver and the Corporation may relocate to other quarters having adequate and suitable FDIC Office Space and the costs of relocation and any rental and utility costs for the balance of the period of occupancy by the Receiver and the Corporation shall be borne by the Assuming Institution.

(b) Certain Payments on behalf of Receiver and Corporation. The Assuming Institution will pay such bills and invoices on behalf of the Receiver and the Corporation as the Receiver or the Corporation may direct for the period beginning on the date of Bank Closing and ending on Settlement Date. The Assuming Institution shall submit its requests for reimbursement of such expenditures pursuant to Article VIII of this Agreement.

4.12Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees of the Failed Bank.

(a)The Assuming Institution agrees to assist the Receiver, as provided in this Section 4.12, in offering individuals who were employees or former employees of the Failed Bank, or any of its Subsidiaries, and who, immediately prior to Bank Closing, were receiving, or were eligible to receive, health insurance coverage or health insurance continuation coverage from the Failed Bank (“Eligible Individuals”), the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan which provides for health insurance continuation coverage to such Eligible Individuals who are qualified beneficiaries of the Failed Bank as

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defined in Section 607 of the Employee Retirement Income Security Act of 1974, as amended (respectively, “qualified beneficiaries” and “ERISA”). The Assuming Institution shall consult with the Receiver and not later than five (5) Business Days after Bank Closing shall provide written notice to the Receiver of the number (if available), identity (if available) and addresses (if available) of the Eligible Individuals who are qualified beneficiaries of the Failed Bank and for whom a “qualifying event” (as defined in Section 603 of ERISA) has occurred and with respect to whom the Failed Bank’s obligations under Part 6 of Subtitle B of Title I of ERISA have not been satisfied in full, and such other information as the Receiver may reasonably require. The Receiver shall cooperate with the Assuming Institution in order to permit it to prepare such notice and shall provide to the Assuming Institution such data in its possession as may be reasonably required for purposes of preparing such notice.

(b)The Assuming Institution shall take such further action to assist the Receiver in offering the Eligible Individuals who are qualified beneficiaries of the Failed Bank the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan as the Receiver may direct. All expenses incurred and paid by the Assuming Institution (i) in connection with the obligations of the Assuming Institution under this Section 4.12, and (ii) in providing health insurance continuation coverage to any Eligible Individuals who are hired by the Assuming Institution and such employees’ qualified beneficiaries shall be borne by the Assuming Institution.

(c)No later than five (5) Business Days after Bank Closing, the Assuming Institution shall provide the Receiver with a list of all Failed Bank employees the Assuming Institution will not hire. Unless otherwise agreed, the Assuming Institution pays all salaries and payroll costs for all Failed Bank Employees until the list is provided to the Receiver.  The Assuming Institution shall be responsible for all costs and expenses (i.e. salary, benefits, etc.) associated with all other employees not on that list from and after the date of delivery of the list to the Receiver.  The Assuming Institution shall offer to the Failed Bank employees it retains employment benefits comparable to those the Assuming Institution offers its current employees.

(d)This Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement, and for the benefit of no other Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee). Nothing in this Section 4.12 is intended by the parties, or shall be construed, to give any Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee) other than the Corporation, the Receiver and the Assuming Institution any legal or equitable right, remedy or claim under or with respect to the provisions of this Section.

4.13Agreement with Respect to Interim Asset Servicing. At any time after Bank Closing, the Receiver may establish on its books an asset pool(s) and may transfer to such asset pool(s) (by means of accounting entries on the books of the Receiver) all or any assets and liabilities of the Failed Bank which are not acquired by the Assuming Institution, including, without limitation, wholly unfunded Commitments and assets and liabilities which may be acquired, funded or originated by the Receiver subsequent to Bank Closing. The Receiver may remove assets (and liabilities) from or add assets (and liabilities) to such pool(s) at any time in its

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discretion. At the option of the Receiver, the Assuming Institution agrees to service, administer, and collect such pool assets in accordance with and for the term set forth in Exhibit 4.13 “Interim Asset Servicing Arrangement”.

4.14Reserved.

4.15Agreement with Respect to Loss Sharing. The Assuming Institution shall be entitled to require reimbursement from the Receiver for loss sharing on certain loans in accordance with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and the Commercial Shared-Loss Agreement attached hereto as Exhibit 4.15B, collectively, the “Shared-Loss Agreements.” The assets that shall be subject to the Shared-Loss Agreements are identified on the Schedules 4.15A through 4.15D, attached hereto.

ARTICLE V

DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK

5.1Payment of Checks, Drafts and Orders. Subject to Section 9.5, the Assuming Institution agrees to pay all properly drawn checks, drafts and withdrawal orders of depositors of the Failed Bank presented for payment, whether drawn on the check or draft forms provided by the Failed Bank or by the Assuming Institution, to the extent that the Deposit balances to the credit of the respective makers or drawers assumed by the Assuming Institution under this Agreement are sufficient to permit the payment thereof, and in all other respects to discharge, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to the Deposit balances due and owing to the depositors of the Failed Bank assumed by the Assuming Institution under this Agreement.

5.2Certain Agreements Related to Deposits. Subject to Section 2.2, the Assuming Institution agrees to honor the terms and conditions of any written escrow or mortgage servicing agreement or other similar agreement relating to a Deposit liability assumed by the Assuming Institution pursuant to this Agreement.

5.3Notice to Depositors.

(a)Within seven (7) days after Bank Closing, the Assuming Institution shall give notice by mail to each depositor of the Failed Bank of (i) the assumption of the Deposit liabilities of the Failed Bank, and (ii) the procedures to claim Deposits (the Receiver shall provide item (ii) to Assuming Institution). The Assuming Institution shall also publish notice of its assumption of the Deposit liabilities of the Failed Bank in a newspaper of general circulation in the county or counties in which the Failed Bank was located.

(b)Within seven (7) days after Bank Closing, the Assuming Institution shall give notices by mail to each depositor of the Failed Bank, as required under Section 2.2.

(c)If the Assuming Institution proposes to charge fees different from those fees formerly charged by the Failed Bank, the Assuming Institution shall include its fee schedule in its mailed notice.

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(d)The Assuming Institution shall obtain approval of all notices and publications required by this Section 5.3 from counsel for the Receiver prior to mailing or publication.

ARTICLE VI

RECORDS

6.1Transfer of Records.  In accordance with Sections 2.1 and 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Institution, whether located on Bank Premises occupied or not occupied by the Assuming Institution or at any other location, any and all Records of the Failed Bank, other than the following:

(a)Records pertaining to former employees of the Failed Bank who were no longer employed by the Failed Bank as of Bank Closing and Records pertaining to employees of the Failed Bank who were employed by the Failed Bank as of Bank Closing and for whom the Receiver is unable to obtain a waiver to release such Records to the Assuming Institution;

(b)Records pertaining to (i) any asset or liability of the Failed Bank retained by the Receiver, or (ii) any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement; and

(c)Any other Records as determined by the Receiver.

6.2Delivery of Assigned Records. The Receiver shall deliver to the Assuming Institution all Records described in Section 6.1 as soon as practicable on or after the date of this Agreement.

6.3Preservation of Records.

(a) The Assuming Institution agrees that it will preserve and maintain for the joint benefit of the Receiver, the Corporation and the Assuming Institution, all Records of which it has custody. The Assuming Institution shall have the primary responsibility to respond to subpoenas, discovery requests, and other similar official inquiries and customer requests for lien releases with respect to the Records of which it has custody. With respect to its obligations under this Section regarding Electronically Stored Information, the Assuming Institution will complete the Data Retention Catalog attached hereto as Schedule 6.3 and submit it to the Receiver for the Receiver’s approval of the Assuming Institution’s data retention plan.

(b) With regard to all Records of which it has custody which are ten (10) years old as of the date of the appointment of the Receiver, the Assuming Institution agrees to request written permission to destroy such records by submitting a written request to destroy, specifying precisely which records are included in the request, to DRR– Records Manager, CServiceFDICDAL@FDIC.gov; and

(c) With regard to all Records of which it has custody which have been maintained in the custody of the Assuming Institution after six (6) years from the date of the appointment of the

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Receiver, the Assuming Institution agrees to request written permission to destroy such records by submitting a written request to destroy, specifying precisely which records are included in the request, to DRR– Records Manager, CServiceFDICDAL@FDIC.gov.

6.4Access to Records; Copies. The Assuming Institution agrees to permit the Receiver and the Corporation access to all Records of which the Assuming Institution has custody, and to use, inspect, make extracts from or request copies of any such Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the Corporation, any Record in the form of microfilm or microfiche pertaining to Deposit account relationships; provided, that in the event that the Failed Bank maintained one or more duplicate copies of such microfilm or microfiche Records, the Assuming Institution hereby assigns, transfers, and conveys to the Corporation one such duplicate copy of each such Record without cost to the Corporation, and agrees to deliver to the Corporation all Records assigned and transferred to the Corporation under this Article VI as soon as practicable on or after the date of this Agreement. The party requesting a copy of any Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as determined by the Receiver) for providing such duplicate Records. A copy of each Record requested shall be provided as soon as practicable by the party having custody thereof.

ARTICLE VII

BID; INITIAL PAYMENT

The Assuming Institution has submitted to the Receiver a Deposit premium bid of Zero Percent (0%) and an Asset discount bid of negative Nine Million One Hundred Thousand Dollars  ($9,100,000.00) (the “Bid Amount”).  The Deposit premium bid will be applied to the total of all Assumed Deposits except for brokered, CDARS, and any market place or similar subscription services Deposits. On the Payment Date, the Assuming Institution will pay to the Corporation, or the Corporation will pay to the Assuming Institution, as the case may be, the Initial Payment, together with interest on such amount (if the Payment Date is not the day following the day of the Bank Closing Date) from and including the day following the Bank Closing Date to and including the day preceding the Payment Date at the Settlement Interest Rate.

ARTICLE VIII

ADJUSTMENTS

8.1Pro Forma Statement. The Receiver, as soon as practicable after Bank Closing, in accordance with the best information then available, shall provide to the Assuming Institution a pro forma statement reflecting any adjustments of such liabilities and assets as may be necessary. Such pro forma statement shall take into account, to the extent possible, (i) liabilities and assets of a nature similar to those contemplated by Section 2.1 or Section 3.1, respectively, which at Bank Closing were carried in the Failed Bank’s suspense accounts, (ii) accruals as of Bank Closing for all income related to the assets and business of the Failed Bank acquired by the Assuming Institution hereunder, whether or not such accruals were reflected on the Accounting Records of the Failed Bank in the normal course of its operations, and (iii) adjustments to determine the Book Value of any investment in an Acquired Subsidiary and related accounts on

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the “bank only” (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting, whether or not the Failed Bank used the equity method of accounting for investments in subsidiaries, except that the resulting amount cannot be less than the Acquired Subsidiary’s recorded equity as of Bank Closing as reflected on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the Assuming Institution pursuant to Section 3.1 which the Failed Bank charged off during the period beginning the day after the Bid Valuation Date to the date of Bank Closing shall be deemed not to be charged off for the purposes of the pro forma statement, and the purchase price shall be determined pursuant to Section 3.2.

8.2Correction of Errors and Omissions; Other Liabilities.

(a)In the event any bookkeeping omissions or errors are discovered in preparing any pro forma statement or in completing the transfers and assumptions contemplated hereby, the parties hereto agree to correct such errors and omissions, it being understood that, as far as practicable, all adjustments will be made consistent with the judgments, methods, policies or accounting principles utilized by the Failed Bank in preparing and maintaining Accounting Records, except that adjustments made pursuant to this Section 8.2(a) are not intended to bring the Accounting Records of the Failed Bank into accordance with generally accepted accounting principles.

(b)If the Receiver discovers at any time subsequent to the date of this Agreement that any claim exists against the Failed Bank which is of such a nature that it would have been included in the liabilities assumed under Article II had the existence of such claim or the facts giving rise thereto been known as of Bank Closing, the Receiver may, in its discretion, at any time, require that such claim be assumed by the Assuming Institution in a manner consistent with the intent of this Agreement. The Receiver will make appropriate adjustments to the pro forma statement provided by the Receiver to the Assuming Institution pursuant to Section 8.1 as may be necessary.

8.3Payments. The Receiver agrees to cause to be paid to the Assuming Institution, or the Assuming Institution agrees to pay to the Receiver, as the case may be, on the Settlement Date, a payment in an amount which reflects net adjustments (including any costs, expenses and fees associated with determinations of value as provided in this Agreement) made pursuant to Section 8.1 or Section 8.2, plus interest as provided in Section 8.4. The Receiver and the Assuming Institution agree to effect on the Settlement Date any further transfer of assets to or assumption of liabilities or claims by the Assuming Institution as may be necessary in accordance with Section 8.1 or Section 8.2.

8.4Interest. Any amounts paid under Section 8.3 or Section 8.5, shall bear interest for the period from and including the day following Bank Closing to and including the day preceding the payment at the Settlement Interest Rate.

8.5Subsequent Adjustments. In the event that the Assuming Institution or the Receiver discovers any errors or omissions as contemplated by Section 8.2 or any error with respect to the payment made under Section 8.3 after the Settlement Date, the Assuming Institution and the Receiver agree to promptly correct any such errors or omissions, make any

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payments and effect any transfers or assumptions as may be necessary to reflect any such correction plus interest as provided in Section 8.4.

ARTICLE IX

CONTINUING COOPERATION

9.1General Matters. The parties hereto agree that they will, in good faith and with their best efforts, cooperate with each other to carry out the transactions contemplated by this Agreement and to effect the purposes hereof.

9.2Additional Title Documents. The Receiver, the Corporation and the Assuming Institution each agree, at any time, and from time to time, upon the request of any party hereto, to execute and deliver such additional instruments and documents of conveyance as shall be reasonably necessary to vest in the appropriate party its full legal or equitable title in and to the property transferred pursuant to this Agreement or to be transferred in accordance herewith. The Assuming Institution shall prepare such instruments and documents of conveyance (in form and substance satisfactory to the Receiver) as shall be necessary to vest title to the Assets in the Assuming Institution. The Assuming Institution shall be responsible for recording such instruments and documents of conveyance at its own expense.

9.3Claims and Suits.

(a)The Receiver shall have the right, in its discretion, to (i) defend or settle any claim or suit against the Assuming Institution with respect to which the Receiver has indemnified the Assuming Institution in the same manner and to the same extent as provided in Article XII, and (ii) defend or settle any claim or suit against the Assuming Institution with respect to any Liability Assumed, which claim or suit may result in a loss to the Receiver arising out of or related to this Agreement, or which existed against the Failed Bank on or before Bank Closing. The exercise by the Receiver of any rights under this Section 9.3(a) shall not release the Assuming Institution with respect to any of its obligations under this Agreement.

(b)In the event any action at law or in equity shall be instituted by any Person against the Receiver and the Corporation as codefendants with respect to any asset of the Failed Bank retained or acquired pursuant to this Agreement by the Receiver, the Receiver agrees, at the request of the Corporation, to join with the Corporation in a petition to remove the action to the United States District Court for the proper district. The Receiver agrees to institute, with or without joinder of the Corporation as co-plaintiff, any action with respect to any such retained or acquired asset or any matter connected therewith whenever notice requiring such action shall be given by the Corporation to the Receiver.

9.4Payment of Deposits. In the event any depositor does not accept the obligation of the Assuming Institution to pay any Deposit liability of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement and asserts a claim against the Receiver for all or any portion of any such Deposit liability, the Assuming Institution agrees on demand to provide to the Receiver funds sufficient to pay such claim in an amount not in excess of the Deposit liability reflected on the books of the Assuming Institution at the time such claim is

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made. Upon payment by the Assuming Institution to the Receiver of such amount, the Assuming Institution shall be discharged from any further obligation under this Agreement to pay to any such depositor the amount of such Deposit liability paid to the Receiver.

9.5Withheld Payments. At any time, the Receiver or the Corporation may, in its discretion, determine that all or any portion of any deposit balance assumed by the Assuming Institution pursuant to this Agreement does not constitute a “Deposit” (or otherwise, in its discretion, determine that it is the best interest of the Receiver or Corporation to withhold all or any portion of any deposit), and may direct the Assuming Institution to withhold payment of all or any portion of any such deposit balance. Upon such direction, the Assuming Institution agrees to hold such deposit and not to make any payment of such deposit balance to or on behalf of the depositor, or to itself, whether by way of transfer, set-off, or otherwise. The Assuming Institution agrees to maintain the “withheld payment” status of any such deposit balance until directed in writing by the Receiver or the Corporation as to its disposition. At the direction of the Receiver or the Corporation, the Assuming Institution shall return all or any portion of such deposit balance to the Receiver or the Corporation, as appropriate, and thereupon the Assuming Institution shall be discharged from any further liability to such depositor with respect to such returned deposit balance. If such deposit balance has been paid to the depositor prior to a demand for return by the Corporation or the Receiver, and payment of such deposit balance had not been previously withheld pursuant to this Section, the Assuming Institution shall not be obligated to return such deposit balance to the Receiver or the Corporation. The Assuming Institution shall be obligated to reimburse the Corporation or the Receiver, as the case may be, for the amount of any deposit balance or portion thereof paid by the Assuming Institution in contravention of any previous direction to withhold payment of such deposit balance or return such deposit balance the payment of which was withheld pursuant to this Section.

9.6Proceedings with Respect to Certain Assets and Liabilities.

(a)In connection with any investigation, proceeding or other matter with respect to any asset or liability of the Failed Bank retained by the Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement, the Assuming Institution shall cooperate to the extent reasonably required by the Receiver.

(b)In addition to its obligations under Section 6.4, the Assuming Institution shall provide representatives of the Receiver access at reasonable times and locations without other limitation or qualification to (i) its directors, officers, employees and agents and those of the Subsidiaries acquired by the Assuming Institution, and (ii) its books and records, the books and records of such Subsidiaries and all Credit Files, and copies thereof. Copies of books, records and Credit Files shall be provided by the Assuming Institution as requested by the Receiver and the costs of duplication thereof shall be borne by the Receiver.

(c)Not later than ten (10) days after the Put Notice pursuant to Section 3.4 or the date of the notice of transfer of any Loan by the Assuming Institution to the Receiver pursuant to Section 3.6, the Assuming Institution shall deliver to the Receiver such documents with respect to such Loan as the Receiver may request, including without limitation the following: (i) all related Credit Documents (other than certificates, notices and other ancillary documents), (ii) a

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certificate setting forth the principal amount on the date of the transfer and the amount of interest, fees and other charges then accrued and unpaid thereon, and any restrictions on transfer to which any such Loan is subject, and (iii) all Credit Files, and all documents, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) maintained by, owned by, or in the possession of the Assuming Institution or any Affiliate of the Assuming Institution relating to the transferred Loan.

9.7Information. The Assuming Institution promptly shall provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of this Agreement as the Corporation or the Receiver may request from time to time, and, at the request of the Receiver, make available employees of the Failed Bank employed or retained by the Assuming Institution to assist in preparation of the pro forma statement pursuant to Section 8.1.

ARTICLE X

CONDITION PRECEDENT

The obligations of the parties to this Agreement are subject to the Receiver and the Corporation having received at or before Bank Closing evidence reasonably satisfactory to each of any necessary approval, waiver, or other action by any governmental authority, the board of directors of the Assuming Institution, or other third party, with respect to this Agreement and the transactions contemplated hereby, the closing of the Failed Bank and the appointment of the Receiver, the chartering of the Assuming Institution, and any agreements, documents, matters or proceedings contemplated hereby or thereby.

ARTICLE XI

REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION

The Assuming Institution represents and warrants to the Corporation and the Receiver as follows:

(a)Corporate Existence and Authority. The Assuming Institution (i) is duly organized, validly existing and in good standing under the laws of its Chartering Authority and has full power and authority to own and operate its properties and to conduct its business as now conducted by it, and (ii) has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Assuming Institution has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the performance of the transactions contemplated hereby.

(b)Third Party Consents. No governmental authority or other third party consents (including but not limited to approvals, licenses, registrations or declarations) are required in connection with the execution, delivery or performance by the Assuming Institution of this Agreement, other than such consents as have been duly obtained and are in full force and effect.

(c)Execution and Enforceability. This Agreement has been duly executed and delivered by the Assuming Institution and when this Agreement has been duly authorized,

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executed and delivered by the Corporation and the Receiver, this Agreement will constitute the legal, valid and binding obligation of the Assuming Institution, enforceable in accordance with its terms.

(d)Compliance with Law.

(i)Neither the Assuming Institution nor any of its Subsidiaries is in violation of any statute, regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having jurisdiction over the Assuming Institution or any of its Subsidiaries or any assets of any such Person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of the Assuming Institution or of any of its Subsidiaries, or the ownership of the properties of the Assuming Institution or any of its Subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business, operations or condition (financial or otherwise) of the Assuming Institution or the ability of the Assuming Institution to perform, satisfy or observe any obligation or condition under this Agreement.

(ii)Neither the execution and delivery nor the performance by the Assuming Institution of this Agreement will result in any violation by the Assuming Institution of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.

(e)Insured or Guaranteed Loans. If any Loans being transferred pursuant to this Agreement, including the Shared-Loss Agreements, are insured or guaranteed by any department or agency of any governmental unit, federal, state or local, Assuming Institution represents that Assuming Institution has been approved by such agency and is an approved lender or mortgagee, as appropriate, if such approval is required. Assuming Institution further assumes full responsibility for determining whether or not such insurance or guarantees are in full force and effect on the date of this Agreement and with respect to those Loans whose insurance or guaranty is in full force and effect on the date of this Agreement, Assuming Institution assumes full responsibility for doing all things necessary to insure such insurance or guarantees remain in full force and effect. Assuming Institution agrees to assume all of the obligations under the contract(s) of insurance or guaranty, agrees to cooperate with the Receiver where necessary to complete forms required by the insuring or guaranteeing department or agency to effect or complete the transfer to Assuming Institution.

(f)Representations Remain True.  The Assuming Institution represents and warrants that it has executed and delivered to the Corporation a Purchaser Eligibility Certification and Confidentiality Agreement and that all information provided and representations made by or on behalf of the Assuming Institution in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification and Confidentiality Agreement (which are affirmed and ratified hereby) are and remain true and correct in all material respects and do not fail to state any fact required to make the information contained therein not misleading.

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ARTICLE XII

INDEMNIFICATION

12.1        Indemnification of Indemnitees. From and after Bank Closing and subject to the limitations set forth in this Section and Section 12.6 and compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify and hold harmless the Indemnitees against any and all costs, losses, liabilities, expenses (including attorneys' fees) incurred prior to the assumption of defense by the Receiver pursuant to paragraph (d) of Section 12.2, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with claims against any Indemnitee based on liabilities of the Failed Bank that are not assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution for which indemnification is provided hereunder in (a) of this Section 12.1, subject to certain exclusions as provided in (b) of this Section 12.1:

(a)

(1)  claims based on the rights of any shareholder or former shareholder as such of (x) the Failed Bank, or (y) any Subsidiary or Affiliate of the Failed Bank;

(2)  claims based on the rights of any creditor as such of the Failed Bank, or any creditor as such of any director, officer, employee or agent of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank arising prior to Bank Closing;

(3)  claims based on the rights of any present or former director, officer, employee or agent as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank;

(4)  claims based on any action or inaction prior to Bank Closing of the Failed Bank, its directors, officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate;

(5)  claims based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business of the Failed Bank, if any;

(6)  claims based on any failure or alleged failure (not in violation of law) by the Assuming Institution to continue to perform any service or activity previously performed by the Failed Bank which the Assuming Institution is not required to perform pursuant to this Agreement or which arise under any contract to which the Failed Bank was a party which the Assuming Institution elected not to assume in accordance with this Agreement and which neither the Assuming Institution nor any Subsidiary or Affiliate of the Assuming Institution has assumed subsequent to the execution hereof;

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(7)  claims arising from any action or inaction of any Indemnitee, including for purposes of this Section 12.1(a)(7) the former officers or employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken upon the specific written direction of the Corporation or the Receiver, other than any action or inaction taken in a manner constituting bad faith, gross negligence or willful misconduct; and

(8)  claims based on the rights of any depositor of the Failed Bank whose deposit has been accorded "withheld payment" status and/or returned to the Receiver or Corporation in accordance with Section 9.5 and/or has become an "unclaimed deposit" or has been returned to the Corporation or the Receiver in accordance with Section 2.3;

(b)           provided, that, with respect to this Agreement, except for paragraphs (7) and (8) of Section 12.1(a), no indemnification will be provided under this Agreement for any:

(1)  judgment or fine against, or any amount paid in settlement (without the written approval of the Receiver) by, any Indemnitee in connection with any action that seeks damages against any Indemnitee (a "counterclaim") arising with respect to any Asset and based on any action or inaction of either the Failed Bank, its directors, officers, employees or agents as such prior to Bank Closing, unless any such judgment, fine or amount paid in settlement exceeds the greater of (i) the Repurchase Price of such Asset, or (ii) the monetary recovery sought on such Asset by the Assuming Institution in the cause of action from which the counterclaim arises; and in such event the Receiver will provide indemnification only in the amount of such excess; and no indemnification will be provided for any costs or expenses other than any costs or expenses (including attorneys' fees) which, in the determination of the Receiver, have been actually and reasonably incurred by such Indemnitee in connection with the defense of any such counterclaim; and it is expressly agreed that the Receiver reserves the right to intervene, in its discretion, on its behalf and/or on behalf of the Receiver, in the defense of any such counterclaim;

(2)  claims with respect to any liability or obligation of the Failed Bank that is expressly assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(3)  claims with respect to any liability of the Failed Bank to any present or former employee as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank, which liability is expressly assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(4)  claims based on the failure of any Indemnitee to seek recovery of damages from the Receiver for any claims based upon any action or inaction of the Failed Bank, its directors, officers, employees or agents as fiduciary, agent or custodian prior to Bank Closing;

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(5)  claims based on any violation or alleged violation by any Indemnitee of the antitrust, branching, banking or bank holding company or securities laws of the United States of America or any State thereof;

(6)  claims based on the rights of any present or former creditor, customer, or supplier as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(7)  claims based on the rights of any present or former shareholder as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution regardless of whether any such present or former shareholder is also a present or former shareholder of the Failed Bank;

(8)  claims, if the Receiver determines that the effect of providing such indemnification would be to (i) expand or alter the provisions of any warranty or disclaimer thereof provided in Section 3.3 or any other provision of this Agreement, or (ii) create any warranty not expressly provided under this Agreement;

(9)  claims which could have been enforced against any Indemnitee had the Assuming Institution not entered into this Agreement;

(10)  claims based on any liability for taxes or fees assessed with respect to the consummation of the transactions contemplated by this Agreement, including without limitation any subsequent transfer of any Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Institution;

(11)  except as expressly provided in this Article XII, claims based on any action or inaction of any Indemnitee, and nothing in this Agreement shall be construed to provide indemnification for (i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates; provided, that the Receiver, in its discretion, may provide indemnification hereunder for any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates who is also or becomes a director, officer, employee or agent of the Assuming Institution or its Subsidiaries or Affiliates;

(12)  claims or actions which constitute a breach by the Assuming Institution of the representations and warranties contained in Article XI;

(13)  claims arising out of or relating to the condition of or generated by an Asset arising from or relating to the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant, or condition of such Asset which violate any applicable Federal, State or local law or regulation concerning environmental protection; and

(14)  claims based on, related to or arising from any asset, including a loan, acquired or liability assumed by the Assuming Institution, other than pursuant to this Agreement.

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12.2        Conditions Precedent to Indemnification. It shall be a condition precedent to the obligation of the Receiver to indemnify any Person pursuant to this Article XII that such Person shall, with respect to any claim made or threatened against such Person for which such Person is or may be entitled to indemnification hereunder:

(a)           give written notice to the Regional Counsel (Litigation Branch) of the Corporation in the manner and at the address provided in Section 13.7 of such claim as soon as practicable after such claim is made or threatened; provided, that notice must be given on or before the date which is six (6) years from the date of this Agreement;

(b)           provide to the Receiver such information and cooperation with respect to such claim as the Receiver may reasonably require;

(c)           cooperate and take all steps, as the Receiver may reasonably require, to preserve and protect any defense to such claim;

(d)           in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Receiver the right, which the Receiver may exercise in its sole discretion, to conduct the investigation, control the defense and effect settlement of such claim, including without limitation the right to designate counsel and to control all negotiations, litigation, arbitration, settlements, compromises and appeals of any such claim, all of which shall be at the expense of the Receiver; provided, that the Receiver shall have notified the Person claiming indemnification in writing that such claim is a claim with respect to which the Person claiming indemnification is entitled to indemnification under this Article XII;

(e)           not incur any costs or expenses in connection with any response or suit with respect to such claim, unless such costs or expenses were incurred upon the written direction of the Receiver; provided, that the Receiver shall not be obligated to reimburse the amount of any such costs or expenses unless such costs or expenses were incurred upon the written direction of the Receiver;

(f)            not release or settle such claim or make any payment or admission with respect thereto, unless the Receiver consents in writing thereto, which consent shall not be unreasonably withheld; provided, that the Receiver shall not be obligated to reimburse the amount of any such settlement or payment unless such settlement or payment was effected upon the written direction of the Receiver; and

(g)           take reasonable action as the Receiver may request in writing as necessary to preserve, protect or enforce the rights of the indemnified Person against any Primary Indemnitor.

12.3        No Additional Warranty. Nothing in this Article XII shall be construed or deemed to (i) expand or otherwise alter any warranty or disclaimer thereof provided under Section 3.3 or any other provision of this Agreement with respect to, among other matters, the title, value, collectibility, genuineness, enforceability or condition of any (x) Asset, or (y) asset of the Failed Bank purchased by the Assuming Institution subsequent to the execution of this Agreement by the Assuming Institution or any Subsidiary or Affiliate of the Assuming

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Institution, or (ii) create any warranty not expressly provided under this Agreement with respect thereto.

12.4        Indemnification of Receiver and Corporation. From and after Bank Closing, the Assuming Institution agrees to indemnify and hold harmless the Corporation and the Receiver and their respective directors, officers, employees and agents from and against any and all costs, losses, liabilities, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any of the following:

(a)           claims based on any and all liabilities or obligations of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution, whether or not any such liabilities subsequently are sold and/or transferred, other than any claim based upon any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a); and

(b)           claims based on any act or omission of any Indemnitee (including but not limited to claims of any Person claiming any right or title by or through the Assuming Institution with respect to Assets transferred to the Receiver pursuant to Section 3.4 or 3.6), other than any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a); and

(c)           claims based on any failure to preserve, maintain or provide reasonable access to Records transferred to the Assuming Institution pursuant to Article VI.

12.5        Obligations Supplemental. The obligations of the Receiver, and the Corporation as guarantor in accordance with Section 12.7, to provide indemnification under this Article XII are to supplement any amount payable by any Primary Indemnitor to the Person indemnified under this Article XII. Consistent with that intent, the Receiver agrees only to make payments pursuant to such indemnification to the extent not payable by a Primary Indemnitor. If the aggregate amount of payments by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, and all Primary Indemnitors with respect to any item of indemnification under this Article XII exceeds the amount payable with respect to such item, such Person being indemnified shall notify the Receiver thereof and, upon the request of the Receiver, shall promptly pay to the Receiver, or the Corporation as appropriate, the amount of the Receiver's (or Corporation's) payments to the extent of such excess.

12.6        Criminal Claims. Notwithstanding any provision of this Article XII to the contrary, in the event that any Person being indemnified under this Article XII shall become involved in any criminal action, suit or proceeding, whether judicial, administrative or investigative, the Receiver shall have no obligation hereunder to indemnify such Person for liability with respect to any criminal act or to the extent any costs or expenses are attributable to the defense against the allegation of any criminal act, unless (i) the Person is successful on the merits or otherwise in the defense against any such action, suit or proceeding, or (ii) such action, suit or proceeding is terminated without the imposition of liability on such Person.

12.7        Limited Guaranty of the Corporation.  The Corporation hereby guaranteesperformance of the Receiver's obligation to indemnify the Assuming Institution as set forth in

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this Article XII. It is a condition to the Corporation's obligation hereunder that the Assuming Institution shall comply in all respects with the applicable provisions of this Article XII. The Corporation shall be liable hereunder only for such amounts, if any, as the Receiver is obligated to pay under the terms of this Article XII but shall fail to pay. Except as otherwise provided above in this Section 12.7, nothing in this Article XII is intended or shall be construed to create any liability or obligation on the part of the Corporation, the United States of America or any department or agency thereof under or with respect to this Article XII, or any provision hereof, it being the intention of the parties hereto that the obligations undertaken by the Receiver under this Article XII are the sole and exclusive responsibility of the Receiver and no other Person or entity.

12.8        Subrogation. Upon payment by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, to any Indemnitee for any claims indemnified by the Receiver under this Article XII, the Receiver, or the Corporation as appropriate, shall become subrogated to all rights of the Indemnitee against any other Person to the extent of such payment.

ARTICLE XIII

MISCELLANEOUS

13.1        Entire Agreement. This Agreement, the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement, including the Schedules and Exhibits thereto, embodies the entire agreement of the parties hereto in relation to the subject matter herein and supersedes all prior understandings or agreements, oral or written, between the parties.

13.2        Headings. The headings and subheadings of the Table of Contents, Articles and Sections contained in this Agreement, except the terms identified for definition in Article I and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

13.3        Counterparts. This Agreement may be executed in any number of counterparts and by the duly authorized representative of a different party hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

13.4        GOVERNING LAW. THIS AGREEMENT, THE SINGLE FAMILY SHARED-LOSS AGREEMENT, AND THE COMMERCIAL SHARED-LOSS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.

13.5        Successors. All terms and conditions of this Agreement shall be binding on the successors and assigns of the Receiver, the Corporation and the Assuming Institution. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give any Person other than the Receiver, the

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Corporation and the Assuming Institution any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of the Receiver, the Corporation and the Assuming Institution and for the benefit of no other Person.

13.6        Modification; Assignment. No amendment or other modification, rescission, release, or assignment of any part of this Agreement, the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties hereto.

13.7        Notice. Any notice, request, demand, consent, approval or other communication to any party hereto shall be effective when received and shall be given in writing, and delivered in person against receipt therefore, or sent by certified mail, postage prepaid, courier service, telex, facsimile transmission or email to such party (with copies as indicated below) at its address set forth below or at such other address as it shall hereafter furnish in writing to the other parties. All such notices and other communications shall be deemed given on the date received by the addressee.

Assuming Institution

Midland States Bank

Attn: Mr. Jeffrey Ludwig, Chief Financial Officer

133 West Jefferson

Effingham, Illinois 62401

cc:  Mr. Leon Holschbach, President and Chief Executive Officer

Receiver and Corporation

Federal Deposit Insurance Corporation,

Receiver of Westbridge Bank & Trust Company

1601 Bryan Street

Dallas, Texas 75201

Attention: Settlement Agent

In addition, with respect to notices under Article 4.6:

Federal Deposit Insurance Corporation,

Receiver of Westbridge Bank & Trust Company

1601 Bryan Street

Dallas, Texas 75201

cc: Resolutions and Closings Manager, ORE Department

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In addition, with respect to notice under Article XII:

Federal Deposit Insurance Corporation,

Receiver of Westbridge Bank & Trust Company

1601 Bryan Street

Dallas, Texas 75201

cc: Regional Counsel (Litigation Branch)

13.8        Manner of Payment. All payments due under this Agreement shall be in lawful money of the United States of America in immediately available funds as each party hereto may specify to the other parties; provided, that in the event the Receiver or the Corporation is obligated to make any payment hereunder in the amount of $25,000.00 or less, such payment may be made by check.

13.9        Costs, Fees and Expenses. Except as otherwise specifically provided herein, each party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its accountants and counsel; provided, that the Assuming Institution shall pay all fees, costs and expenses (other than attorneys' fees incurred by the Receiver) incurred in connection with the transfer to it of any Assets or Liabilities Assumed hereunder or in accordance herewith.

13.10      Waiver. Each of the Receiver, the Corporation and the Assuming Institution may waive its respective rights, powers or privileges under this Agreement; provided, that such waiver shall be in writing; and further provided, that no failure or delay on the part of the Receiver, the Corporation or the Assuming Institution to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege by the Receiver, the Corporation, or the Assuming Institution under this Agreement, nor will any such waiver operate or be construed as a future waiver of such right, power or privilege under this Agreement.

13.11      Severability. If any provision of this Agreement is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.

13.12      Term of Agreement. This Agreement shall continue in full force and effect until the tenth (10th) anniversary of Bank Closing; provided, that the provisions of Section 6.3 and 6.4 shall survive the expiration of the term of this Agreement; and provided further,  that the receivership of the Failed Bank may be terminated prior to the expiration of the term of this Agreement, and in such event, the guaranty of the Corporation, as provided in and in accordance with the provisions of Section 12.7 shall be in effect for the remainder of the term of this Agreement. Expiration of the term of this Agreement shall not affect any claim or liability of any party with respect to any (i) amount which is owing at the time of such expiration, regardless of when such amount becomes payable, and (ii) breach of this Agreement occurring prior to such expiration, regardless of when such breach is discovered.

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13.13      Survival of Covenants, Etc. The covenants, representations, and warranties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

	FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF WESTBRIDGE BANK & TRUST COMPANY, CHESTERFIELD, MISSOURI
	BY:	/s/ Richard Herrin
	NAME:	Richard Herrin
	TITLE:	Receiver-in-Charge
Attest:
/s/ [ILLEGIBLE]
	FEDERAL DEPOSIT INSURANCE CORPORATION
	BY:	/s/ Richard Herrin
	NAME:	Richard Herrin
	TITLE:	Attorney-in-Fact
Attest:
/s/ [ILLEGIBLE]
	MIDLAND STATES BANK, EFFINGHAM, ILLINOIS
	BY:	/s/ Jeffrey Ludwig
	NAME:	Jeffrey Ludwig
	TITLE:	Chief Financial Officer
Attest:
/s/ L. J. Holschbach

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EXHIBIT 4.15A

SINGLE FAMILY SHARED-LOSS AGREEMENT

This agreement for the reimbursement of loss sharing on certain single family residential mortgage loans (the “Single Family Shared-Loss Agreement”) shall apply when the Assuming Institution purchases Single Family Shared-Loss Loans as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Single Family Shared-Loss Agreement is attached as Exhibit 4.15A and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Single Family Shared-Loss Agreement with respect to the subject matter of this Single Family Shared-Loss Agreement, the terms of this Single Family Shared-Loss Agreement shall control. References in this Single Family Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Single Family Shared-Loss Agreement, unless the context indicates that it is intended to be a reference to a Section of the Purchase and Assumption Agreement.

ARTICLE I — DEFINITIONS

The capitalized terms used in this Single Family Shared-Loss Agreement that are not defined in this Single Family Shared-Loss Agreement are defined in the Purchase and Assumption Agreement. In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Single Family Shared-Loss Agreement.

“Accounting Records” means the subsidiary system of record on which the loan history and balance of each Single Family Shared-Loss Loan is maintained; individual loan files containing either an original or copies of documents that are customary and reasonable with respect to loan servicing, including management and disposition of Other Real Estate; the records documenting alternatives considered with respect to loans in default or for which a default is reasonably foreseeable; records of loss calculations and supporting documentation with respect to line items on the loss calculations; and, monthly delinquency reports and other performance reports customarily utilized by the Assuming Institution in management of loan portfolios.

“Accrued Interest” means, with respect to Single Family Shared-Loss Loans, the amount of earned and unpaid interest at the note rate specified in the applicable loan documents, limited to 90 days.

“Affiliate” shall have the meaning set forth in the Purchase and Assumption Agreement; provided, that, for purposes of this Single Family Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Institution.

“Applicable Percentage” means, the percentage of shared-loss the Receiver will incur with respect to this Single Family Shared-Loss Agreement, which is eighty percent (80%) until the Cumulative Loss Amount equals the SF1-4 Intrinsic Loss Estimate, and eighty percent (80%) thereafter.

“Commencement Date” means the first calendar day following the Bank Closing.

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“Commercial Shared-Loss Agreement” means the Commercial Shared-Loss Agreement attached to the Purchase and Assumption Agreement as Exhibit 4.15B.

“Cumulative Loss Amount” means the sum of all Monthly Loss Amounts less the sum of all Recovery Amounts.

“Customary Servicing Procedures” means procedures (including collection procedures) that the Assuming Institution (or, to the extent a Third Party Servicer is engaged, the Third Party Servicer) customarily employs and exercises in servicing and administering mortgage loans for its own accounts and the servicing procedures established by FNMA or FHLMC (as in effect from time to time), which are in accordance with accepted mortgage servicing practices of prudent lending institutions.

“Deficient Loss” means the determination by a court in a bankruptcy proceeding that the value of the collateral is less than the amount of the loan in which case the loss will be the difference between the then unpaid principal balance (or the NPV of a modified loan that defaults) and the value of the collateral so established.

“Examination Criteria” means the loan classification criteria employed by, or any applicable regulations of, the Assuming Institution’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.

“Final Shared-Loss Month” means the calendar month in which the tenth anniversary of the Commencement Date occurs.

“Foreclosure Loss” means the loss realized when the Assuming Institution has completed the foreclosure on a Single Family Shared-Loss Loan and realized final recovery on the collateral through liquidation and recovery of all insurance proceeds. Each Foreclosure Loss shall be calculated in accordance with the form and methodology specified in Exhibits 2c(1)-(3).

“Holding Company” means any company owning Shares of the Assuming Institution that is a holding company pursuant to the Bank Holding Company Act of 1956, 12 U.S.C. 1841 et seq. or the Home Owner’s Loan Act, 12 U.S.C. 1461 et seq.

“Home Equity Loan” means a loan or funded or unfunded portions of a line of credit secured by a mortgage on a one-to four-family residences or stock of cooperative housing association, where the Failed Bank did not have a first lien on the same property as collateral.

“Investor-Owned Residential Loan” means a Loan, excluding advances made pursuant to a Home Equity Loan, that is secured by a mortgage on a one- to four family residences or stock of cooperative housing associations that is not owner-occupied or the borrower’s primary residence.

“Loss” means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss, Modification Default Loss or Deficient Loss.

“Loss Amount” means the dollar amount of loss incurred and reported on the Monthly Certificate for a Shared-Loss Loan.

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“Modification Default Loss” means the loss calculated in Exhibits 2a(1)-(3) for single family loans previously modified pursuant to this Single Family Shared-Loss Agreement that subsequently default and result in a foreclosure, short sale or Deficient Loss.

“Modification Guidelines” has the meaning provided in Section 2.1(a) of this Single Family Shared-Loss Agreement.

“Monthly Certificate” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

“Monthly Loss Amount” means the sum of all Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and Deficient Losses realized by the Assuming Institution for any Shared Loss Month.

“Monthly Shared-Loss Amount” means the change in the Cumulative Shared-Loss Amount from the beginning of each month to the end of each month.

“Net Loss Amount” means the sum of Cumulative Loss Amounts under this Single Family Shared-Loss Agreement and Aggregate Net Charge-Offs under the Commercial Shared-Loss Agreement.

“Neutral Member” has the meaning provided in Section 2.1(f)(ii) of this Single Family Shared-Loss Agreement.

“Portfolio Loss” means the loss realized on either (i) a portfolio sale of Single Family Shared-Loss Loans in accordance with the terms of Article IV or (ii) the sale of a loan with the consent of the Receiver as provided in Section 2.7.

“Recovery Amount” means, with respect to any period prior to the Termination Date, the amount of collected funds received by the Assuming Institution that (i) are applicable against a Foreclosure Loss calculated in accordance with Exhibits 2c(1)-(3), or (iii) gains realized from a Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming Institution has previously received a Restructuring Loss payment from the Receiver (iv) or any incentive payments from national programs paid to an investor or borrower on loans that have been modified or otherwise treated (short sale or foreclosure) in accordance with Exhibit 5.

“Related Loans” has the meaning set forth in Section 3.1.

“Restructuring Loss” means the loss on a modified or restructured loan measured by the difference between (a) the principal, Accrued Interest, tax and insurance advances, third party or other fees due on a loan prior to the modification or restructuring, and (b) the net present value of estimated cash flows on the modified or restructured loan, discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be calculated in accordance with the form and methodology attached as Exhibits 2a(1)-(3), as applicable.

“Restructured Loan” means a Single Family Shared-Loss Loan for which the Assuming Institution has received a Restructuring Loss payment from the Receiver. This applies to owner occupied and investor owned residences.

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“Servicing Officer” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

“SF1-4 Intrinsic Loss Estimate” means total losses under this Single Family Shared-Loss Agreement in the amount of Two Million Dollars ($2,000,000.00).

“Shared Loss Loan” means a Single Family Shared-Loss Loan, Investor-Owned Residential Loan, Restructured Loan or Home Equity Loan, and any Commitment with respect to those loans.

“Shared-Loss Month” means each calendar month between the Commencement Date and the last day of the month in which the tenth anniversary of the Commencement Date occurs, provided that, the first Shared-Loss Month shall begin on the Commencement Date and end on the last day of that month.

“Shares” means common stock and any instrument which by its terms is currently convertible into common stock, or which may become convertible into common stock.

“Short-Sale Loss” means the loss resulting from the Assuming Institution’s agreement with the mortgagor to accept a payoff in an amount less than the balance due on the loan (including the costs of any cash incentives to borrower to agree to such sale or to maintain the property pending such sale), further provided, that each Short-Sale Loss shall be calculated in accordance with the form and methodology specified in Exhibits 2b(1)-(3).

“Single Family Shared-Loss Loan” means a single family one-to-four owner-occupied residential mortgage loan, excluding Home Equity Loans, that is secured by a mortgage on a one-to four family residence or stock of a cooperative housing association.

“Termination Date” means the last day of the Final Shared-Loss Month.

“Then-Current Interest Rate” means the most recently published Freddie Mac survey rate for 30-year fixed-rate loans for Investor-Owned Loans or such other interest rate approved by the Receiver.

“Third Party Servicer” means any servicer appointed from time to time by the Assuming Institution or any Affiliate of the Assuming Institution to service the Shared-Loss Loans on behalf of the Assuming Institution, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.

“Total Intrinsic Loss Estimate” means the sum of the SF1-4 Intrinsic Loss Estimate in the Single Family Shared-Loss Agreement, and the Commercial Intrinsic Loss Estimate in the Commercial Shared-Loss Agreement, expressed in dollars.

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ARTICLE II — SHARED-LOSS ARRANGEMENT

2.1Shared-Loss Arrangement.

(a)Loss Mitigation and Consideration of Alternatives.

(i)  For each Single Family Shared-Loss Loan in default or for which a default is reasonably foreseeable, the Assuming Institution shall undertake reasonable and customary loss mitigation efforts, in accordance with any of the following programs selected by Assuming Institution in its sole discretion, Exhibit 5 (FDIC Mortgage Loan Modification Program), the United States Treasury’s Home Affordable Modification Program Guidelines or any other modification program approved by the United States Treasury Department, the Corporation, the Board of Governors of the Federal Reserve System or any other governmental agency (it being understood that the Assuming Institution can select different programs for the various Single Family Shared-Loss Loans) (such program chosen, the “Modification Guidelines”). After selecting the applicable Modification Guideline for each such Single Family Shared-Loss Loan, the Assuming Institution shall document its consideration of foreclosure, loan restructuring under the applicable Modification Guideline chosen, and short-sale (if short-sale is a viable option) alternatives and shall select the alternative the Assuming Institution believes, based on its estimated calculations, will result in the least Loss. If unemployment or underemployment is the primary cause for default or for which a default is reasonably foreseeable, the Assuming Institution may consider the borrower for a temporary forbearance plan which reduces the loan payment to an affordable level for at least six (6) months.

(ii)  Losses on Home Equity Loans shall be shared under the charge-off policies of the Assuming Institution’s Examination Criteria as if they were Single Family Shared-Loss Loans.

(iii)  Losses on Investor-Owned Residential Loans shall be treated as Restructured Loans, and with the consent of the Receiver can be restructured under terms separate from the Exhibit 5 standards. Please refer to Exhibits 2(a)(1)-(2) for guidance in Calculation of Loss for Restructured Loans. Losses on Investor-Owned Residential Loans will be treated as if they were Single Family Shared-Loss Loans.

(iv)  The Assuming Institution shall retain its loss calculations for the Shared Loss Loans and such calculations shall be provided to the Receiver upon request. For the avoidance of doubt and notwithstanding anything herein to the contrary, (x) the Assuming Institution is not required to modify or restructure any Shared-Loss Loan on more than one occasion and (y) the Assuming Institution is not required to consider any alternatives with respect to any Shared-Loss Loan in the process of foreclosure as of the Bank Closing if the Assuming Institution can document that a loan modification is not cost effective and shall be entitled to continue such foreclosure measures and recover the Foreclosure Loss as provided herein, and (z) the Assuming Institution shall have a transition period of up to 90 days after Bank Closing to implement the Modification Guidelines, during which time, the Assuming Institution may submit claims under such guidelines as may be in place at the Failed Bank.

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(b)Monthly Certificates.

Not later than fifteen (15) days after the end of each Shared-Loss Month, beginning with the month in which the Commencement Date occurs and ending in the Final Shared-Loss Month, the Assuming Institution shall deliver to the Receiver a certificate, signed by an officer of the Assuming Institution involved in, or responsible for, the administration and servicing of the Shared-Loss Loans whose name appears on a list of servicing officers furnished by the Assuming Institution to the Receiver, (a “Servicing Officer”) setting forth in such form and detail as the Receiver may reasonably specify (a “Monthly Certificate”):

(i)(A) a schedule substantially in the form of Exhibit 1 listing:

(i) each Shared-Loss Loan for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Shared-Loss Loan, and the total Monthly Loss Amount for all Shared-Loss Loans;

(ii) each Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Shared-Loss Loan, and the total Recovery Amount for all Shared-Loss Loans;

(iii) the total Monthly Loss Amount for all Shared-Loss Loans minus the total monthly Recovery Amount for all Shared-Loss Loans;

(iv) the Cumulative Loss Amount as of the beginning and end of the month;

(v) the Monthly Shared Loss Amount;

(vi) the result obtained in (v) times the Applicable Percentage, which is the amount to be paid under Section 2.1(d) of this Single Family Shared-Loss Agreement by the Receiver to the Assuming Institution if the amount is a positive number, or by the Assuming Institution to the Receiver if the amount is a negative number;

(ii)for each of the Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a schedule showing the calculation of the Loss Amount using the form and methodology shown in Exhibits 2a(1)-(3), Exhibit 2b, or Exhibits 2c(1)-(2), as applicable.

(iii)For each of the Restructured Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2, a schedule showing the calculation using the form and methodology shown in Exhibits 2d(1)-(2)

(vi)a portfolio performance and summary schedule substantially in the form shown in Exhibit 3.

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(c)Monthly Data Download. Not later than fifteen (15) days after the end of each month, beginning with the month in which the Commencement Date occurs and ending with the Final Shared-Loss Month, Assuming Institution shall provide Receiver:

(i)the servicing file in machine-readable format including but not limited to the fields shown on Exhibit 2.1(c) for each outstanding Single Family Shared-Loss Loan, as applicable; and

(ii)an Excel file for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan listing:

(A)Foreclosure date

(B)Unpaid loan principal balance

(C)Appraised value or BPO value, as applicable

(D)Projected liquidation date

Notwithstanding the foregoing, the Assuming Institution shall not be required to provide any of the foregoing information to the extent it is unable to do so as a result of the Failed Bank’s or Receiver’s failure to provide information required to produce the information set forth in this Section 2.1(c); provided, that the Assuming Institution shall, consistent with Customary Servicing Procedures seek to produce any such missing information or improve any inaccurate information previously provided to it.

(d)Payments With Respect to Shared-Loss Assets. Not later than fifteen (15) days after the date on which the Receiver receives the Monthly Certificate, the Receiver shall pay to the Assuming Institution, in immediately available funds, an amount equal to the Applicable Percentage of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Institution shall pay to the Receiver in immediately available funds the Applicable Percentage of that amount.

(e)Limitations on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to Section 2.1(d) with respect to any Foreclosure Loss, Restructuring Loss, Short Sale Loss, Deficient Loss, or Portfolio Loss that the Receiver determines, based upon the criteria set forth in this Single Family Shared-Loss Agreement (including the analysis and documentation requirements of Section 2.1(a)) or Customary Servicing Procedures, should not have been effected by the Assuming Institution; provided, however, (x) the Receiver must provide notice to the Assuming Institution detailing the grounds for not making such payment, (y) the Receiver must provide the Assuming Institution with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the Receiver shall make payment with respect to the properly effected Loss, and (2) to the extent not curable, shall not constitute grounds for the Receiver to withhold payment as to all other Losses (or portion of Losses) that are properly payable pursuant to the terms of this Single Family Shared-Loss Agreement. In the event that the Receiver does not make any payment with respect to Losses claimed pursuant to Section 2.1(d), the Receiver and Assuming Institution shall, upon final resolution, make the necessary adjustments to the Monthly Shared-Loss Amount for that Monthly Certificate and the payment pursuant to Section 2.1(d) above shall be adjusted

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accordingly.

(f)Payments by Wire-Transfer. All payments under this Single Family Shared-Loss Agreement shall be made by wire-transfer in accordance with the wire-transfer instructions on Exhibit 4.

(g)Payment in the Event Losses Fail to Reach Expected Level. If the asset premium (discount) bid expressed in dollars is a five per cent (5%) or more discount to the purchase price of the Assets determined in accordance with Article III, then on the date that is 45 days following the last day (such day, the “True-Up Measurement Date”) of the calendar month in which the tenth anniversary of the calendar day following the Bank Closing occurs, or upon the final disposition of all Shared Loss Assets under the Single Family Shared-Loss Agreement at any time after the termination of this Commercial Shared-Loss Agreement, the Assuming Institution shall pay to the Receiver fifty percent (50%) of any positive amount resulting from the following calculation:

A - (B + C + D), where

A equals 20% of the Total Intrinsic Loss Estimate;

B equals 20% of the Net Loss Amount;

C equals 25% of the asset premium (discount) bid, expressed in dollars, of total Shared Loss Assets on Schedules 4.15A,4.15B, and 4.15D at Bank Closing; and

D equals 3.5% of total Shared Loss Assets on Schedules 4.15A, 4.15B and 4.15D at Bank Closing.

The Assuming Institution shall deliver to the Receiver not later than 30 days following the True-Up Measurement Date, a schedule, signed by an officer of the Assuming Institution, setting forth in reasonable detail the foregoing calculation, including the calculation of the Net Loss Amount.

(h)Payments as Administrative Expenses. Payments from the Receiver with respect to this Single Family Shared-Loss Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Single Family Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.

2.2Auditor Report; Right to Audit.

(a)Within the time period permitted for the examination audit pursuant to 12 CFR Section 363 after the end of each fiscal year during which the Receiver makes any payment to the Assuming Institution under this Single Family Shared-Loss Agreement, the Assuming Institution shall deliver to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Single Family Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Institution’s books and records, nothing has

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come to their attention suggesting that any computations required to be made by the Assuming Institution during such fiscal year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In the event that the Assuming Institution cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Institution during such year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In such event, the Assuming Institution and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

(b)The Assuming Institution shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.

(c)The Receiver or the FDIC in its corporate capacity (“Corporation”), its contractors and their employees, and its agents may perform an audit or audits to determine the Assuming Institution’s compliance with the provisions of this Single Family Shared-Loss Agreement, including this Article II, by providing not less than ten (10) Business Days’ prior written notice. Assuming Institution shall provide access to pertinent records and proximate working space in Assuming Institution’s facilities. The scope and duration of any such audit shall be within the reasonable discretion of the Receiver or the Corporation, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Institution’s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit or audits, the Assuming Institution and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.3Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Federal Deposit Insurance Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Monthly Certificate delivered pursuant to Section 2.1, if in its good faith and reasonable judgment there is a reasonable basis under the requirements of this Single Family Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Institution detailing the grounds for withholding such payment. At such time as the Assuming Institution demonstrates to the satisfaction of the Receiver, in its reasonable judgment, that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Institution the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days.

2.4Books and Records. The Assuming Institution shall at all times during the term of this Single Family Shared-Loss Agreement keep books and records sufficient to ensure and document compliance with the terms of this Single Family Shared-Loss Agreement, including

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but not limited to (a) documentation of alternatives considered with respect to defaulted loans or loans for which default is reasonably foreseeable, (b) documentation showing the calculation of loss for claims submitted to the Receiver, (c) retention of documents that support each line item on the loss claim forms, and (d) documentation with respect to the Recovery Amount on loans for which the Receiver has made a loss-share payment

2.5Information. The Assuming Institution shall promptly provide to the Receiver such other information, including but not limited to, financial statements, computations, and bank policies and procedures, relating to the performance of the provisions of this Single Family Shared-Loss Agreement, as the Receiver may reasonably request from time to time.

2.6Tax Ruling. The Assuming Institution shall not at any time, without the Receiver’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver pursuant to this Single Family Shared-Loss Agreement.

2.7Loss of Shared-Loss Coverage on Shared-Loss Loans. The Receiver shall be relieved of its obligations with respect to a Shared-Loss Loan upon payment of a Foreclosure Loss amount, or a Short Sale Loss amount with respect to such Single Family Shared-Loss Loan, or upon the sale without FDIC consent of a Single Family Shared-Loss Loan by Assuming Institution to a person or entity that is not an Affiliate. The Assuming Institution shall provide the Receiver with timely notice of any such sale. Failure to administer any Shared-Loss Loan or Loans in accordance with Article III shall at the discretion of the Receiver constitute grounds for the loss of shared loss coverage with respect to such Shared-Loss Loan or Loans. Notwithstanding the foregoing, a sale of the Single Family Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to have occurred as the result of (i) any change in the ownership or control of Assuming Institution or the transfer of any or all of the Single Family Shared-Loss Loan(s) to any Affiliate of Assuming Institution, (ii) a merger by Assuming Institution with or into any other entity, or (iii) a sale by Assuming Institution of all or substantially all of its assets.

ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS LOANS

3.1Agreement with Respect to Administration. The Assuming Institution shall (and shall cause any of its Affiliates to which the Assuming Institution transfers any Shared-Loss Loans to) manage, administer, and collect the Shared-Loss Loans while owned by the Assuming Institution or any Affiliate thereof during the term of this Single Family Shared-Loss Agreement in accordance with the rules set forth in this Article III. The Assuming Institution shall be responsible to the Receiver in the performance of its duties hereunder and shall provide to the Receiver such reports as the Receiver reasonably deems advisable, including but not limited to the reports required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Institution’s performance of its duties hereunder.

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3.2          Duties of the Assuming Institution.

(a)           In the performance of its duties under this Article III, the Assuming Institution shall:

(i) manage and administer each Shared-Loss Loan in accordance with Assuming Institution’s usual and prudent business and banking practices and Customary Servicing Procedures;

(ii) exercise its best business judgment in managing, administering and collecting amounts owed on the Shared-Loss Loans;

(iii) use commercially reasonable efforts to maximize Recoveries with respect to Losses on Shared-Loss Loans without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Loans;

(iv) retain sufficient staff (in Assuming Institution’s discretion) to perform its duties hereunder; and

(v) other than as provided in Section 2.1(a), comply with the terms of the Modification Guidelines for any Single Family Shared-Loss Loans meeting the requirements set forth therein. For the avoidance of doubt, the Assuming Institution may propose exceptions to Exhibit 5 (the FDIC Loan Modification Program) for a group of Loans with similar characteristics, with the objectives of (1) minimizing the loss to the Assuming Institution and the FDIC and (2) maximizing the opportunity for qualified homeowners to remain in their homes with affordable mortgage payments.

(b)           Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Loan including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Loans will be provided to FDIC for informational purposes and if such transaction is not entered into on an arm’s length basis on commercially reasonable terms such transaction shall be subject to the prior written approval of the Receiver.

3.3          Shared-Loss Asset Records and Reports. The Assuming Institution shall establish and maintain such records as may be appropriate to account for the Single Family Shared-Loss Loans in such form and detail as the Receiver may reasonably require, and to enable the Assuming Institution to prepare and deliver to the Receiver such reports as the Receiver may from time to time request regarding the Single Family Shared-Loss Loans and the Monthly Certificates required by Section 2.1 of this Single Family Shared-Loss Agreement.

3.4          Related Loans.

(a)           Assuming Institution shall use its best efforts to determine which loans are “Related Loans,” as hereinafter defined. The Assuming Institution shall not manage, administer or collect any “Related Loan” in any manner that would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Loan to which such loan is related. A “Related Loan” means any loan or extension of credit to an Obligor of a Shared-Loss Loan held by the Assuming Institution at any time on or prior to the end of the Final Shared-Loss Month.

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(b)           The Assuming Institution shall prepare and deliver to the Receiver with the Monthly Certificates for the calendar months ending June 30 and December 31, a schedule of all Related Loans on the Accounting Records of the Assuming Institution as of the end of each such semi-annual period.

3.5          Legal Action; Utilization of Special Receivership Powers. The Assuming Institution shall notify the Receiver in writing (such notice to be given in accordance with Article V below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Institution derives as a result of having acquired an asset from the Receiver, and the Assuming Institution shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Institution and the Assuming Institution shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Institution will advise the Receiver as to the status of any such legal action. The Assuming Institution shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

3.6          Third Party Servicer. The Assuming Institution may perform any of its obligations and/or exercise any of its rights under this Single Family Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Institution hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Institution shall be included in calculating Losses to the extent such expenses would be included in such calculation if the expenses were incurred by Assuming Institution); provided, however, that the use thereof by the Assuming Institution shall not release the Assuming Institution of any obligation or liability hereunder.

ARTICLE IV — PORTFOLIO SALE

4.1          Assuming Institution Portfolio Sales of Remaining Shared-Loss Loans. The Assuming Institution shall have the right, with the consent of the Receiver, to liquidate for cash consideration, from time to time in one or more transactions, all or a portion of Shared-Loss Loans held by the Assuming Institution at any time prior to the Termination Date (“Portfolio Sales”). If the Assuming Institution exercises its option under this Section 4.1, it must give sixty (60) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale, which shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors. Sales of Restructured Loans shall be sold in a separate pool from Shared-Loss Loans that have not been restructured. Other proposals for the sale of a Shared-Loss Loan or Shared-Loss Loans submitted by the Assuming Institution will be considered by the Receiver on a case-by-case basis.

4.2          Assuming Institution’s Liquidation of Remaining Shared-Loss Loans. In the event that the Assuming Institution does not conduct a Portfolio Sale pursuant to Section 4.1, the Receiver shall have the right, exercisable in its sole and absolute discretion, to require the Assuming Institution to liquidate for cash consideration, any Shared-Loss Loans held by the Assuming Institution at any time after the date that is six months prior to the Termination Date.

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If the Receiver exercises its option under this Section 4.2, it must give notice in writing to the Assuming Institution, setting forth the time period within which the Assuming Institution shall be required to liquidate the Shared-Loss Loans. The Assuming Institution will comply with the Receiver’s notice and must liquidate the Shared-Loss Loans as soon as reasonably practicable by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors. The selection of any financial advisor or other third party broker or sales agent retained for the liquidation of the remaining Shared-Loss Loans pursuant to this Section shall be subject to the prior approval of the Receiver, such approval not to be unreasonably withheld, delayed or conditioned.

4.3          Calculation of Sale Gain or Loss. For Shared-Loss Loans that are not Restructured Loans, gain or loss on the sales under Section 4.1 or Section 4.2 will be calculated as the sale price received by the Assuming Institution less the unpaid principal balance of the remaining Shared-Loss Loans. For any Restructured Loan included in the sale gain or loss on sale will be calculated as (a) the sale price received by the Assuming Institution less (b) the net present value of estimated cash flows on the Restructured Loan that was used in the calculation of the related Restructuring Loss plus (c) Loan principal payments collected by the Assuming Institution from the date the Loan was restructured to the date of sale. (See Exhibits 2d(1)-(2) for example calculations).

ARTICLE V — LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER

All notices, demands and other communications hereunder shall be in writing and shall be delivered by hand, or overnight courier, receipt requested, addressed to the parties as follows:

If to Receiver, to:	Federal Deposit Insurance Corporation as Receiver
	for Westbridge Bank & Trust Company
	Division of Resolutions and Receiverships
	550 17th Street, N.W.
	Washington, D.C. 20429
	Attention: Ralph Malami, Manager, Capital Markets
with a copy to:	Federal Deposit Insurance Corporation
	as Receiver for Westbridge Bank & Trust Company
	Room E7056
	3501 Fairfax Drive
	Arlington, VA 22226
	Attn: Special Issues Unit

With respect to a notice under Section 3.5 of this Single Family Shared-Loss Agreement, copies of such notice shall be sent to:

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	Federal Deposit Insurance Corporation
	Legal Division 1601 Bryan St.
	Dallas, Texas 75201
	Attention: Regional Counsel
If to Assuming Institution, to:
	Midland States Bank
	Attn: Mr. Jeffrey Ludwig, Chief Financial
	Officer
	133 West Jefferson
	Effingham, Illinois 62401
	cc:      Mr. Leon Holschbach, President and
	Chief Executive Officer

Such Persons and addresses may be changed from time to time by notice given pursuant to the provisions of this Article V. Any notice, demand or other communication delivered pursuant to the provisions of this Article V shall be deemed to have been given on the date actually received.

ARTICLE VI — MISCELLANEOUS

6.1.         Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of a party hereto in connection with this Single Family Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2          Successors and Assigns; Specific Performance. This Single Family Shared-Loss Agreement, and all of the terms and provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and assigns only. The Receiver may assign or otherwise transfer this Single Family Shared-Loss Agreement and the rights and obligations of the Receiver hereunder (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this Single Family Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, the Assuming Institution may not assign or otherwise transfer this Single Family Shared-Loss Agreement or any of the Assuming Institution’s rights or obligations hereunder (in whole or in part), or sell or transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss Assets or Shared-Loss Securities, without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole and absolute discretion. An assignment or transfer of this Single Family Shared-Loss Agreement includes:

(i) a merger or consolidation of the Assuming Institution with or into another company, if the shareholders of the Assuming Institution will own less than sixty-six and two/thirds percent (66.66%) of the equity of the consolidated entity;

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(ii) a merger or consolidation of the Assuming Institution’s Holding Company with or into another company, if the shareholders of the Holding Company will own less than sixty-six and two/thirds percent (66.66%) of the equity of the consolidated entity;

(iii) the sale of all or substantially all of the assets of the Assuming Institution to another company or person; or

(iv) a sale of shares by any one or more shareholders that will effect a change in control of the Assuming Institution, as determined by the Receiver with reference to the standards set forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).

For the avoidance of doubt, any transaction under this Section 6.2 that requires the Receiver’s consent that is made without consent of the Receiver hereunder will relieve the Receiver of any of its obligations under this Single Family Shared-Loss Agreement.

No Loss shall be recognized under this Single Family Shared-Loss Agreement as a result of any accounting adjustments that are made due to or as a result of any assignment or transfer of this Single Family Shared-Loss Agreement or any merger, consolidation, sale or other transaction to which the Assuming Institution, its Holding Company or any Affiliate is a party, regardless of whether the Receiver consents to such assignment or transfer in connection with such transaction pursuant to this Section 6.2.

6.3          WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

6.4          No Third Party Beneficiary. This Single Family Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be construed to grant to any other Person any right, remedy or Claim under or in respect of this Single Family Shared-Loss Agreement or any provision hereof.

6.5          Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

6.6          Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Single Family Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

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ARTICLE VII

DISPUTE RESOLUTION

7.1          Dispute Resolution Procedures.

(a)           In the event a dispute arises about the interpretation, application, calculation of Loss, or calculation of payments or otherwise with respect to this Single Family Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and the Assuming Institution shall make every attempt in good faith to resolve such items within sixty (60) days following the receipt of a written description of the SF Shared-Loss Dispute Item, with notification of the possibility of taking the matter to arbitration (the date on which such 60-day period expires, or any extension of such period as the parties hereto may mutually agree to in writing, herein called the “Resolution Deadline Date”). If the Receiver and the Assuming Institution resolve all such items to their mutual satisfaction by the Resolution Deadline Date, then within thirty (30) days following such resolution, any payment due as a result of such resolution shall be made arising from the settlement of the SF Shared-Loss Dispute.

(b)           If the Receiver and the Assuming Institution fail to resolve any outstanding SF Shared-Loss Dispute Items by the Resolution Deadline Date, then either party may notify the other of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant to the provisions of this Article VII. Failure of either party to submit pursuant to paragraph (c) hereof any unresolved SF Shared-Loss Dispute Item to arbitration within thirty (30) days following the Resolution Deadline Date (the date on which such thirty (30) day period expires is herein called the “Arbitration Deadline Date”) shall extinguish that party’s right to submit the non-submitted SF Shared-Loss Dispute Item to arbitration, and constitute a waiver of the submitting party’s right to dispute such non-submitted SF Shared-Loss Dispute Item (but not a waiver of any similar claim which may arise in the future).

(c)           If a SF Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by the rules of the American Arbitration Association (the “AAA”), except as otherwise provided herein. Either party may submit a matter for arbitration by delivering a notice, prior to the Arbitration Deadline Date, to the other party in writing setting forth:

(i)            A brief description of each SF Shared-Loss Dispute Item submitted for arbitration;

(ii)           A statement of the moving party’s position with respect to each SF Shared-Loss Dispute Item submitted for arbitration;

(iii)          The value sought by the moving party, or other relief requested regarding each SF Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably calculable; and

(iv)          The name and address of the arbiter selected by the moving party (the “Moving Arbiter”), who shall be a neutral, as determined by the AAA.

Failure to adequately include any information above shall not be deemed to be a waiver of the parties right to arbitrate so long as after notification of such failure the moving party cures such failure as promptly as reasonably practicable.

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(d)           The non-moving party shall, within thirty (30) days following receipt of a notice of arbitration pursuant to this Section 7.1, deliver a notice to the moving party setting forth:

(i)            The name and address of the arbiter selected by the non-moving party (the “Respondent Arbiter”), who shall be a neutral, as determined by the AAA;

(ii)           A statement of the position of the respondent with respect to each Dispute Item; and

(iii)          The ultimate resolution sought by the respondent or other relief, if any, the respondent deems is due the moving party with respect to each SF Shared-Loss Dispute Item.

Failure to adequately include any information above shall not be deemed to be a waiver of the non-moving party’s right to defend such arbitration so long as after notification of such failure the non-moving party cures such failure as promptly as reasonably practicable

(e)           The Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished by the AAA. In accordance with the rules of the AAA, the three (3) arbiters shall constitute the arbitration panel for resolution of each SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall be deemed to be the decision of the arbiters for all purposes hereunder. The arbitration shall proceed on such time schedule and in accordance with the Rules of Commercial Arbitration of the AAA then in effect, as modified by this Section 7.1. The arbitration proceedings shall take place at such location as the parties thereto may mutually agree, but if they cannot agree, then they will take place at the offices of the Corporation in Washington, DC, or Arlington, Virginia.

(f)            The Receiver and Assuming Institution shall facilitate the resolution of each outstanding SF Shared-Loss Dispute Item by making available in a prompt and timely manner to one another and to the arbiters for examination and copying, as appropriate, all documents, books, and records under their respective control and that would be discoverable under the Federal Rules of Civil Procedure.

(g)           The arbiters designated pursuant to subsections (c), (d) and (e) hereof shall select, with respect to each Dispute Item submitted to arbitration pursuant to this Section 7.1, either (i) the position and relief submitted by the Assuming Institution with respect to each SF Shared-Loss Dispute Item, or (ii) the position and relief submitted by the Receiver with respect to each SF Shared-Loss Dispute Item, in either case as set forth in its respective notice of arbitration. The arbiters shall have no authority to select a value for each Dispute Item other than the determination set forth in Section 7.1(c) and Section 7.1(d). The arbitration shall be final, binding and conclusive on the parties.

(h)           Any amounts ultimately determined to be payable pursuant to such award shall bear interest at the Settlement Interest Rate from and including the date specified for the arbiters decisions specified in this Section 7.1, without regard to any extension of the finality of such award, to but not including the date paid. All payments required to be made under this Section 7.1 shall be made by wire transfer.

(i)            For the avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute

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Item(s) is provided prior to the Termination Date, the terms of this Single Family Shared-Loss Agreement shall remain in effect with respect to the Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss Dispute Item(s) until such time as any such dispute is finally resolved.

7.2          Fees and Expenses of Arbiters. The aggregate fees and expenses of the arbiters shall be borne equally by the parties. The parties shall pay the aggregate fees and expenses within thirty (30) days after receipt of the written decision of the arbiters (unless the arbiters agree in writing on some other payment schedule).

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EXHIBIT 4.15B

COMMERCIAL SHARED-LOSS AGREEMENT

This agreement for reimbursement of loss sharing expenses on certain loans and other assets (the “Commercial Shared-Loss Agreement”) shall apply when the Assuming Institution purchases Shared-Loss Assets as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Commercial Shared-Loss Agreement is attached as Exhibit 4.15B and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss Agreement with respect to the subject matter of this Commercial Shared-Loss Agreement, the terms of this Commercial Shared-Loss Agreement shall control. References in this Commercial Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Commercial Shared-Loss Agreement unless the context indicates that a Section of the Purchase and Assumption Agreement is intended.

ARTICLE I – DEFINITIONS

Capitalized terms used in this Commercial Shared-Loss Agreement that are not defined in this Commercial Shared-Loss Agreement are defined in the Purchase and Assumption Agreement In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Commercial Shared-Loss Agreement.

“AAA” means the American Arbitration Association as provided in Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.

“Accrued Interest” means, with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance at any time, the amount of earned and unpaid interest, taxes, credit life and/or disability insurance premiums (if any) payable by the Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance, all as reflected on the Accounting Records of the Failed Bank or the Assuming Institution (as applicable); provided, that Accrued Interest shall not include any amount that accrues on or with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance after that Asset has been placed on non-accrual or nonperforming status by either the Failed Bank or the Assuming Institution (as applicable).

“Additional ORE” means Shared-Loss Loans that become Other Real Estate after Bank Closing Date.

“Affiliate” shall have the meaning set forth in the Purchase and Assumption Agreement; provided, that, for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Institution.

“Aggregate Net Charge-Offs” means the total amount of Charge-Offs, less the total amount of Recoveries, for all Shared-Loss Quarters and all Recovery Quarters.

“Applicable Anniversary of the Commencement Date” means the fifth (5th) anniversary of the Commencement Date.

“Applicable Percentage” means the percentage of shared-loss the Receiver will incur with respect to this Commercial Shared-Loss Agreement, which is Eighty Percent (80%) until the total of Net

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Charge-Offs equals the Commercial Intrinsic Loss Estimate, and Eighty Percent (80%)thereafter.

“Calendar Quarter” means a quarterly period (a) for the first such period, beginning on the Commencement Date and ending on the last calendar day of either March, June, September or December, whichever is the first to occur after the Commencement Date, and (b) for quarterly periods thereafter, beginning on the first calendar day of the calendar month immediately after the month that ended the prior period and ending on the last calendar day of each successive three-calendar-month period thereafter (i.e., each March, June, September and December, starting in the applicable order depending on the ending date of first such period) of any year.

“Capitalized Expenditures” means those expenditures that (i) would be capitalized under generally accepted accounting principles, and (ii) are incurred with respect to Shared-Loss Loans, Other Real Estate, or Additional ORE. Capitalized Expenditures shall not include expenses related to environmental conditions including, but not limited to, remediation, storage or disposal of any hazardous or toxic substances or any pollutant or contaminant.

“Charge-Offs” means, with respect to any Shared-Loss Assets for any period, an amount equal to the aggregate amount of loans or portions of loans classified as “Loss” under the Examination Criteria, including

(a) charge-offs of

(i) the principal amount of such assets net of unearned interest (including write-downs associated with Other Real Estate, Additional ORE, or loan modification(s)); and

(ii) Accrued Interest; and

(iii) Capitalized Expenditures; plus

(b) Pre-Charge-Off Expenses incurred on the respective Shared-Loss Loans, all as effected by the Assuming Institution during such period and reflected on the Accounting Records of the Assuming Institution; provided, that:

(i) the aggregate amount of Accrued Interest (including any reversals thereof) for the period after Bank Closing that shall be included in determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed ninety (90) days Accrued Interest; and

(ii) no Charge-Off shall be taken with respect to any anticipated expenditure by the Assuming Institution until such expenditure is actually incurred; and

(iii) any financial statement adjustments made in connection with the purchase of any Assets pursuant to this Purchase and Assumption Agreement or any future purchase, merger, consolidation or other acquisition of the Assuming Institution shall not constitute “Charge-Offs;” and

(c) except for Portfolio Sales, the sale or other disposition of Other Real Estate, or Additional ORE to a Person other than an Affiliate of the Assuming Institution conducted in a commercially reasonable and prudent manner, or any other sales or dispositions consented to by the Receiver, losses incurred on the sale or other disposition of Shared-Loss Assets or Shared-Loss Securities to any Person shall not constitute Charge-Offs.

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“Commencement Date” means the first calendar day following Bank Closing.

“Commercial Intrinsic Loss Estimate” means total losses under this Commercial Shared-Loss Agreement in the amount of Sixteen Million Dollars ($16,000,000.00).

“Consumer Loans” means loans to individuals for household, family and other personal expenditures, not secured by real estate, including but not limited to loans for (i) purchase of private automobiles, pickup trucks, household appliances, furniture, trailers and boats; (ii) repairs or improvements to the borrower’s residence not secured by real estate; (iii) educational expenses, including student loans, whether or not guaranteed by the United States or any state; (iv) medical expenses; (v) taxes; (v) vacations; (vi) personal (non business) debt consolidation; (vii) purchases of mobile homes not combined with real property to be used as a residence; and (viii) other personal expenditures. Consumer Loans can be installment loans, demand loans, single payment time loans, regardless of size or maturity, and regardless of whether the loans are made by the consumer loan department or by any other department within the Failed Bank. Consumer Loans also include retail installment sales paper purchased by the Failed Bank from merchants or dealers, finance companies and others, and extensions of credit pursuant to a credit card plan or debit card plan.

“Environmental Assessment” means an assessment of the presence, storage or release of any hazardous or toxic substance, pollutant or contaminant with respect to the collateral securing a Shared-loss Loan that has been fully or partially charged off.

“Examination Criteria” means the loan classification criteria employed by, or any applicable regulations of, the Assuming Institution’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.

“Failed Bank Charge-Offs/Write-Downs” means, with respect to any Asset, an amount equal to the aggregate amount of reversals or charge-offs of Accrued Interest and charge-offs and write-downs of principal effected by the Failed Bank with respect to that Asset as reflected on the Accounting Records of the Failed Bank.

“FDIC Party” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.

“Holding Company” means any company owning Shares of the Assuming Institution that is a holding company pursuant to the Bank Holding Company Act of 1956, 12 U.S.C. 1841 et seq. or the Home Owner’s Loan Act, 12 U.S.C. 1461 et seq.

“Net Charge-Offs” means, with respect to any period, an amount equal to the aggregate amount of Charge-Offs for such period less the amount of Recoveries for such period.

“Net Loss Amount” means the sum of all Aggregate Net Charge-Offs under this Commercial Shared-Loss Agreement and the Cumulative Loss Amounts under the Single Family Shared-Loss Agreement.

“Neutral Member” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.

“New Shared-Loss Loans” means loans that would otherwise be subject to loss sharing under this Commercial Shared-Loss Agreement that were originated after the Bid Valuation Date and before

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Bank Closing.

“Notice of Dispute” has the meaning provided in Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.

“Other Real Estate” means all of the following (including any of the following fully or partially charged off the books and records of the Failed Bank or the Assuming Institution) that (i) are owned by the Failed Bank as of Bank Closing and are purchased pursuant to the Purchase and Assumption Agreement or (ii) have arisen subsequent to Bank Closing from the collection or settlement by the Assuming Institution of a Shared-Loss Loan:

(A)all interests in real estate (other than Bank Premises and Fixtures), including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights; and

(B)all other assets (whether real or personal property) acquired by foreclosure or in full or partial satisfaction of judgments or indebtedness.

“OTTI Adjustment” means any other than temporary impairment of the Shared-Loss Securities, determined pursuant to FAS 115, expressed as a positive number, or reversals of other than temporary impairment, expressed as a negative number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason of the application of fair value accounting do not qualify for loss sharing payments).

“OTTI Loss” means any other than temporary impairment of the Shared-Loss Securities, determined pursuant to FAS 115, expressed as a positive number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason of the application of fair value accounting do not qualify for loss sharing payments).

“Permitted Advance” means an advance of funds by the Assuming Institution with respect to a Shared-Loss Loan, or the making of a legally binding commitment by the Assuming Institution to advance funds with respect to a Shared-Loss Loan, that

(i) in the case of such an advance, is actually made, and, in the case of such a commitment, is made and all of the proceeds thereof actually advanced, within one (1) year after the Commencement Date; and

(ii) does not cause the sum of

(A) the book value of such Shared-Loss Loan as reflected on the Accounting Records of the Assuming Institution after any such advance has been made by the Assuming Institution; plus

(B) the unfunded amount of any such commitment made by the Assuming Institution related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan; and

(iii) is not made with respect to a Shared-Loss Loan with respect to which

(A) there exists a related Shared-Loss Loan Commitment; or

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(B) the Assuming Institution has taken a Charge-Off; and

(iv) is made in good faith, is supported at the time it is made by documentation in the Credit Files and conforms to and is in accordance with the applicable requirements set forth in Article III of this Commercial Shared-Loss Agreement and with the then effective written internal credit policy guidelines of the Assuming Institution; provided, that the limitations in subparagraphs (i), (ii) and (iii) of this definition shall not apply to any such action (other than to an advance or commitment related to the remediation, storage or final disposal of any hazardous or toxic substance, pollutant or contaminant) that is taken by Assuming Institution in its reasonable discretion to preserve or secure the value of the collateral for such Shared-Loss Loan.

“Permitted Amendment” means, with respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment, modification, renewal or extension thereof, or any waiver of any term, right, or remedy thereunder, made by the Assuming Institution in good faith and otherwise in accordance with the applicable requirements set forth in Article III of this Commercial Shared-Loss Agreement and the then effective written internal credit policy guidelines of the Assuming Institution; provided, that:

(i) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the amount of principal (A) then remaining available to be advanced by the Assuming Institution under the Shared-Loss Loan Commitment or (B) then outstanding under the Shared-Loss Loan;

(ii) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the maximum amount of principal authorized as of Bank Closing to be outstanding at any one time under the underlying revolving line of credit relationship with the debtor (regardless of the extent to which such revolving line of credit may have been funded as of Bank Closing or may subsequently have been funded and/or repaid); and

(iii) no such amendment, modification, renewal, extension or waiver shall extend the term of such Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment or Shared-Loss Loan as existed on Bank Closing was beyond the end of the final Shared-Loss Quarter, in which event no such amendment, modification, renewal, extension or waiver shall extend such term beyond the term as existed as of Bank Closing.

“Pre-Charge-Off Expenses” means those expenses incurred in the usual and prudent management of a Shared-Loss Loan that would qualify as a Reimbursable Expense or Recovery Expense if incurred after a Charge-Off of the related Shared-Loss Asset had occurred.

“Quarterly Certificate” has the meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.

“Recoveries” shall mean the following:

(i) Generally.

(A) In addition to any sums to be applied as Recoveries pursuant to subparagraph (ii) below, “Recoveries” means, with respect to any period, the sum of (without duplication):

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(1) the amount of collections during such period by the Assuming Institution on Charge-Offs of Shared-Loss Assets effected by the Assuming Institution prior to the end of the final Shared-Loss Quarter; plus

(2) the amount of collections during such period by the Assuming Institution on Failed Bank Charge-Offs/Write-Downs; plus

(3) the amount of gain on any sale or other disposition during such period by the Assuming Institution of Shared Loss Loans, Other Real Estate, or Additional ORE (provided, that the amount of any such gain included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses); plus

(4) the amount of collections during such period by the Assuming Institution of any Reimbursable Expenses or Recovery Expenses; plus

(5) the amount of any fee or other consideration received by the Assuming Institution during or prior to such period in connection with any amendment, modification, renewal, extension, refinance, restructure, commitment or other similar action taken by the Assuming Institution with respect to a Shared-Loss Asset with respect to which there exists a Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been effected by the Assuming Institution during or prior to such period (provided, that the amount of any such fee or other consideration included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses).

(B) Order of Application. For the purpose of determining the amounts to be applied as Recoveries pursuant to subparagraph (A) above, the Assuming Institution shall apply amounts received on the Assets that are not otherwise applied to reduce the book value of principal of a Shared-Loss Loan (or, in the case of Other Real Estate, Additional ORE, and Capitalized Expenditures, that are not otherwise applied to reduce the book value thereof) in the following order: first to Charge-Offs and Failed Bank Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses; then to interest income; and then to other expenses incurred by the Assuming Institution.

(ii)Interest Income as Recoveries. If there occurs an amendment, modification, renewal, extension, refinance, restructure, commitment, sale or other similar action with respect to a Shared-Loss Loan as to which there exists a Failed Bank Charge-Off/Write Down or as to which a Charge-Off has been effected by the Assuming Institution during or prior to such period, and if, as a result of such occurrence, the Assuming Institution recognizes any interest income for financial accounting purposes on that Shared-Loss Loan, then “Recoveries” shall also include the portion of the total amount of any such interest income recognized by the Assuming Institution which is derived by multiplying:

(A) the total amount of any such interest income recognized by the Assuming Institution during such period with respect to that Shared-Loss Loan as described above, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) immediately above was recognized, and the denominator of which is the total

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amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

provided, however, that the amount of any interest income included as Recoveries for a particular Shared-Loss Loan shall not exceed the aggregate amount of (x) Failed Bank Charge-Offs/Write-Downs, (y) Charge-Offs effected by the Assuming Institution during or prior to the period in which the amount of Recoveries is being determined, plus (z) any Reimbursable Expenses and Recovery Expenses paid to the Assuming Institution pursuant to this Commercial Shared-Loss Agreement during or prior to the period in which the amount of Recoveries is being determined, all with respect to that particular Shared-Loss Loan; and, provided, further, that any collections on any such Shared-Loss Loan that are not applied to reduce book value of principal or recognized as interest income shall be applied pursuant to subparagraph (i) above.

(iii) Exceptions to Recoveries.  Notwithstanding subparagraphs (i) and (ii) above, the term “Recoveries” shall not include:

(A) any amounts paid to the Assuming Institution by the Receiver pursuant to Section 2.1 of this Commercial Shared-Loss Agreement;

(B) amounts received with respect to Charge-Offs effected by the Assuming Institution after the final Shared-Loss Quarter;

(C) after the final Shared-Loss Quarter, income received by the Assuming Institution from the operation of, and any gains recognized by the Assuming Institution on the disposition of, Other Real Estate, or Additional ORE (such income and gains being hereinafter together referred to as “ORE Income”), except to the extent that aggregate ORE Income exceeds the aggregate expenses paid to third parties by or on behalf of the Assuming Institution after the final Shared-Loss Quarter to manage, operate and maintain Other Real Estate, or Additional ORE (such expenses being hereinafter referred to as “ORE Expenses”). In determining the extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery Quarter, the Assuming Institution will subtract

(1) ORE Expenses paid to third parties during such Recovery Quarter (provided, that, in the case of the final Recovery Quarter only, the Assuming Institution will subtract ORE Expenses paid to third parties from the beginning of the final Recovery Quarter up to the date the Assuming Institution is required to deliver the final Quarterly Certificate pursuant to this Commercial Shared-Loss Agreement), from

(2) ORE Income received during such Recovery Quarter, to calculate net ORE income (“Net ORE Income”) for that Recovery Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter is positive, such amount shall be reported as Recoveries on the Quarterly Certificate for such Recovery Quarter.

If the amount of Net ORE Income so calculated for a Recovery Quarter is negative (“Net ORE Loss Carryforward”), such amount shall be added to any ORE Expenses paid to third parties in the next succeeding Recovery Quarter, which sum shall then be subtracted from ORE Income for that next succeeding Recovery Quarter, for the purpose of determining the amount of Net ORE Income (or, if applicable, Net ORE Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the amount of the Net ORE Loss Carryforward that does not exceed the aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates for all Recovery Quarters may be included as a Recovery Expense on the Quarterly Certificate for the final Recovery Quarter.

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“Recovery Amount” has the meaning provided in Section 2.1(b)(ii) of this Commercial Shared-Loss Agreement.

“Recovery Expenses” means, for any Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures) paid to third parties (other than Affiliates of the Assuming Institution) by or on behalf of the Assuming Institution, as limited by Sections 3.2(c) and (d) of Article III to this Commercial Shared-Loss Agreement, to recover amounts owed with respect to:

(i) any Shared-Loss Asset as to which a Charge-Off was effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the Accounting Records of the Assuming Institution); and

(ii) Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and expenses related to an Environmental Assessment and any other costs or expenses related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any remediation expenses for any such pollutant or contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset, without the Assuming Institution having obtained the prior consent of the Receiver for such expenses).

Provided, that, so long as income with respect to a Shared-Loss Loan is being prorated pursuant to the arithmetical formula in subsection (ii) of the definition of “Recoveries”, the term “Recovery Expenses” shall not include that portion of any such expenses paid during such Recovery Quarter to recover any amounts owed on that Shared-Loss Loan that is derived by:

subtracting (1) the product derived by multiplying:

(A) the total amount of any such expenses paid by or on behalf of the Assuming Institution during such Recovery Quarter with respect to that Shared-Loss Loan, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (ii)(A) of the definition of “Recoveries” was recognized, and the denominator of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

from (2) the total amount of any such expenses paid during that Recovery Quarter with respect to that Shared-Loss Loan.

“Recovery Quarter” has the meaning provided in Section 2.1(a)(ii) of this Commercial Shared-Loss Agreement.

“Reimbursable Expenses” means, for any Shared-Loss Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures), paid to third parties (other than Affiliates of the Assuming Institution) by or on behalf of the Assuming Institution, as limited by

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Sections 3.2(c) and (d) of Article III of this Commercial Shared-Loss Agreement, to:

(i) recover amounts owed with respect to any Shared-Loss Asset as to which a Charge-Off has been effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the Accounting Records of the Assuming Institution) and recover amounts owed with respect to Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and expenses related to an Environmental Assessment and any other costs or expenses related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any such remediation expenses for any such pollutant or contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset, without the Assuming Institution having obtained the prior consent of the Receiver for such expenses); provided, that, so long as income with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in subsection (II) of the definition of “Recoveries”, the term “Reimbursable Expenses” shall not include that portion of any such expenses paid during such Shared-Loss Quarter to recover any amounts owed on that Shared-Loss Loan that is derived by:

subtracting (1) the product derived by multiplying:

(A) the total amount of any such expenses paid by or on behalf of the Assuming Institution during such Shared-Loss Quarter with respect to that Shared-Loss Loan, by

(B) a fraction, the numerator of which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) of the definition of “Recoveries” was recognized, and the denominator of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

from (2) the total amount of any such expenses paid during that Shared-Loss Quarter with respect to that Shared-Loss Loan;

(ii) manage, operate or maintain Other Real Estate, or Additional ORE less the amount of any income received by the Assuming Institution during such Shared-Loss Quarter with respect to such Other Real Estate, or Additional ORE (which resulting amount under this clause (ii) may be negative);

(iii) litigation expenses with respect to Shared-Loss Assets.

“Review Board” has the meaning provided in Section 2.1(f)(i) of this Commercial Shared-Loss Agreement.

“Shared-Loss Amount” has the meaning provided in Section 2.1(b)(i) of this Commercial Shared-Loss Agreement.

“Shared-Loss Asset Repurchase Price” means, with respect to any Shared-Loss Asset, the principal amount thereof plus any other fees or penalties due from an Obligor (including, subject to the limitations discussed below, the amount of any Accrued Interest) stated on the Accounting Records of the Assuming Institution, as of the date as of which the Shared-Loss Asset Repurchase Price is being determined

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(regardless, in the case of a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable Expenses and Recovery Expenses incurred up to and through the date of consummation of purchase of such Shared-Loss Asset; provided, that (i) in the case of a Shared-Loss Loan there shall be excluded from such amount the amount of any Accrued Interest accrued on or with respect to such Shared-Loss Loan prior to the ninety (90)-day period ending on the day prior to the purchase date determined pursuant to Sections 2.1(e)(i) or 2.1(e)(iii) of this Commercial Shared-Loss Agreement, except to the extent such Accrued Interest was included in the Book Value of such Shared-Loss Loan, and (ii) any collections on a Shared-Loss Loan received by the Assuming Institution after the purchase date applicable to such Shared-Loss Loan shall be applied (without duplication) to reduce the Shared-Loss Asset Repurchase Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of determining the amount of unpaid interest which accrued during a given period with respect to a variable-rate Shared-Loss Loan, all collections of interest shall be deemed to be applied to unpaid interest in the chronological order in which such interest accrued.

“Shared-Loss Assets” means Shared-Loss Loans, Other Real Estate purchased by the Assuming Institution, Additional ORE, Shared-Loss Subsidiaries, and Capitalized Expenditures, but does not include Shared-Loss Securities.

“Shared-Loss Loan Commitment” means:

(i) any Commitment to make a further extension of credit or to make a further advance with respect to an existing Shared-Loss Loan; and

(ii) any Shared-Loss Loan Commitment (described in subparagraph (i) immediately preceding) with respect to which the Assuming Institution has made a Permitted Amendment.

“Shared-Loss Loan Commitment Advance” means an advance pursuant to a Shared-Loss Loan Commitment with respect to which the Assuming Institution has not made a Permitted Advance.

“Shared-Loss Loans” means:

(i)(A) Loans purchased by the Assuming Institution pursuant to the Purchase and Assumption Agreement set forth on Schedule 4.15(b) to the Purchase and Assumption Agreement;

(B) New Shared-Loss Loans purchased by the Assuming Institution pursuant to the Purchase and Assumption Agreement;

(C) Permitted Advances;

(D) Shared-Loss Loan Commitment Advances, if any; provided, that Shared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted Advances and Shared-Loss Loan Commitment Advances with respect to which an Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor;

(E) but does not include Consumer Loans; and

(ii)  any Shared-Loss Loans (described in subparagraph (i) immediately preceding) with respect to which the Assuming Institution has made a Permitted Amendment.

“Shared-Loss Securities” means those securities and other assets listed on Exhibit 4.15(C).

“Shared-Loss Subsidiaries” means those subsidiaries listed on Exhibit 4.15D.

“Shared-Loss Quarter” has the meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.

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“Shares” means common stock and any instrument which by its terms is currently convertible into common stock, or which may become convertible into common stock.

“SLS Net Realized Gain” means the net realized gain on the sale of a Shared Loss Security determined pursuant to FAS 115, expressed as a negative number on the Quarterly Certificate.

“SLS Net Realized Loss” means the net realized loss on the sale of a Shared Loss Security determined pursuant to FAS 115, expressed as a positive number on the Quarterly Certificate.

“Termination Date” means the eighth (8th) anniversary of the Commencement Date.

“Total Intrinsic Loss Estimate” means the sum of the Commercial Intrinsic Loss Estimate in this Commercial Shared-Loss Agreement and the SF1-4 Intrinsic Loss Estimate in the Single Family Shared-Loss Agreement, expressed in dollars.

“Third Party Servicer” means any servicer appointed from time to time by the Assuming Institution or any Affiliate of the Assuming Institution to service the Shared-Loss Assets on behalf of the Assuming Institution, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.

ARTICLE II — SHARED-LOSS ARRANGEMENT

2.1 Shared-Loss Arrangement.

(a)Quarterly Certificates. (i) Not later than thirty (30) days after the end of each Calendar Quarter from and including the initial Calendar Quarter to and including the Calendar Quarter in which the Applicable Anniversary of the Commencement Date falls (each of such Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the Assuming Institution shall deliver to the Receiver a certificate, signed by the Assuming Institution’s chief executive officer and its chief financial officer, setting forth in such form and detail as the Receiver may specify (a “Quarterly Certificate”)(an example of a Quarterly Certificate is attached as Exhibit 1):

(A)the amount of Charge-Offs, the amount of Recoveries and the amount of Net Charge-Offs (which amount may be negative) during such Shared-Loss Quarter with respect to the Shared-Loss Assets (and for Recoveries, with respect to the Assets for which a charge-off was effected by the Failed Bank prior to Bank Closing); and

(B)the aggregate amount of Reimbursable Expenses (which amount may be negative) during such Shared-Loss Quarter; and

(C)SLS Net Realized Loss and SLS Net Realized Gain, if any; and

(D)any OTTI Adjustment.

(ii)Not later than thirty (30) days after the end of each Calendar Quarter from and including the first Calendar Quarter following the final Shared-Loss Quarter to and including the Calendar Quarter in which the Termination Date falls (each of such Calendar Quarters being referred to herein as a “Recovery Quarter”), the Assuming Institution shall deliver to the Receiver a Quarterly Certificate setting

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forth, in such form and detail as the Receiver may specify

(A)the amount of Recoveries and Recovery Expenses during such Recovery Quarter. On the Quarterly Certificate for the first Recovery Quarter only, the Assuming Institution may report as a separate item, in such form and detail as the Receiver may specify, the aggregate amount of any Reimbursable Expenses that: (a) were incurred prior to or during the final Shared-Loss Quarter, and (b) had not been included in any Quarterly Certificate for any Shared-Loss Quarter because they had not been actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) during any Shared-Loss Quarter and (c) were actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) during the first Recovery Quarter; and

(B)SLS Net Realized Gain, and any reversals of OTTI Loss.

(b)Payments With Respect to Shared-Loss Assets.

(i)For purposes of this Section 2.1(b), the Assuming Institution shall initially record the Shared-Loss Assets on its Accounting Records at Book Value, and initially record the Shared-Loss Securities on its Accounting Records at Book Value, and adjust such amounts as such values may change after the Bank Closing. If the amount of all Net Charge-Offs during any Shared-Loss Quarter plus Reimbursable Expenses, plus SLS Net Realized Gain and SLS Net Realized Loss, plus the OTTI Adjustment during such Shared-Loss Quarter (the “Shared-Loss Amount”) is positive, then, except as provided in Sections 2.1(c) and (e) below, and subject to the provisions of Section 2.1(b)(iii) below, not later than fifteen (15) days after the date on which the Receiver receives the Quarterly Certificate with respect to such Shared-Loss Quarter, the Receiver shall pay to the Assuming Institution an amount equal to the Applicable Percentage of the Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount during any Shared-Loss Quarter is negative, the Assuming Institution shall pay to the Receiver an amount equal to the Applicable Percentage of the Shared-Loss Amount for such Shared-Loss Quarter, which payment shall be delivered to the Receiver together with the Quarterly Certificate for such Shared-Loss Quarter.

(ii)(A)If the amount of gross Recoveries during any Recovery Quarter less Recovery Expenses during such Recovery Quarter plus SLS Net Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (the “Recovery Amount”) is positive, then, simultaneously with its delivery of the Quarterly Certificate with respect to such Recovery Quarter, the Assuming Institution shall pay to the Receiver an amount equal to the Applicable Percentage of the Recovery Amount for such Recovery Quarter.

(B)If the Recovery Amount is negative, then such negative amount shall be subtracted from the amount of gross Recoveries during the next succeeding Recovery Quarter in determining the Recovery Amount in such next succeeding Recovery Quarter; provided, that this Section 2.1(b)(ii) shall operate successively in the event that the Recovery Amount (after giving effect to this Section 2.1(b)(ii)) in such next succeeding Recovery Quarter is negative.

(C)The Assuming Institution shall specify, in the Quarterly Certificate for the final Recovery Quarter, the aggregate amount for all Recovery Quarters only, as of the end of, and including, the final Recovery Quarter of (A) Recoveries plus SLS Net Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (“Aggregate Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C) only those Recovery Expenses that have been actually “offset” against Aggregate Recovery Period Recoveries (including those so “offset” in that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in this sentence, the term “offset” means the amount that

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has been applied to reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set forth in this Section 2.1(b)(ii). If, at the end of the final Recovery Quarter the amount of Aggregate Recovery Expenses exceeds the amount of Aggregate Recovery Period Recoveries, the Receiver shall have no obligation to pay to the Assuming Institution all or any portion of such excess.

(D)Subsequent to the Assuming Institution’s calculation of the Recovery Amount (if any) for the final Recovery Quarter, the Assuming Institution shall also show on the Quarterly Certificate for the final Recovery Quarter the results of the following three mathematical calculations: (i) Aggregate Recovery Period Recoveries minus Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses minus Aggregate Offset Recovery Expenses; and (iii) the lesser of the two amounts calculated in (i) and (ii) immediately above (“Additional Recovery Expenses”) multiplied by the Applicable Percentage (the amount so calculated in (iii) being defined as the “Additional Recovery Expense Amount”). If the Additional Recovery Expense Amount is greater than zero, then the Assuming Institution may request in the Quarterly Certificate for the final Recovery Quarter that the Receiver reimburse the Assuming Institution the amount of the Additional Recovery Expense Amount and the Receiver shall pay to the Assuming Institution the Additional Recovery Expense Amount within fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate.

(E)On the Quarterly Certificate for the final Recovery Quarter only, the Assuming Institution may include, in addition to any Recovery Expenses for that Recovery Quarter that were paid by or on behalf of the Assuming Institution in that Recovery Quarter, those Recovery Expenses that: (a) were incurred prior to or during the final Recovery Quarter, and (b) had not been included in any Quarterly Certificate for any Recovery Quarter because they had not been actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) during any Recovery Quarter, and (c) were actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) prior to the date the Assuming Institution is required to deliver that final Quarterly Certificate to the Receiver under the terms of Section 2.1(a)(ii).

(iii)With respect to each Shared-Loss Quarter and Recovery Quarter, collections by or on behalf of the Assuming Institution on any charge-off effected by the Failed Bank prior to Bank Closing on an Asset other than a Shared-Loss Asset or Shared-Loss Securities shall be reported as Recoveries under this Section 2.1 only to the extent such collections exceed the Book Value of such Asset, if any. For any Shared-Loss Quarter or Recovery Quarter in which collections by or on behalf of the Assuming Institution on such Asset are applied to both Book Value and to a charge-off effected by the Failed Bank prior to Bank Closing, the amount of expenditures incurred by or on behalf of the Assuming Institution attributable to the collection of any such Asset, that shall be considered a Reimbursable Expense or a Recovery Expense under this Section 2.1 will be limited to a proportion of such expenditures which is equal to the proportion derived by dividing (A) the amount of collections on such Asset applied to a charge-off effected by the Failed Bank prior to Bank Closing, by (B) the total collections on such Assets. With respect to Assets that were completely charged off by the Failed Bank and had a zero Book Value at Bank Closing, for the purpose of calculating the payments under this Section 2.1(b) for Recoveries on those Assets for each such quarter, the Assuming Institution shall pay an amount equal to fifty percent (50%) of the Recoveries on Failed Bank Charge-Offs/Write-Downs with respect to such Assets, and shall separately account for the other computations on those Recoveries under this Section 2.1(b) using fifty percent (50%) (and not the Applicable Percentage).

(iv)If the Assuming Institution has duly specified an amount of Reimbursable Expenses on the Quarterly Certificate for the first Recovery Quarter as described above in Section 2.1(a)(ii)(E), then, not later than fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate, the Receiver shall pay to the Assuming Institution an amount equal to the Applicable Percentage of the amount

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of such Reimbursable Expenses.

(v)Payments from the Receiver with respect to this Commercial Shared-Loss Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Commercial Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.

(c)Limitation on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to this Section 2.1 with respect to any Charge-Off of a Shared-Loss Asset that the Receiver or the Corporation determines, based upon the Examination Criteria, should not have been effected by the Assuming Institution; provided, (x) the Receiver must provide notice to the Assuming Institution detailing the grounds for not making such payment, (y) the Receiver must provide the Assuming Institution with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the Receiver shall make payment with respect to any properly effected Charge-Off and (2) to the extent not curable, the Receiver shall make a payment as to all Charge-Offs (or portion of Charge-Offs) that were effected which would have been payable as a Charge-Off if the Assuming Institution had properly effected such Charge-Off. In the event that the Receiver does not make any payments with respect to any Charge-Off of a Shared-Loss Asset pursuant to this Section 2.1 or determines that a payment was improperly made, the Assuming Institution and the Receiver shall, upon final resolution, make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections. Failure to administer any Shared-Loss Asset or Assets, or Shared-Loss Securities, in accordance with Article III shall at the discretion of the Receiver constitute grounds for the loss of shared loss coverage with respect to such Shared-Loss Loan or Loans.

(d)Sale of, or Additional Advances or Amendments with Respect to, Shared-Loss Loans and Administration of Related Loans. No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 (i) if the Assuming Institution sells or otherwise transfers such Shared-Loss Loan or any interest therein (whether with or without recourse) to any Person, (ii) after the Assuming Institution makes any additional advance, commitment or increase in the amount of a commitment with respect to such Shared-Loss Loan that does not constitute a Permitted Advance or a Shared-Loss Loan Commitment Advance, (iii) after the Assuming Institution makes any amendment, modification, renewal or extension to such Shared-Loss Loan that does not constitute a Permitted Amendment, or (iv) after the Assuming Institution has managed, administered or collected any “Related Loan” (as such term is defined in Section 3.4 of Article III of this Commercial Shared-Loss Agreement) in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of such Shared-Loss Asset to which such loan is related; provided, that any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the taking of any action described in clause (i), (ii), (iii) or (iv) of this Section 2.1 (d) by the Assuming Institution shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of treatment of Recoveries on such Charge-Offs until such time as the amount of Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.

(e)Option to Purchase.

(i)In the event that the Assuming Institution determines that there is a substantial likelihood that continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of $5,000,000 or more on the Accounting Records of the Assuming Institution will result in an expenditure, after Bank Closing, of funds by on behalf of the Assuming Institution to a third party for a specified purpose (the expenditure of which, in its best

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judgment, will maximize collections), which do not constitute Reimbursable Expenses or Recovery Expenses, and such expenses will exceed ten percent (10%) of the then book value thereof as reflected on the Accounting Records of the Assuming Institution, the Assuming Institution shall (i) promptly so notify the Receiver and (ii) request that such expenditure be treated as a Reimbursable Expense or Recovery Expense for purposes of this Section 2.1. (Where the Assuming Institution determines that there is a substantial likelihood that the previously mentioned situation exists with respect to continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of less than $1,000,000 on the Accounting Records of the Assuming Institution, the Assuming Institution may so notify the Receiver and request that such expenditure be treated as a Reimbursable Expense or Recovery Expense.) Within thirty (30) days after its receipt of such a notice, the Receiver will advise the Assuming Institution of its consent or denial, that such expenditures shall be treated as a Reimbursable Expense or Recovery Expense, as the case may be. Notwithstanding the failure of the Receiver to give its consent with respect to such expenditures, the Assuming Institution shall continue to administer such Shared-Loss Asset in accordance with Section 2.2, except that the Assuming Institution shall not be required to make such expenditures. At any time after its receipt of such a notice and on or prior to the Termination Date the Receiver shall have the right to purchase such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii), notwithstanding any consent by the Receiver with respect to such expenditure.

(ii)During the period prior to the Termination Date, the Assuming Institution shall notify the Receiver within fifteen (15) days after any of the following becomes fully or partially charged-off:

(A) a Shared-Loss Loan having a Legal Balance (or, in the case of more than one (1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance) of $5,000,000 or more in circumstances in which the legal claim against the relevant Obligor survives; or

(B) a Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R. 215.2(d), a “principal shareholder” as defined in 12 C.F.R. 215.2(l), or an Affiliate of the Assuming Institution.

During the period prior to the Termination Date, the Assuming Institution shall notify the Receiver within fifteen (15) days after any complete or partial charge-off of a Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R. 215.2(d), a “principal shareholder” as defined in 12 C.F.R. 215.2(l), or an Affiliate of the Assuming Institution.

(iii)If the Receiver determines in its discretion that the Assuming Institution is not diligently pursuing collection efforts with respect to any Shared-Loss Asset which has been fully or partially charged-off or written-down (including any Shared-Loss Asset which is identified or required to be identified in a notice pursuant to Section 2.1(e)(ii)) or any Asset for which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its option, exercisable at any time on or prior to the Termination Date, require the Assuming Institution to assign, transfer and convey such Shared-Loss Asset or Asset to and for the sole benefit of the Receiver for a price equal to the Shared-Loss Asset Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Shared-Loss Asset or Asset.

(iv)Not later than ten (10) days after the date upon which the Assuming Institution receives notice of the Receiver’s intention to purchase or require the assignment of any Shared-Loss Asset or Asset pursuant to Section 2.1(e)(i) or (iii), the Assuming Institution shall transfer to the Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto and shall take all such other actions as may be necessary and appropriate to adequately effect the transfer of such Shared-Loss Asset or Asset from the Assuming Institution to the Receiver. Not later than fifteen (15) days after the date upon which the Receiver

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receives such Shared-Loss Asset or Asset and any Credit Files relating thereto, the Receiver shall pay to the Assuming Institution an amount equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or Asset less the Related Liability Amount.

(v)The Receiver shall assume all Related Liabilities with respect to any Shared-Loss Asset or Asset set forth in the notice described in Section 2.1(e)(iv).

(f)Dispute Resolution.

(i) (A) Any dispute as to whether a Charge-Off of a Shared-Loss Asset was made in accordance with Examination Criteria shall be resolved by the Assuming Institution’s Chartering Authority. (B) With respect to any other dispute arising under the terms of this Commercial Shared-Loss Agreement which the parties hereto cannot resolve after having negotiated such matter, in good faith, for a thirty (30) day period, other than a dispute the Corporation is not permitted to submit to arbitration under the Administrative Dispute Resolution Act of 1996 (“ADRA”), as amended, such other dispute shall be resolved by determination of a review board (a “Review Board”) established pursuant to Section 2.1(f). Any Review Board under this Section 2.1(f) shall follow the provisions of the Federal Arbitration Act and shall follow the provisions of the ADRA. (C) Any determination by the Assuming Institution’s Chartering Authority or by a Review Board shall be conclusive and binding on the parties hereto and not subject to further dispute, and judgment may be entered on said determination in accordance with applicable arbitration law in any court having jurisdiction thereof.

(ii)A Review Board shall consist of three (3) members, each of whom shall have such expertise as the Corporation and the Assuming Institution agree is relevant. As appropriate, the Receiver or the Corporation (the “FDIC Party”) will select one member, one member will be selected by the Assuming Institution and the third member (the “Neutral Member”) will be selected by the other two members. The member of the Review Board selected by a party may be removed at any time by such party upon two (2) days’ written notice to the other party of the selection of a replacement member. The Neutral Member may be removed by unanimous action of the members appointed by the FDIC Party and the Assuming Institution after two (2) days’ prior written notice to the FDIC Party and the Assuming Institution of the selection of a replacement Neutral Member. In addition, if a Neutral Member fails for any reason to serve or continue to serve on the Review Board, the other remaining members shall so notify the parties to the dispute and the Neutral Member in writing that such Neutral Member will be replaced, and the Neutral Member shall thereafter be replaced by the unanimous action of the other remaining members within twenty (20) business days of that notification.

(iii)No dispute may be submitted to a Review Board by any of the parties to this Commercial Shared-Loss Agreement unless such party has provided to the other party a written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day period following the providing of a Notice of Dispute, the parties to the dispute will make every effort in good faith to resolve the dispute by mutual agreement. As part of these good faith efforts, the parties should consider the use of less formal dispute resolution techniques, as judged appropriate by each party in its sole discretion. Such techniques may include, but are not limited to, mediation, settlement conference, and early neutral evaluation. If the parties have not agreed to a resolution of the dispute by the end of such forty-five (45)-day period, then, subject to the discretion of the Corporation and the written consent of the Assuming Institution as set forth in Section 2.1(f)(i)(B) above, on the first day following the end of such period, the FDIC Party and the Assuming Institution shall notify each other of its selection of its member of the Review Board and such members shall be instructed to promptly select the Neutral Member of the Review Board. If the members appointed by the FDIC Party and the Assuming Institution are unable to promptly agree upon the initial selection of the Neutral Member, or a timely replacement Neutral Member as set forth in Section 2.1(f)(ii) above, the two

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appointed members shall apply to the American Arbitration Association (“AAA”), and such Neutral Member shall be appointed in accordance with the Commercial Arbitration Rules of the AAA.

(iv)The resolution of a dispute pursuant to this Section 2.1(f) shall be governed by the Commercial Arbitration Rules of the AAA to the extent that such rules are not inconsistent with this Section 2.1(f). The Review Board may modify the procedures set forth in such rules from time to time with the prior approval of the FDIC Party and the Assuming Institution.

(v)Within fifteen (15) days after the last to occur of the final written submissions of both parties, the presentation of witnesses, if any, and oral presentations, if any, the Review Board shall adopt the position of one of the parties and shall present to the parties a written award regarding the dispute. The determination of any two (2) members of a Review Board will constitute the determination of such Review Board.

(vi)The FDIC Party and the Assuming Institution will each pay the fees and expenses of the member of the Review Board selected by it. The FDIC Party and Assuming Institution will share equally the fees and expenses of the Neutral Member. No such fees or expenses incurred by or on behalf of the Assuming Institution shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise.

(vii)Each party will bear all costs and expenses incurred by it in connection with the submission of any dispute to a Review Board. No such costs or expenses incurred by or on behalf of the Assuming Institution shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise. The Review Board shall have no authority to award costs or expenses incurred by either party to these proceedings.

(viii)Any dispute resolution proceeding held pursuant to this Section 2.1(f) shall not be public. In addition, each party and each member of any Review Board shall strictly maintain the confidentiality of all issues, disputes, arguments, positions and interpretations of any such proceeding, as well as all information, attachments, enclosures, exhibits, summaries, compilations, studies, analyses, notes, documents, statements, schedules and other similar items associated therewith, except as the parties agree in writing or such disclosure is required pursuant to law, rule or regulation. Pursuant to ADRA, dispute resolution communications may not be disclosed either by the parties or by any member of the Review board unless:

(1) all parties to the dispute resolution proceeding agree in writing;

(2) the communication has already been made public;

(3) the communication is required by statute, rule or regulation to be made public;

or

(4) a court determines that such testimony or disclosure is necessary to prevent a manifest injustice, help establish a violation of the law or prevent harm to the public health or safety, or of sufficient magnitude in the particular case to outweigh the integrity of dispute resolution proceedings in general by reducing the confidence of parties in future cases that their communications will remain confidential.

(ix)Any dispute resolution proceeding pursuant to this Section 2.1(f) (whether as a matter of good faith negotiations, by resort to a Review Board, or otherwise) is a compromise negotiation for purposes of the Federal Rules of Evidence and state rules of evidence. The parties agree that all proceedings, including any statement made or document prepared by any party, attorney or other participants are privileged and shall not be disclosed in any subsequent proceeding or document or construed for any purpose

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as an admission against interest. Any document submitted and any statements made during any dispute resolution proceeding are for settlement purposes only. The parties further agree not to subpoena any of the members of the Review Board or any documents submitted to the Review Board. In no event will the Neutral Member voluntarily testify on behalf of any party.

(x)No decision, interpretation, determination, analysis, statement, award or other pronouncement of any Review Board shall constitute precedent as regards any subsequent proceeding (whether or not such proceeding involves dispute resolution under this Commercial Shared-Loss Agreement) nor shall any Review Board be bound to follow any decision, interpretation, determination, analysis, statement, award or other pronouncement rendered by any previous Review Board or any other previous dispute resolution panel which may have convened in connection with a transaction involving other failed financial institutions or Federal assistance transactions.

(xi)The parties may extend any period of time in this Section 2.1(f) by mutual agreement. Notwithstanding anything above to the contrary, no dispute shall be submitted to a Review Board until each member of the Review Board, and any substitute member, if applicable, agrees to be bound by the provisions of this Section 2.1(f) as applicable to members of a Review Board. Prior to the commencement of the Review Board proceedings, or, in the case of a substitute Neutral Member, prior to the re-commencement of such proceedings subsequent to that substitution, the Neutral Member shall provide a written oath of impartiality.

(xii)For the avoidance of doubt, and notwithstanding anything herein to the contrary, in the event any notice of dispute is provided to a party under this Section 2.1(g) prior to the Termination Date, the terms of this Commercial Shared-Loss Agreement shall remain in effect with respect to any such items set forth in such notice until such time as any such dispute with respect to such item is finally resolved.

(g)Payment in the Event Losses Fail to Reach Expected Level. If the asset premium (discount) bid expressed in dollars is a five per cent (5%) or more discount to the purchase price of the Assets determined in accordance with Article III, then on the date that is 45 days following the last day (such day, the “True-Up Measurement Date”) of the calendar month in which the tenth anniversary of the calendar day following the Bank Closing occurs, or upon the final disposition of all Shared Loss Assets under the Single Family Shared-Loss Agreement at any time after the termination of this Commercial Shared-Loss Agreement, the Assuming Institution shall pay to the Receiver fifty percent (50%) of any positive amount resulting from the following calculation:

A - (B + C + D), where

A equals 20% of the Total Intrinsic Loss Estimate;

B equals 20% of the Net Loss Amount;

C equals 25% of the asset premium (discount) bid, expressed in dollars, of total Shared Loss Assets on Schedules 4.15A,4.15B, and 4.15D at Bank Closing; and

D equals 3.5% of total Shared Loss Assets on Schedules 4.15A, 4.15B and 4.15D at Bank Closing.

The Assuming Institution shall deliver to the Receiver not later than 30 days following the True-Up Measurement Date, a schedule, signed by an officer of the Assuming Institution, setting forth in reasonable detail the foregoing calculation, including the calculation of the Net Loss Amount.

2.2Administration of Shared-Loss Assets.  The Assuming Instituion shall at all times prior to

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the Termination Date comply with the Rules Regarding the Administration of Shared-Loss Assets as set forth in Article III of this Commercial Shared-Loss Agreement.

2.3Auditor Report; Right to Audit.

(a)Within the time period permitted for the examination audit pursuant to 12 CFR Section 363 after the end of each fiscal year from and including the fiscal year during which Bank Closing falls to and including the calendar year during which the Termination Date falls, the Assuming Institution shall deliver to the Corporation and to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Commercial Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Institution’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Institution during such year by this Article II were not made by the Assuming Institution in accordance herewith. In the event that the Assuming Institution cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Institution during such year by this Article II were not made by the Assuming Institution in accordance herewith. In such event, the Assuming Institution and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made. It is the intention of this provision to align the timing of the audit required under this Commercial Shared-Loss Agreement with the examination audit required pursuant to 12 CFR Section 363.

(b)The Assuming Institution shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.

(c)The Receiver or the Corporation, their agents, contractors and their employees, may perform an audit to determine the Assuming Institution’s compliance with the provisions of this Commercial Shared-Loss Agreement, including this Article II, at any time by providing not less than ten (10) Business Days prior written notice. The scope and duration of any such audit shall be within the discretion of the Receiver or the Corporation, as the case may be, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Institution’s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit, the Assuming Institution and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.4Withholdings.  Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Quarterly Certificate delivered pursuant to Section 2.1, if, in its judgment, there is a reasonable basis under the terms of this Commercial Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Institution detailing the grounds for withholding such payment. At such time as the Assuming Institution demonstrates to the satisfaction of the Receiver that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Institution the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days. In the event the Receiver or the Assuming Institution elects to submit the issue of the eligibility of the item for reimbursement or payment for determination under the dispute resolution procedures of Section 2.1(f), then (i) if the dispute is settled by the mutual agreement of the parties in accordance with Section 2.1(f)(iii), the Receiver shall pay the amount

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withheld (to the extent so agreed) within fifteen (15) Business Days from the date upon which the dispute is determined by the parties to be resolved by mutual agreement, and (ii) if the dispute is resolved by the determination of a Review Board, the Receiver shall pay the amount withheld (to the extent so determined) within fifteen (15) Business Days from the date upon which the Receiver is notified of the determination by the Review Board of its obligation to make such payment. Any payment by the Receiver pursuant to this Section 2.4 shall be made together with interest on the amount thereof from the date the payment was agreed or determined otherwise to be due, at the interest rate per annum determined by the Receiver to be equal to the coupon equivalent of the three (3)-month U.S. Treasury Bill Rate in effect as of the first Business Day of each Calendar Quarter during which such interest accrues as reported in the Federal Reserve Board’s Statistical Release for Selected Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not so reported for such day, for the next preceding Business Day for which such rate was so reported.

2.5Books and Records.   The Assuming Institution shall at all times during the term of this Commercial Shared-Loss Agreement keep books and records which fairly present all dealings and transactions carried out in connection with its business and affairs. Except as otherwise provided for in the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement, all financial books and records shall be kept in accordance with generally accepted accounting principles, consistently applied for the periods involved and in a manner such that information necessary to determine compliance with any requirement of the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement will be readily obtainable, and in a manner such that the purposes of the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement may be effectively accomplished. Without the prior written approval of the Corporation, the Assuming Institution shall not make any change in its accounting principles adversely affecting the value of the Shared-Loss Assets except as required by a change in generally accepted accounting principles. The Assuming Institution shall notify the Corporation of any change in its accounting principles affecting the Shared-Loss Assets which it believes are required by a change in generally accepted accounting principles.

2.6Information.   The Assuming Institution shall promptly provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of the Purchase and Assumption Agreement or otherwise relating to its business and affairs or this Commercial Shared-Loss Agreement, as the Corporation or the Receiver may request from time to time.

2.7Tax Ruling.   The Assuming Institution shall not at any time, without the Corporation’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Corporation pursuant to the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement.

ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS ASSETS AND SHARED-LOSS SECURITIES

3.1Agreement with Respect to Administration.   The Assuming Institution shall (and shall cause any of its Affiliates to which the Assuming Institution transfers any Shared-Loss Assets or Shared-Loss Securities), or shall cause a Third Party Servicer to, manage, administer, and collect the Shared-Loss Assets and Shared-Loss Securities while owned by the Assuming Institution or any Affiliate thereof during the term of this Commercial Shared-Loss Agreement in accordance with the rules set forth in this Article III (“Rules”). The Assuming Institution shall be responsible to the Receiver and the Corporation in the performance of its duties hereunder and shall provide to the Receiver and the Corporation such reports as the Receiver or the Corporation reasonably deems advisable, including but not limited to the reports required by Section 3.3 hereof, and shall permit the Receiver and the Corporation at all times to monitor the Assuming

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Institution’s performance of its duties hereunder.

3.2Duties of the Assuming Institution with Respect to Shared-Loss Assets.

(a) In the performance of its duties under these Rules, the Assuming Institution shall:

(i)manage, administer, collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss Asset in a manner consistent with (A) usual and prudent business and banking practices; (B) the Assuming Institution’s (or, in the case a Third Party Servicer is engaged, the Third Party Servicer’s) practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Institution, with respect to the management, administration and collection of and taking of charge-offs and write-downs with respect to loans, other real estate and repossessed collateral that do not constitute Shared Loss Assets;

(ii)exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss Assets;

(iii)use its best efforts to maximize collections with respect to Shared-Loss Assets and, if applicable for a particular Shared-Loss Asset, without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Assets;

(iv)adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Assets, as provided in Section 3.4 hereof;

(v)retain sufficient staff to perform its duties hereunder; and

(vi)provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution of any contract pursuant to which any third party (other than an Affiliate of the Assuming Institution) will manage, administer or collect any of the Shared-Loss Assets, together with a copy of that contract.

(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Asset including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior written approval of the Receiver or the Corporation.

(c) The following categories of expenses shall not be deemed to be Reimbursable Expenses or Recovery Expenses:

(i)Federal, State, or local income taxes and expenses related thereto;

(ii)salaries or other compensation and related benefits of Assuming Institution employees and the employees of its Affiliates including, without limitation, any bonus, commission or severance arrangements, training, payroll taxes, dues, or travel- or relocation-related expenses,;

(iii)the cost of space occupied by the Assuming Institution, any Affiliate thereof and their staff, the rental of and maintenance of furniture and equipment, and expenses for data processing including the purchase or enhancement of data processing systems;

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(iv)except as otherwise provided herein, fees for accounting and other independent professional consultants (other than consultants retained to assess the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant with respect to the collateral securing a Shared-Loss Asset that has been fully or partially charged-off); provided, that for purposes of this Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary to assist in collections with respect to Shared-Loss Assets shall not be deemed to be fees of other independent consultants;

(v)allocated portions of any other overhead or general and administrative expense other than any fees relating to specific assets, such as appraisal fees or environmental audit fees, for services of a type the Assuming Institution does not normally perform internally;

(vi)any expense not incurred in good faith and with the same degree of care that the Assuming Institution normally would exercise in the collection of troubled assets in which it alone had an interest; and

(vii)any expense incurred for a product, service or activity that is of an extravagant nature or design.

(d) Subject to Section 3.7, the Assuming Institution shall not contract with third parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Institution would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this Commercial Shared-Loss Agreement.

3.3Duties of the Assuming Institution with Respect to Shared-Loss Securities.

(a) In the performance of its duties under these Rules, the Assuming Institution shall:

(i)    manage, administer, collect and each Shared-Loss Security in a manner consistent with (A) usual and prudent business and banking practices; (B) the Assuming Institution’s practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Institution, with respect to the management, administration and collection of similar assets that are not Shared-Loss Securities;

(ii)exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss Securities;

(iii)use its best efforts to maximize collections with respect to Shared-Loss Securities and, if applicable for a particular Shared-Loss Security, without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Securities, provided that, any sale of a Shared-Loss Security shall only be made with the prior approval of the Receiver or the Corporation;

(iv)adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Securities, as provided in Section 3.4 hereof;

(v)retain sufficient staff to perform its duties hereunder; and

(vi)provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution of any contract pursuant to which any third party (other than an Affiliate of the Assuming Institution) will manage, administer or collect any of the Shared-

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Loss Securities, together with a copy of that contract.

(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Security including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior written approval of the Receiver or the Corporation.

(c) The Assuming Institution shall not contract with third parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Institution would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this Commercial Shared-Loss Agreement.

3.4Records and Reports. The Assuming Institution shall establish and maintain records on a separate general ledger, and on such subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets and the Shared-Loss Securities, in such form and detail as the Receiver or the Corporation may require, to enable the Assuming Institution to prepare and deliver to the Receiver or the Corporation such reports as the Receiver or the Corporation may from time to time request regarding the Shared-Loss Assets, the Shared-Loss Securities and the Quarterly Certificates required by Section 2.1 of this Commercial Shared-Loss Agreement.

3.5Related Loans.

(a)The Assuming Institution shall not manage, administer or collect any “Related Loan” in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Asset to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Institution at any time on or prior to the end of the final Recovery Quarter that is: (i) made to the same Obligor with respect to a Loan that is a Shared-Loss Asset or with respect to a Loan from which Other Real Estate, or Additional ORE derived, or (ii) attributable to the same primary Obligor with respect to any Loan described in clause (i) under the rules of the Assuming Institution’s Chartering Authority concerning the legal lending limits of financial institutions organized under its jurisdiction as in effect on the Commencement Date, as applied to the Assuming Institution.

(b)The Assuming Institution shall prepare and deliver to the Receiver with the Quarterly Certificates for the Calendar Quarters ending June 30 and December 31 for all Shared-Loss Quarters and Recovery Quarters, a schedule of all Related Loans which are commercial loans or commercial real estate loans with Legal Balances of $5,000,000 or more on the Accounting Records of the Assuming Institution as of the end of each such semi-annual period, and all other commercial loans or commercial real estate loans attributable to the same Obligor on such loans of $5,000,000 or more.

3.6Legal Action; Utilization of Special Receivership Powers. The Assuming Institution shall notify the Receiver in writing (such notice to be given in accordance with Article IV below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Institution derives as a result of having acquired a Shared-Loss Asset from the Receiver, and the Assuming Institution shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Institution and the Assuming Institution shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Institution will advise the Receiver as to the status of any such legal action. The Assuming Institution shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

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3.7Third Party Servicer. The Assuming Institution may perform any of its obligations and/or exercise any of its rights under this Commercial Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Institution hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Institution shall be Reimbursable Expenses or Recovery Expenses, as the case may be, to the same extent such expenses would so qualify if incurred by the Assuming Institution); provided, however, that the use thereof by the Assuming Institution shall not release the Assuming Institution of any obligation or liability hereunder.

ARTICLE IV — PORTFOLIO SALE

4.1Assuming Institution Portfolio Sales of Remaining Shared-Loss Assets. The Assuming Institution shall have the right with the consent of the Receiver, commencing as of the first day of the third to last Shared-Loss Quarter, to liquidate for cash consideration, in one or more transactions, all or a portion of Shared-Loss Assets held by the Assuming Institution (“Portfolio Sales”). If the Assuming Institution exercises its option under this Section 4.1, it must give thirty (30) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale which shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors.

4.2Calculation of Sale Gain or Loss. For Shared-Loss Assets gain or loss on the sales under Section 4.1 will be calculated as the aggregate sales price received by the Assuming Institution less the aggregate book value of the remaining Shared-Loss Assets.

ARTICLE V — LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR RECEIVER

As a supplement to the notice provisions contained in Section 13.7 of the Purchase and Assumption Agreement, any notice, request, demand, consent, approval, or other communication (a “Notice”) given to the Corporation and/or the Receiver in the loss-sharing context shall be given as follows:

5.1With respect to a Notice under Section 2 and Sections 3.1-3.5 of this Commercial Shared-Loss Agreement:

Federal Deposit Insurance Corporation

Division of Resolutions and Receiverships

550 17th Street, N.W.

Washington, D.C. 20429

Attention: Assistant Director, Franchise and Asset Marketing

5.2With respect to a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:

Federal Deposit Insurance Corporation Legal Division

1601 Bryan Street

Dallas, Texas 75201

Attention: Regional Counsel

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with a copy to:

Federal Deposit Insurance Corporation Legal Division

550 17th Street, N.W.

Washington, D.C. 20429

Attention: Senior Counsel (Special Issues Group)

ARTICLE VI — MISCELLANEOUS

6.1Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by a party hereto in connection with this Commercial Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2Successors and Assigns; Specific Performance. This Commercial Shared-Loss Agreement, and all of the terms and provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and assigns only. The Receiver may assign or otherwise transfer this Commercial Shared-Loss Agreement and the rights and obligations of the Receiver hereunder (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this Commercial Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, the Assuming Institution may not assign or otherwise transfer this Commercial Shared-Loss Agreement or any of the Assuming Institution’s rights or obligations hereunder (in whole or in part), or sell or transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss Assets or Shared-Loss Securities, without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole and absolute discretion. An assignment or transfer of this Commercial Shared-Loss Agreement includes:

(i) a merger or consolidation of the Assuming Institution with or into another company, if the shareholders of the Assuming Institution will own less than sixty-six and two/thirds percent (66.66%) of the equity of the consolidated entity;

(ii) a merger or consolidation of the Assuming Institution’s Holding Company with or into another company, if the shareholders of the Holding Company will own less than sixty-six and two/thirds percent (66.66%) of the equity of the consolidated entity;

(iii) the sale of all or substantially all of the assets of the Assuming Institution to another company or person; or

(iv) a sale of shares by any one or more shareholders that will effect a change in control of the Assuming Institution, as determined by the Receiver with reference to the standards set forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).

For the avoidance of doubt, any transaction under this Section 6.2 that requires the Receiver’s consent that is made without consent of the Receiver hereunder will relieve the Receiver of any of its obligations under this Commercial Shared-Loss Agreement.

No Loss shall be recognized under this Commercial Shared-Loss Agreement as a result of any accounting adjustments that are made due to or as a result of any assignment or transfer of this Commercial Shared-Loss Agreement or any merger, consolidation, sale or other transaction to which the Assuming Institution, its Holding Company or any Affiliate is a party, regardless of whether the Receiver consents to such assignment or transfer in connection with such transaction pursuant to this Section 6.2.

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6.3WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

6.4No Third Party Beneficiary. This Commercial Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in Commercial Shared-Loss Agreement or the Exhibits shall be construed to grant to any other Person any right, remedy or claim under or in respect of this Commercial Shared-Loss Agreement or any provision hereof.

6.5Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

6.6Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Commercial Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

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EX-3.1

Exhibit 3.1

FORM BCA 2.10 (rev. Dec. 2003)
ARTICLES OF INCORPORATION
Business Corporation Act

Jesse White, Secretary of State
Department of Business Services
Springfield, IL 62756
Telephone	(217) 782-9522
	(217)782-6961
http://www.cyberdriveillinois.com

Remit payment in the form of a cashier’s check, certified check, money order or an Illinois attorney’s or CPA’s check payable to the Secretary of State. SEE NOTE 1 TO DETERMINE FEES

Filing Fee: $150.00 Franchise Tax $25.00 Total $175.00 File # 6725-4171 Approved:  /s/ kk

                    Submit in duplicate                     Type or Print clearly in black ink                   Do not write above this line

1.CORPORATE NAME: New Midland States, Inc.

(The corporate name must contain the word “corporation”, “company,” “Incorporated,” “limited” or an abbreviation thereof.)

2.	Initial Registered Agent:	Douglas	J.	Tucker
		First Name	Middle Initial	Last name
		133 W. Jefferson Avenue
	Initial Registered Office:	NumberStreet	Suite #	(A P.O. BOX ALONE IS NOT ACCEPTABLE)
		Effingham	62401	Effingham
		City	ZIP Code	County

3.Purpose or purposes for which the corporation is organized:

(If not sufficient space to cover this point, add one or more sheets of this size.)

The transaction of any or all lawful businesses for which corporations may be incorporated under the Illinois Business Corporation Act.

4.Paragraph 1: Authorized Shares, Issued Shares and Consideration Received:

		Number of Shares	Number of Shares	Consideration to be
Class	Par Value	Authorized	Proposed to be Issued	Received Therefor
See attached Exhibit A.				$
			TOTAL=	$

Paragraph 2: The preferences, qualifications, limitations, restrictions and special or relative rights in respect of the shares of each class are:

(If not sufficient space to cover this point, add one or more sheets of this size.)

5. OPTIONAL:(a) Number of directors constituting the initial board of directors of the corporation:                       

(b) Names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and qualify:

Name Address City, State, ZIP

6. OPTIONAL

(a)	It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be:	$	151,500,363.00
(b)	It is estimated that the value of the property to be located within the state of Illinois during the following year will be:	$	3,616,274.00
(c)	It is estimated that the gross amount of business that will be transacted by the corporation during the following year will be:	$	61,242.00
(d)	It is estimated that the gross amount of business that will be transacted from places of business in the State of Illinois during the following year will be:	$	58,287.00

7. OPTIONAL:OTHER PROVISIONS        See attached

Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorizing preemptive rights, denying cumulative voting, regulating internal affairs, voting majority requirements, fixing a duration other than perpetual, etc.

8.NAME(S) & ADDRESS(ES) OF INCORPORATOR(S)

The undersigned incorporator(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true.

Dated	October 21,	2010
	(Month & Day)	Year

Signature and Name		Address
1.	/s/ Douglas J. Tucker	1.	133 W. Jefferson Avenue
	Signature		Street
	Douglas J. Tucker		Effingham	Illinois	62401
	(Type or Print Name)		City/Town	State	ZIP Code
2.		2.
	Signature		Street
	(Type or Print Name)		City/Town	State	ZIP Code
3.		3.
	Signature		Street
	(Type or Print Name)		City/Town	State	ZIP Code

(Signatures must be in BLACK INK on original document. Carbon copy, photocopy or rubber stamp signatures may only be used on conformed copies.)

NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by a duly authorized corporate officer. Type or print officer’s name and title beneath signature.

Note 1: Fee Schedule

The initial franchise tax is assessed at the rate of 15/100 of 1 percent ($1.50 per $1,000) on the paid-in capital represented in this State. (Minimum initial franchise tax is $25)

The filing fee is $150

The minimum total due (franchise tax + filing fee) is $175.

Note 2: Return to:

(Firm name)

(Attention)

(Mailing Address)

(City, State, ZIP Code)

EXHIBIT A

TO THE

ARTICLES OF INCORPORATION

OF

NEW MIDLAND STATES, INC.

Article 4

AUTHORIZED STOCK

Section 4.1            Authorized Shares.  The aggregate number of shares of stock which the corporation shall have authority to issue is Forty Four Million (44,000,000) shares of stock, consisting of Forty Million (40,000,000) shares of Common Stock, par value of $0.01 per share, and Four Million (4,000,000) shares of Preferred Stock, par value of $2.00. The proposed number of shares to be issued is 100 shares of Common Stock and the consideration to be received therefore is $100. No shares of Preferred Stock are proposed to be issued.

Section 4.2            Common Stock.  Except as otherwise provided in any resolution or resolutions adopted by the board of directors providing for the issuance of a class of Common Stock, the Common Stock shall:  (a) have the exclusive voting power of the corporation, (b) entitle the holders thereof to one vote per share at all meetings of the shareholders of the corporation, (c) entitle the holders to share ratably, without preference over any other shares of the corporation, in all assets of the corporation in the event of any dissolution, liquidation or winding up of the corporation, and (d) entitle the record holders thereof on such record dates as are determined, from time to time by the board of directors, to receive such dividends, if any, if, as and when declared by the board of directors.

Section 4.3            Preferred Stock.  The shares of Preferred Stock may be issued from time to time in one or more series.  The board of directors of this corporation shall have authority to fix by resolution or resolutions the designations and the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, the voting rights, the dividend rate, conversion rights, redemption price and liquidation preference, of any series of shares of Preferred Stock, to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding).  In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series.

Section 4.4            No Pre-emptive Rights.  No holder of any class of shares of the corporation shall, as such holder, have any preemptive or preferential right to (a) purchase or subscribe to any shares of any class of stock of the corporation, whether now or hereafter authorized, whether unissued or in treasury, or (b) purchase any obligations convertible into shares of any class of stock of the corporation, in either case which at any time may be proposed to be issued by the corporation or subjected to rights or options to purchase granted by the corporation.

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Section 4.5            Unclaimed Dividends.  Any and all right, title, interest and claim in or to any dividends declared by the Corporation, whether in cash, stock, or otherwise, which are unclaimed by the shareholder entitled thereto for a period of five (5) years after the close of business on the payment date, shall be and be deemed to be extinguished and abandoned; and such unclaimed dividends in the possession of the Corporation, its transfer agents or other agents or depositaries shall at such time become the absolute property of the Corporation, free and clear of any and all claims of any persons whatsoever.

Article 5
BOARD OF DIRECTORS

Section 5.1            Size; Qualifications.  The business and affairs of the corporation shall be managed by or under the direction of the board of directors, which shall consist of no fewer than six (6) and no greater than eleven (11) persons, as fixed from time to time by resolution of not less than two-thirds of the number of directors which immediately prior to such proposed change had been fixed, in the manner prescribed herein, by the board of directors of the corporation, provided, however, that the number of directors shall not be reduced as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire board of directors shall be seven (7) until otherwise fixed as described immediately above.  Directors need not be residents of the State of Illinois and need not be shareholders of the corporation.

Section 5.2            Powers.  In addition to the powers and authority expressly conferred upon them by statute or by these Articles of Incorporation or the Bylaws of the corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation.

Section 5.3            Classification of Board of Directors.  The directors of the corporation shall be divided into three classes, Class I, Class II and Class III, as nearly equal in number as the then total number of directors constituting the entire board of directors permits with the term of office of one class expiring each year.  Directors of Class I shall hold office for an initial term expiring at the 2011 annual meeting, directors of Class II shall hold office for an initial term expiring at the 2012 annual meeting and directors of Class III shall hold office for an initial term expiring at the 2013 annual meeting.  At each annual meeting of shareholders, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting.  Any vacancies in the board of directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled by the board of directors, acting by not less than two-thirds of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified.  If the number of directors is changed, any increase or decrease in the number of directors shall be apportioned among the classes so as to maintain all classes as equal in number as possible.

Section 5.4            Quorum.  The greater of:  (a) a majority of the directors at any time in office; and (b) one-third of the number of directors fixed pursuant to paragraph Section 5.1 of this Article shall constitute a quorum of the board of directors.  If at any meeting of the board of directors there shall be less than such a quorum, a majority of the directors present may adjourn

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the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

Section 5.5            Action at Meeting.  Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors unless a greater number is required by law or by these articles of incorporation.

Section 5.6            Resignation and Removal of Directors.  A director may resign at any time upon written notice to the board of directors.  Notwithstanding any other provisions of these articles of incorporation or the bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these articles of incorporation or the bylaws of the corporation), any director or the entire board of directors of the corporation may be removed at any time, but only for “cause” as defined below, and only by the affirmative vote of the holders of not less than 70% of the outstanding shares of stock of the corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at an annual meeting of shareholders or at a meeting of the shareholders for which the notice of the meeting names the director or directors to be removed at said meeting.  For the purposes of removal of a director, “cause” shall be deemed to exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction or has been adjudged by a court of competent jurisdiction to be liable for gross negligence or willful misconduct in the performance of such director’s duty to the Corporation and such adjudication is no longer subject to direct appeal.

Section 5.7            No Cumulative Voting.  There shall be no cumulative voting for directors of the corporation.

Section 5.8            No Written Ballots.  Elections of directors need not be by written ballot unless the bylaws of the corporation shall so provide.

Article 6
BYLAWS

The bylaws may be amended, altered or repealed by resolution adopted by not less than two-thirds of the number of directors as may be fixed from time to time, in the manner prescribed herein, or in a manner otherwise provided in the bylaws.  The bylaws of the corporation may also be amended, altered or repealed by the shareholders of the corporation, provided, however, that such amendment, alteration or repeal is approved by the affirmative vote of the holders of not less than 70% of the outstanding shares of stock of the corporation then entitled to vote generally in the election of directors.

Article 7

AMENDMENTS

The corporation reserves the right to amend, alter, change or repeal any provision contained in these articles of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation.

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Article 8

INDEMNIFICATION

Subject to the limits of applicable federal and state banking law and regulation, the corporation shall indemnify each person who is or was a director or officer of the corporation and each person who serves or served at the request of the corporation as a director, officer or partner of another enterprise in accordance with, and to the fullest extent authorized by, the Illinois Business Corporation Act, as the same now exists or may be hereafter amended.  No amendment to or repeal of this Article shall apply to or have any effect on the rights of any individual referred to in this Article for or with respect to acts or omissions of such individual occurring prior to such amendment or repeal.

Article 9

PERSONAL LIABILITY OF DIRECTORS

To the fullest extent permitted by the Illinois Business Corporation Act, as the same now exists or may be hereafter amended, a director of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director.  No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to the effective date of such amendment or repeal.  If the Illinois Business Corporation Act is amended or interpreted to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Illinois Business Corporation Act as so amended or interpreted.

Article 10

ADDITIONAL VOTING REQUIREMENTS

Section 10.1         Voting Requirements.  Except as otherwise expressly provided in Section 10.3 of this Article, and notwithstanding any other provision of these articles of incorporation:

(a)           any merger or consolidation of the corporation or of any Subsidiary with or into any other corporation;

(b)           any sale, lease, exchange or other disposition by the corporation or any Subsidiary of assets constituting all or substantially all of the assets of the corporation and its Subsidiaries taken as a whole to or with any other corporation, person or other entity in a single transaction or a series of related transactions;

(c)           the amendment, alteration, change or repeal of these articles of incorporation; and

(d)           the voluntary dissolution of the corporation;

shall require the affirmative vote of the holders of shares having at least 70% of the voting power of all outstanding stock of the corporation entitled to vote thereon.  Such affirmative vote shall be required notwithstanding the fact that no vote or a lesser vote may be required, or that some

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lesser percentage may be specified, by law or otherwise in these articles of incorporation or by the bylaws of the corporation.

Section 10.2         Subsidiary.  For purposes of this Article, the term “Subsidiary” means any entity in which the corporation beneficially owns, directly or indirectly, more than 75% of the outstanding voting stock.  The phrase “voting security” as used in Section 10.1 of this Article shall mean any security which is (or upon the happening of any event, would be) entitled to vote for the election of directors, and any security convertible, with or without consideration into such security or carrying any warrant or right to subscribe to or purchase such a security.

Section 10.3         Exceptions.  Notwithstanding anything contained in this Article or applicable law to the contrary, any action or transaction described in Section 10.1 of this Article that is:

(a)           approved at any time prior to its consummation by resolution adopted by not less than two-thirds of the number of directors as may be fixed from time to time, in the manner prescribed herein, by the board of directors of the corporation; or

(b)           with any entity of which a majority of all of the classes of equity is owned of record or beneficially by the corporation; or

(c)           a merger with another entity which may be authorized without action by the shareholders of the corporation to the extent and in the manner permitted from time to time by the law of the State of Illinois;

shall only require the affirmative vote of the holders of at least a majority of the voting power of all outstanding stock of the corporation entitled to vote thereon.

Section 10.4         Construction.  The interpretation, construction and application of any provision or provisions of this Article and the determination of any facts in connection with the application of this Article, shall be made by not less than two-thirds of the number of directors as may be fixed from time to time, in the manner prescribed herein, by the board of directors of the corporation.  Any such interpretation, construction, application or determination, when made in good faith, shall be conclusive and binding for all purposes of this Article.

Article 11

BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS

To the extent not already applicable to the corporation, the provisions of Section 7.85 of the Illinois Business Corporation act, as the same now exists or may hereafter be amended or as such Section 7.85 may hereafter be renumbered or recodified, will be deemed to apply to the corporation, and the corporation shall be subject to all of the restrictions set forth in such Section 7.85.

Article 12

SHAREHOLDERS’ ACTION

Any action required or permitted to be taken by the holders of capital stock of the corporation must be effected at a duly called annual or special meeting of the holders of capital stock of the corporation and may not be effected by any consent in writing by such holders.

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Article 13

NON-SHAREHOLDER INTERESTS

In connection with the exercise of its judgment in determining what is in the best interests of this Corporation and its shareholders when evaluating a proposal by another person or persons to make a tender or exchange offer for any equity security of this Corporation or any subsidiary, to merge or consolidate with this corporation or any subsidiary or to purchase or otherwise acquire all or substantially all of the assets of this Corporation or any subsidiary, the board of directors of this Corporation may consider all of the following factors and any other factors which it deems relevant:  (i) the adequacy of the amount to be paid in connection with any such transaction; (ii) the social and economic effects of the transaction on the Corporation and its subsidiaries and the other elements of the communities in which the Corporation or its subsidiaries operate or are located; (iii) the business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing or likely financial obligations of the acquiring person or persons, and the possible effect of such conditions upon the Corporation and its subsidiaries and the other elements of the communities in which the Corporation and its subsidiaries operate or are located; (iv) the competence, experience, and integrity of the acquiring person or persons and its or their management; and (v) any antitrust or other legal or regulatory issues which may be raised by any such transaction.

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STATEMENT OF RESOLUTION ESTABLISHING SERIES

OF

SERIES C 9% NON-CUMULATIVE PERPETUAL CONVERTIBLE
PREFERRED STOCK

OF

NEW MIDLAND STATES, INC.

Pursuant to and in accordance with Section 6.10 of the Illinois Business Corporation Act of 1983 (the “IBCA”), the undersigned corporation made the following statement:

ARTICLE 1

The name of the corporation is New Midland States, Inc. (the “Corporation”).

ARTICLE 2

That pursuant to the authority vested in the board of directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the Articles of Incorporation of the Corporation (the “Articles”), the Board of Directors on October 25, 2010, adopted the following resolution creating a series of 3,130 shares of Preferred Stock designated as “Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Articles, a series of Preferred Stock, par value $2.00 per share, of the Corporation is hereby created, such series to be known as Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:

1.             Issuance.  The Board of Directors (the “Board”) of the Corporation has determined that 3,130 shares of the authorized and unissued preferred stock be identified as “Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock” and has authorized such shares for issuance at a price of $10,000 per share (hereinafter referred to as the “Series C Preferred Stock”).

2.             Dividends.

(a)           Dividends on the Series C Preferred Stock will be payable semi-annually in arrears, when, as and if authorized by the Board of Directors and declared by the Corporation out of legally available funds, on a non-cumulative basis on the $10,000 per share liquidation preference, at an annual rate equal to 9%.  Subject to the foregoing, dividends will be payable in arrears on December 1 and June 1 of each year (each, a “Dividend Payment Date”) commencing on June 1, 2011, or, if any such day is not a business day, the next business day.  Each dividend will be payable to holders of record as they appear on the Corporation’s stock register on the fifteenth day of the month prior to the month in which the relevant Dividend Payment Date

occurs.  Each period from and including a Dividend Payment Date (or the date of the issuance of the Series C Preferred Stock) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period.  Dividends payable for each Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.  If a scheduled Dividend Payment Date falls on a day that is not a business day, the dividend will be paid on the next business day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid.

(b)           Dividends on the Series C Preferred Stock will be non-cumulative.  If for any reason the Board of Directors does not authorize and the Corporation does not declare full cash dividends on the Series C Preferred Stock for a Dividend Period, the Corporation will have no obligation to pay any dividends for that period, whether or not the Board of Directors authorizes and the Corporation declares dividends on the Series C Preferred Stock for any subsequent Dividend Period.  The Corporation is not obligated to and will not pay holders of the Series C Preferred Stock any dividend in excess of the dividends on the Series C Preferred Stock that are payable as described above.  There is no sinking fund with respect to dividends.

(c)           The Series C Preferred Stock created hereby shall rank equally, as to dividends, with the Corporation’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series D Preferred Stock”).  The Corporation may not declare or pay or set apart for payment full dividends on any series of preferred stock ranking, as to dividends, equally with or junior to the Series C Preferred Stock unless the Corporation has previously declared and paid or set apart for payment, or the Corporation contemporaneously declares and pays or sets apart for payment, full dividends on the Series C Preferred Stock for the most recently completed Dividend Period.  When dividends are not paid in full on the Series C Preferred Stock and any series of preferred stock ranking equally as to dividends, all dividends upon the Series C Preferred Stock and such equally ranking series will be declared and paid pro rata.  For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on shares of Series C Preferred Stock and the aggregate of the current and accrued dividends due on any equally ranking series.  The Corporation will not pay interest or any sum of money instead of interest on any dividend payment that may be in arrears on the Series C Preferred Stock.  Unless the Corporation has paid or declared and set aside for payment full dividends on the Series C Preferred Stock for the most recently completed Dividend Period, the Corporation will not:

·declare or make any dividend payment or distribution on any junior ranking stock, other than a dividend paid in junior ranking stock, or

·redeem, purchase, otherwise acquire or set apart money for a sinking fund for the redemption of any junior or equally ranking stock, except by conversion into or exchange for junior ranking stock.

As used herein, “junior to the Series C Preferred Stock,” “junior ranking stock” and like terms refer to the Corporation’s Common Stock and any other class or series of the Corporation’s capital stock over which the Series C Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on the Corporation’s liquidation,

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dissolution or winding up, and “equally ranking” and like terms refer to the Series D Preferred Stock, and any other class or series of the Corporation’s capital stock that ranks on a parity with the Series C Preferred Stock in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up. Subject to the conditions described above, and not otherwise, dividends (payable in cash, stock, or otherwise), as may be determined by the Board of Directors or a duly authorized committee of the board, may be declared and paid on the Corporation’s Common Stock and any other stock ranking equally with or junior to the Series C Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Series C Preferred Stock will not be entitled to participate in those dividends.

3.             Conversion.  The holders of the Series C Preferred Stock shall have the following conversion rights (the “Conversion Rights”) and be subject to the following provisions with respect to the conversion of Series C Preferred Stock:

(a)           Right to Convert.  Each share of Series C Preferred Stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of Common Stock, at the Conversion Price (as hereafter defined) therefor in effect at the time of conversion determined as provided herein, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of the Corporation or any transfer agent for the Series C Preferred Stock or Common Stock.

(b)           Conversion Price.  Each share of Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing $10,000 by the Conversion Price per share in effect at the time of conversion for each share of Preferred Stock.  The Conversion Price per share for the Preferred Stock at the date on which such share of Preferred Stock is originally issued (the “Original Issue Date”) shall be $11.75, provided that if at the date of conversion the Corporation has not declared and paid dividends with respect to two or more Dividend Periods, the Conversion Price shall be $9.243 (the “Conversion Price”).  The Conversion Price shall be subject to adjustment from time to time as provided herein.  Each such Conversion Price of $11.75 and $9.243 has been proportionately adjusted to reflect the prior conversion of each one (1) share of the common stock of Midland States Bancorp, Inc., a Delaware corporation and the predecessor company to the Corporation, into ten (10) shares of the Corporation’s Common Stock.

(c)           Mandatory Conversion; Unpaid Dividends.

(i)            The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date (the “Mandatory Conversion Date”) to call and convert all (but not less than all) of the outstanding shares of Series C Preferred Stock into shares of Common Stock if, on the date the Corporation gives the Conversion Notice (as hereinafter defined), the Book Value Per Share of the Corporation’s Common Stock equals or exceeds $10.629.  (This targeted Book Value Per Share of the Corporation’s Common Stock of $10.629 has been proportionately adjusted to reflect the prior conversion of each one (1) share of the common stock of Midland States Bancorp, Inc., a Delaware corporation and the predecessor company to the Corporation, into ten (10) shares of the Corporation’s Common Stock, and is equal to one-tenth of 115% of the book value per share of $92.43 at December 31, 2008, of the common stock of Midland States Bancorp, Inc., the predecessor company).  “Book Value Per Share of the Corporation’s

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Common Stock” at any date means the result of dividing the Corporation’s total common shareholders’ equity at that date, determined in accordance with U.S. generally accepted accounting principles, by the number of shares of common stock then outstanding, net of any shares held in the treasury.

(ii)           Not less than 30 days nor more than 60 days prior to the Mandatory Conversion Date, written notice (the “Conversion Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series C Preferred Stock at their address last shown on the records of the Corporation.  The Conversion Notice shall state: (A) the number of shares being converted; (B) what the Mandatory Conversion Date and Conversion Price are; (C) that the holders’ voluntary Conversion Rights (as herein defined) shall terminate; and (D) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series C Preferred Stock to be converted.

(iii)          On or before the Mandatory Conversion Date, the holders of shares of Series C Preferred Stock being converted shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Conversion Notice, and thereupon a certificate or certificates for the number of shares of Common Stock into which such shares of Series C Preferred Stock have been converted shall be issued to the person whose name appears on such surrendered certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired.

(iv)          If the Conversion Notice shall have been duly given, and if on the Mandatory Conversion Date the required number of shares of Common Stock are issuable, all shares of Series C Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series C Preferred Stock shall thereafter represent only the right to receive (A) the corresponding shares of Common Stock, plus cash in lieu of any fractional shares of Common Stock due upon conversion of shares of Series C Preferred Stock, (B) the amount of dividends or other distributions with a record date after the Mandatory Conversion Date but prior to the surrender date, and with a payment date at, prior or subsequent to surrender date, not paid with respect to the Common Stock issuable upon conversion, less the amount of any withholding taxes which may be required thereon and (C) the amount equal to any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, on such Series C Preferred Stock (the “Net Accrued Dividends”) through such Mandatory Conversion Date.

(d)           Mechanics of Voluntary Conversion; Unpaid Dividends.

(i)            Before any holder of Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent of the Series C Preferred Stock or Common Stock, and shall give written notice by mail, postage prepaid, to the Corporation at such office that he elects to convert the same and shall state therein the number of shares of Series C Preferred Stock being converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Thereupon the Corporation shall promptly issue and deliver at such office to such holder of Series C Preferred

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Stock or to the nominee or nominees of such holder a certificate or certificates for the number of shares of Common Stock to which he shall be entitled.

(ii)           Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series C Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.  A holder of Series C Preferred Stock who surrenders shares of Series C Preferred Stock for conversion shall be entitled to receive from the Corporation on the date of such surrender an amount in cash equal to the Net Accrued Dividends on such surrendered shares of Series C Preferred Stock, but any future dividends with respect to the surrendered shares of Series C Preferred Stock shall cease to accrue after such surrender and all rights with respect to such shares shall forthwith after such surrender terminate.

(e)           Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; conversely, if the Corporation shall at any time or from time to time after the Original Issue Date reduce the outstanding shares of Common Stock by a stock combination, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph 3(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)            Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series C Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series C Preferred Stock by a fraction:

(i)            the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series C Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series C Preferred Stock shall be adjusted pursuant to this paragraph 3(f) as of the time of actual payment of such dividends or distributions.

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(g)           Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Series C Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series C Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph 3 with respect to the rights of the holders of the Series C Preferred Stock. Notwithstanding the foregoing, to the extent the Corporation has a rights plan in effect with respect to the Common Stock on any date upon which Series C Preferred Stock is converted, upon conversion, the holder will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such date, the rights have separated from the shares of Common Stock in accordance with the provisions of such rights plan.

(h)           Adjustment for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon the conversion of the Series C Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares of stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph 3), then and in each such event the holder of each share of Series C Preferred Stock shall have the right thereafter to convert such share into the kind and amounts of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series C Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

(i)            Reorganization, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph 3) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Series C Preferred Stock shall thereafter be entitled to receive upon conversion of the Series C Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor Corporation resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Series C Preferred Stock would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph 3 with respect to the rights of the holders of the Series C Preferred Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this paragraph 3 (including adjustment of the Conversion Prices and the number of shares purchasable upon conversion of the Series C Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

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(j)            Sale of Shares Below Conversion Price.

(i)            If at any time or from time to time after the Original Issue Date, the Corporation shall issue or sell Additional Shares of Common Stock (as hereinafter defined), other than as a dividend as provided in paragraph 3(f) above, and other than upon a subdivision or combination of shares of Common Stock as provided in paragraph 3(e) above, for a consideration per share less than the Conversion Price for the Series C Preferred Stock (or, if an adjusted Conversion Price shall be in effect by reason of a previous adjustment, then less than such adjusted Conversion Price), then and in each case the applicable Conversion Price for the Series C Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (B) the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price, and the denominator of which shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (Y) the number of such Additional Shares of Common Stock so issued.

(ii)           For the purpose of making any adjustment in the Conversion Price or number of shares of Common Stock purchasable on the conversion of Series C Preferred Stock as provided above, the consideration received by the Corporation for any issue or sale of securities shall,

(A)to the extent it consists of cash, be computed at the net amount of cash received by the Corporation after deduction of any underwriting or similar commissions, concessions or compensation paid or allowed by the Corporation in connection with such issue or sale,

(B)to the extent it consists of services or property other than cash, be computed at the fair value of such services or property as determined in good faith by the Board of Directors; and

(C)if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined), or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

(iii)          For the purpose of the adjustment provided in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of, or stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being hereinafter referred to as “Convertible Securities”), then, in each case, if the Effective Price (as hereinafter defined) of such rights, options or Convertible Securities shall be less than the then existing Conversion Price for the Series C Preferred Stock, the Corporation shall be deemed to have

7

issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such shares, or an amount equal to the total amount of the consideration, if any, received by the Corporation for the rights or options or Convertible Securities, plus, in the case of such options or rights, the minimum amounts of consideration, if any, payable to the Corporation upon exercise or conversion of such options or rights. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total of all such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities.

If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Corporation on the conversion of such Convertible Securities.

(iv)          For the purpose of the adjustment provided for in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of Convertible Securities, then, in each such case, if the Effective Price thereof is less than the current Conversion Price, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such rights or options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the conversion of such Convertible Securities. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total amount of such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of such Conversion Price adjusted upon the issuance of such rights or options shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities.

The provisions of subparagraph (iii) above for the readjustment of such Conversion Price upon the expiration of rights or options or the rights of conversion of Convertible Securities,

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shall apply mutatis mutandis to the rights, options and Convertible Securities referred to in this subparagraph (iv).

(k)           Definition.  The term “Additional Shares of Common Stock” as used herein shall mean all shares of Common Stock issued or deemed issued by the Corporation after the Original Issue Date, whether or not subsequently reacquired or retired by the Corporation, other than (i) shares of Common Stock issued upon conversion of the Series C Preferred Stock and (ii) any shares of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions and combinations) issued to employees, officers, directors, consultants or other persons performing services for the Corporation (if so issued solely because of any such person’s status as an officer, director, employee, consultant or other person performing services for the Corporation and not as part of any offering of the Corporation’s securities) pursuant to any stock option plan, stock purchase plan or management incentive plan, agreement or arrangement approved by the Board.

(l)            Accountants’ Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series C Preferred Stock, the Corporation, at its expense, shall cause independent certified public accountants of recognized standing selected by the Corporation (who may be the independent certified public accountants then auditing the books of the Corporation) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series C Preferred Stock at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Conversion Price at the time in effect for each series of the Series C Preferred Stock and (iii) the number of Additional Shares of Common Stock and the type and amount, if any, of other property which at the time would be received upon conversion of the Series C Preferred Stock.

(m)          Notices of Record Date.  In the event of any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all the assets of the Corporation to any other corporation, entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Corporation shall mail to each holder of Series C Preferred Stock (other than any such holder who is also a holder of record, or the affiliate of a holder of record, of the Corporation’s Common Stock, or is a director or executive officer, or an affiliate of a director or executive officer, of the Corporation) at least 20 days prior to the record date specified therein, a notice specifying (A) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (B) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

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(n)           Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of shares of Series C Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of the Corporation’s Common Stock on the date of conversion, as determined in good faith by the Corporation’s Board of Directors.  Whether or not the fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series C Preferred Stock the holder holds at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

(o)           Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series C Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series C Preferred Stock.  As a condition precedent to the taking of any action which would cause an adjustment to the Conversion Price, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient in order that it may validly and legally issue the shares of its Common Stock issuable based upon such adjusted Conversion Price.

(p)           Notices.  Any notice required by the provisions of this paragraph 3 to be given to the holder of shares of the Series C Preferred Stock shall be deemed given (i) when delivered by hand, (ii) when delivered by Federal Express or a similar overnight courier to each holder of record at his or her address appearing on the books of the Corporation or (iii) five days after being deposited in any United States Post Office enclosed in a postage prepaid, registered or certified envelope addressed to each holder of record at his or her address appearing on the books of the Corporation.

(q)           Payment of Taxes.  The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series C Preferred Stock or shares of Common Stock or other securities issued on account of Series C Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series C Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series C Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(r)            No Dilution or Impairment.  The Corporation shall not amend its articles of incorporation, as amended, or participate in any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of

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the material terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series C Preferred Stock against dilution or other impairment.

4.             Voting Rights.

(a)           The Series C Preferred Stock shall have no voting rights except as provided herein or as otherwise from time to time required by law.

(b)           Whenever dividends payable on the Series C Preferred Stock have not been paid for three or more Dividend Periods, whether or not consecutive, the holders shall have the right, with holders of any other series of securities of the Corporation ranking equally with the Series C Preferred Stock as to dividends that have similar voting rights and on which dividends likewise have not been paid (the “Voting Parity Securities”), voting together as a class, at a special meeting called at the request of holders of at least 20% of the shares of Series C Preferred Stock outstanding or of holders of at least 20% of the shares of any Voting Parity Securities (unless such request for a special meeting is received less than 90 calendar days before the date fixed for the next annual or special meeting of the Corporation’s shareholders, in which event such election shall be held only at such next annual or special meeting of the Corporation’s shareholders) or at the Corporation’s next annual or special meeting of the Corporation’s shareholders, to elect two additional directors to the Board of Directors; provided that the election of any such director does not cause the Corporation to violate the applicable corporate governance requirements or any applicable exchange or trading market where the Common Stock is then listed or quoted, as the case may be; and provided, further, that at no time will the Corporation’s Board of Directors include more than two directors elected pursuant to this paragraph 4(b). At any meeting held for the purpose of electing such a director, the presence in person or by proxy of the holders of shares representing at least a majority of the voting power of the Series C Preferred Stock and any Voting Parity Securities, voting together as a class, shall be required to constitute a quorum of such shares.  The affirmative vote of the holders of Series C Preferred Stock and holders of any Voting Parity Securities, voting together as a class, representing a majority of the voting power of such shares present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(c)           Upon the election of any such directors, the number of directors that comprise the board of directors shall be increased by such number of directors.  Such directors shall be elected to terms that are the shorter of the next annual meeting of the Corporation and such time as full dividends have been paid on the Series C Preferred Stock for at least three consecutive Dividend Periods.  In the event such term expires prior to the time full dividends have been paid on the Series C Preferred Stock for at least three consecutive Dividend Periods, any such directors may be elected to successive terms of similar duration until full dividends have been paid on the Series C Preferred Stock for at least three consecutive Dividend Periods.  Holders of Series C Preferred Stock, together with holders of any Voting Parity Securities, voting together as a class, may remove any director they elected.  Any vacancy created by the removal of any such director shall be filled only by the vote of the holders of the Series C Preferred Stock and holders of any Voting Parity Securities, voting together as a class.  If the office of either such director becomes

11

vacant for any reason other than removal, the remaining director may choose a successor who will hold office for the unexpired term of the vacant office.

(d)           So long as any shares of Series C Preferred Stock remain outstanding, the Corporation shall not, without the vote, in person or by proxy, or written consent of the holders of at least 75% of the shares of the Series C Preferred Stock, voting as a separate class:

(i)            amend the articles of incorporation, as amended, to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the Series C Preferred Stock with respect to payment of dividends or distribution of assets on liquidation of the Corporation; as well as any amendment of the articles of incorporation, as amended, or amended and restated bylaws that would alter or change the voting powers, preferences or special rights of the Series C Preferred Stock so as to materially and adversely affect them; provided that the amendment of the articles of incorporation, as amended, so as to authorize or create, or to increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of stock of the Corporation ranking on a parity with or junior to the Series C Preferred Stock with respect to dividends and in the distribution of assets on liquidation, dissolution or winding-up of the Corporation shall not be deemed to materially and adversely affect the voting powers, preferences or special rights of the Series C Preferred Stock; or

(ii)           consummate a binding share exchange, a reclassification involving the Series C Preferred Stock or a merger or consolidation of the Corporation with another entity; provided, however, that the holders of Series C Preferred Stock shall have no right to vote under this provision or otherwise under Illinois law if in each case (A) both (1) the Series C Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity (or its ultimate parent) that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) the Series C Preferred Stock remaining outstanding or the new preferred securities, as the case may be, have such powers, preferences and special rights, taken as a whole, as are not materially less favorable to the holders thereof than the powers, preferences and special rights of the Series C Preferred Stock, or (B) the Corporation has exercised its mandatory conversion rights pursuant to paragraph 3(c) hereof in connection with such consummation.

(e)           The number of votes of each share of Series C Preferred Stock and any Voting Parity Securities participating in the votes described above shall be calculated on an as converted basis or, if not all of such stock is convertible or exchangeable for Common Stock, shall be in proportion to the liquidation preference of such share.

5.             Redemption Rights.

(a)           The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date (the “Redemption Date”) to call and redeem all (but not less than all) of the outstanding shares of Series C Preferred Stock at a price of $10,000 per share, plus any authorized, declared and unpaid dividends thereon, without accumulation of any undeclared

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dividends, through the Redemption Date (the “Redemption Price”).  Redemption of the Series C Preferred Stock is subject to receipt by the Corporation of any required prior approvals from the Board of Governors of the Federal Reserve System or any other regulatory authority.

(b)           Not less than 30 days nor more than 60 days prior to the Redemption Date, written notice (the “Redemption Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series C Preferred Stock at their address last shown on the records of the Corporation.  The Redemption Notice shall state: (i) the number of shares being redeemed; (ii) what the Redemption Date and Redemption Price are; (iii) that the holders’ voluntary Conversion Rights (as defined in paragraph 3) shall terminate; and (iv) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series C Preferred Stock to be redeemed.

(c)           On or before the Redemption Date, the holders of shares of Series C Preferred Stock being redeemed, unless a holder has exercised his or her right to convert the shares as provided in paragraph 3 hereof, shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

(d)           If the Redemption Notice shall have been duly given, and if on or before the Redemption Date the Redemption Price has been set aside by the Corporation, then all shares of Series C Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series C Preferred Stock shall thereafter represent only the right to receive the Redemption Price.

6.             Liquidation.  Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series C Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, the amount of $10,000 per share, plus any authorized, declared and unpaid dividends through the date of such distribution, without accumulation of any undeclared dividends, before any payment or distribution shall be made on the Common Stock but pro rata with and in proportion to the liquidation rights of the holders of any other series of preferred stock with parity rights upon liquidation that are then outstanding. In the event the assets of the Corporation available for distribution to the holders of shares of the Series C Preferred Stock upon any dissolution, liquidation or winding up of the Corporation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this paragraph 6, then all of the assets of the Corporation to be distributed to such holders of Series C Preferred Stock shall be distributed ratably to the holders of Series C Preferred Stock.  After the payment to the holders of the shares of the Series C Preferred Stock of the full amounts provided for in this paragraph 6, the holders of the Series C Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

7.             Information Rights.  The holders of shares of Series C Preferred Stock shall be entitled to receive audited annual financial statements of the Corporation, as soon as such statements become available.

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FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said issue of Series C Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the articles of incorporation, as amended, of the Corporation pursuant to the provisions of the Illinois Business Corporation Act.

IN WITNESS WHEREOF, New Midland States, Inc. has caused this Statement of Resolution Establishing Series to be signed this 25th day of October, 2010, by a duly authorized officer, who affirms, under penalties of perjury, that the facts stated herein are true.

NEW MIDLAND STATES, INC.
By:	/s/ Douglas J. Tucker
	Name:	Douglas J. Tucker
	Title:	Senior Vice President & Corporate Counsel

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STATEMENT OF RESOLUTION ESTABLISHING SERIES

OF

SERIES D 9% NON-CUMULATIVE PERPETUAL CONVERTIBLE
PREFERRED STOCK

OF

NEW MIDLAND STATES, INC.

Pursuant to and in accordance with Section 6.10 of the Illinois Business Corporation Act of 1983 (the “IBCA”), the undersigned corporation made the following statement:

ARTICLE 1

The name of the corporation is New Midland States, Inc. (the “Corporation”).

ARTICLE 2

That pursuant to the authority vested in the board of directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the Articles of Incorporation of the Corporation (the “Articles”), the Board of Directors on October 25, 2010, adopted the following resolution creating a series of 4,400 shares of Preferred Stock designated as “Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Articles, a series of Preferred Stock, par value $2.00 per share, of the Corporation is hereby created, such series to be known as Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:

1.             Issuance.  The Board of Directors (the “Board”) of the Corporation has determined that 4,400 shares of the authorized and unissued preferred stock be identified as “Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock” and has authorized such shares for issuance at a price of $10,000 per share (hereinafter referred to as the “Series D Preferred Stock”).  The date on which the Series D Preferred Stock is originally issued shall hereinafter be referred to as the “Original Issue Date.”

2.             Dividends.

(a)           Dividends on the Series D Preferred Stock will be payable semi-annually in arrears, when, as and if authorized by the Board of Directors and declared by the Corporation out of legally available funds, on a non-cumulative basis on the $10,000 per share liquidation preference, at an annual rate equal to 9%.  Subject to the foregoing, dividends will be payable in arrears on December 1 and June 1 of each year (each, a “Dividend Payment Date”) commencing on June 1, 2011, or, if any such day is not a business day, the next business day.  Each dividend will be payable to holders of record as they appear on the Corporation’s stock register on the

fifteenth day of the month prior to the month in which the relevant Dividend Payment Date occurs.  Each period from and including a Dividend Payment Date (or the date of the issuance of the Series D Preferred Stock) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period”.  Dividends payable for each Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.  If a scheduled Dividend Payment Date falls on a day that is not a business day, the dividend will be paid on the next business day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid.

(b)           Dividends on the Series D Preferred Stock will be non-cumulative.  If for any reason the Board of Directors does not authorize and the Corporation does not declare full cash dividends on the Series D Preferred Stock for a Dividend Period, the Corporation will have no obligation to pay any dividends for that period, whether or not the Board of Directors authorizes and the Corporation declares dividends on the Series D Preferred Stock for any subsequent Dividend Period.  The Corporation is not obligated to and will not pay holders of the Series D Preferred Stock any dividend in excess of the dividends on the Series D Preferred Stock that are payable as described above.  There is no sinking fund with respect to dividends.

(c)           The Series D Preferred Stock created hereby shall rank equally, as to dividends, with the Corporation’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series C Preferred Stock”).  The Corporation may not declare or pay or set apart for payment full dividends on any series of preferred stock ranking, as to dividends, equally with or junior to the Series D Preferred Stock unless the Corporation has previously declared and paid or set apart for payment, or the Corporation contemporaneously declares and pays or sets apart for payment, full dividends on the Series D Preferred Stock for the most recently completed Dividend Period.  When dividends are not paid in full on the Series D Preferred Stock and any series of preferred stock ranking equally as to dividends, all dividends upon the Series D Preferred Stock and such equally ranking series will be declared and paid pro rata.  For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on shares of Series D Preferred Stock and the aggregate of the current and accrued dividends due on any equally ranking series.  The Corporation will not pay interest or any sum of money instead of interest on any dividend payment that may be in arrears on the Series D Preferred Stock.  Unless the Corporation has paid or declared and set aside for payment full dividends on the Series D Preferred Stock for the most recently completed Dividend Period, the Corporation will not:

·declare or make any dividend payment or distribution on any junior ranking stock, other than a dividend paid in junior ranking stock, or

·redeem, purchase, otherwise acquire or set apart money for a sinking fund for the redemption of any junior or equally ranking stock, except by conversion into or exchange for junior ranking stock.

As used herein, “junior to the Series D Preferred Stock,” “junior ranking stock” and like terms refer to the Corporation’s Common Stock and any other class or series of the Corporation’s capital stock over which the Series D Preferred Stock has preference or priority in

2

the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up, and “equally ranking” and like terms refer to the Series C Preferred Stock, and any other class or series of the Corporation’s capital stock that ranks on a parity with the Series D Preferred Stock in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up. Subject to the conditions described above, and not otherwise, dividends (payable in cash, stock, or otherwise), as may be determined by the Board of Directors or a duly authorized committee of the board, may be declared and paid on the Corporation’s Common Stock and any other stock ranking equally with or junior to the Series D Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Series D Preferred Stock will not be entitled to participate in those dividends.

3.             Conversion.  The holders of the Series D Preferred Stock shall have the following conversion rights (the “Conversion Rights”) and be subject to the following provisions with respect to the conversion of Series D Preferred Stock:

(a)           Right to Convert.  Each share of Series D Preferred Stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of Common Stock, at the Conversion Price (as hereafter defined) as provided herein, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of the Corporation or any transfer agent for the Series D Preferred Stock or Common Stock.

(b)           Conversion Price.  Each share of Series D Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing $10,000 by the Conversion Price per share.  The Conversion Price per share shall be equal to $23.00 (the “Conversion Price”).  (The Conversion Price of $23.00 has been proportionately adjusted to reflect the prior conversion of each one (1) share of the common stock of Midland States Bancorp, Inc., a Delaware corporation and the predecessor company to the Corporation, into ten (10) shares of the Corporation’s Common Stock, and is equal to one-tenth of 143% of the book value per share of $160.76 at December 31, 2009, of the common stock of Midland States Bancorp, Inc., the predecessor company).

(c)           Mandatory Conversion; Unpaid Dividends.

(i)            Except as limited or restricted by the terms of any outstanding Series C Preferred Stock, The Corporation shall have the right at any time (the “Mandatory Conversion Date”) after the fifth anniversary of the Original Issue Date to call and convert all (but not less than all) of the outstanding shares of Series D Preferred Stock into shares of Common Stock if, on the date the Corporation gives the Conversion Notice (as hereinafter defined), the Book Value Per Share of the Corporation’s Common Stock equals or exceeds $18.487.  (This targeted Book Value Per Share of the Corporation’s Common Stock of $18.487 has been proportionately adjusted to reflect the prior conversion of each one (1) share of the common stock of Midland States Bancorp, Inc., a Delaware corporation and the predecessor company to the Corporation, into ten (10) shares of the Corporation’s Common Stock, and is equal to one-tenth of 115% of the book value per share of $160.76 at December 31, 2009, of the common stock of Midland States Bancorp, Inc., the predecessor company).  “Book Value Per Share of the Corporation’s Common Stock” at any date means the result obtained by dividing (i) the Corporation’s total common

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shareholders’ equity at that date, by (ii) the number of shares of Common Stock then outstanding, net of any shares held in the treasury.

(ii)           Not less than 30 days nor more than 60 days prior to the Mandatory Conversion Date, written notice (the “Conversion Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series D Preferred Stock at their address last shown on the records of the Corporation.  The Conversion Notice shall state: (A) the number of shares being converted; (B) the Mandatory Conversion Date; (C) that the holders’ voluntary Conversion Rights (as herein defined) shall terminate; and (D) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series D Preferred Stock to be converted.

(iii)          On or before the Mandatory Conversion Date, the holders of shares of Series D Preferred Stock being converted shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Conversion Notice, and thereupon a certificate or certificates for the number of shares of Common Stock into which such shares of Series D Preferred Stock have been converted shall be issued to the person whose name appears on such surrendered certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired.

(iv)          If the Conversion Notice shall have been duly given, and if on the Mandatory Conversion Date the required number of shares of Common Stock are issuable, all shares of Series D Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series D Preferred Stock shall thereafter represent only the right to receive (A) the corresponding shares of Common Stock, plus cash in lieu of any fractional shares of Common Stock due upon conversion of shares of Series D Preferred Stock, (B) the amount of dividends or other distributions with a record date after the Mandatory Conversion Date but prior to the surrender date, and with a payment date at, prior or subsequent to surrender date, not paid with respect to the Common Stock issuable upon conversion, less the amount of any withholding taxes which may be required thereon and (C) the amount equal to any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, on such Series D Preferred Stock (the “Net Accrued Dividends”) through such Mandatory Conversion Date.

(d)           Mechanics of Voluntary Conversion; Unpaid Dividends.

(i)            Before any holder of Series D Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent of the Series D Preferred Stock or Common Stock, and shall give written notice by mail, postage prepaid, to the Corporation at such office that he elects to convert the same and shall state therein the number of shares of Series D Preferred Stock being converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Thereupon the Corporation shall promptly issue and deliver at such office to such holder of Series D Preferred Stock or to the nominee or nominees of such holder a certificate or certificates for the number of shares of Common Stock to which he shall be entitled.

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(ii)           Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series D Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.  A holder of Series D Preferred Stock who surrenders shares of Series D Preferred Stock for conversion shall be entitled to receive from the Corporation on the date of such surrender an amount in cash equal to the Net Accrued Dividends on such surrendered shares of Series D Preferred Stock, but any future dividends with respect to the surrendered shares of Series D Preferred Stock shall cease to accrue after such surrender and all rights with respect to such shares shall forthwith after such surrender terminate.

(e)           Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price shall be proportionately decreased; conversely, if the Corporation shall at any time or from time to time after the Original Issue Date reduce the outstanding shares of Common Stock by a stock combination, the Conversion Price shall be proportionately increased.  Any adjustment under this paragraph 3(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)            Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series D Preferred Stock shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series D Preferred Stock by a fraction:

(i)            the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series D Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series D Preferred Stock shall be adjusted pursuant to this paragraph 3(f) as of the time of actual payment of such dividends or distributions.

(g)           Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Series D Preferred Stock

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shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series D Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph 3 with respect to the rights of the holders of the Series D Preferred Stock. Notwithstanding the foregoing, to the extent the Corporation has a rights plan in effect with respect to the Common Stock on any date upon which Series D Preferred Stock is converted, upon conversion, the holder will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such date, the rights have separated from the shares of Common Stock in accordance with the provisions of such rights plan.

(h)           Adjustment for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon the conversion of the Series D Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares of stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph 3), then and in each such event the holder of each share of Series D Preferred Stock shall have the right thereafter to convert such share into the kind and amounts of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series D Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

(i)            Reorganization, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph 3) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Series D Preferred Stock shall thereafter be entitled to receive upon conversion of the Series D Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor Corporation resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Series D Preferred Stock would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph 3 with respect to the rights of the holders of the Series D Preferred Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this paragraph 3 (including adjustment of the Conversion Prices and the number of shares purchasable upon conversion of the Series D Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

(j)            Sale of Shares Below Conversion Price.

(i)            If at any time or from time to time after the Original Issue Date, the Corporation shall issue or sell Additional Shares of Common Stock (as hereinafter defined),

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other than as a dividend as provided in paragraph 3(f) above, and other than upon a subdivision or combination of shares of Common Stock as provided in paragraph 3(e) above, for a consideration per share less than the Conversion Price for the Series D Preferred Stock (or, if an adjusted Conversion Price shall be in effect by reason of a previous adjustment, then less than such adjusted Conversion Price), then and in each case the applicable Conversion Price for the Series D Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (B) the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price, and the denominator of which shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (Y) the number of such Additional Shares of Common Stock so issued.

(ii)           For the purpose of making any adjustment in the Conversion Price or number of shares of Common Stock purchasable on the conversion of Series D Preferred Stock as provided above, the consideration received by the Corporation for any issue or sale of securities shall,

(A) to the extent it consists of cash, be computed at the net amount of cash received by the Corporation after deduction of any underwriting or similar commissions, concessions or compensation paid or allowed by the Corporation in connection with such issue or sale,

(B) to the extent it consists of services or property other than cash, be computed at the fair value of such services or property as determined in good faith by the Board of Directors; and

(C) if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined), or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

(iii)          For the purpose of the adjustment provided in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of, or stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being hereinafter referred to as “Convertible Securities”), then, in each case, if the Effective Price (as hereinafter defined) of such rights, options or Convertible Securities shall be less than the then existing Conversion Price for the Series D Preferred Stock, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such

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shares, or an amount equal to the total amount of the consideration, if any, received by the Corporation for the rights or options or Convertible Securities, plus, in the case of such options or rights, the minimum amounts of consideration, if any, payable to the Corporation upon exercise or conversion of such options or rights. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total of all such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities.

If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Corporation on the conversion of such Convertible Securities.

(iv)          For the purpose of the adjustment provided for in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of Convertible Securities, then, in each such case, if the Effective Price thereof is less than the Conversion Price, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such rights or options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the conversion of such Convertible Securities. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total amount of such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of such Conversion Price adjusted upon the issuance of such rights or options shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities.

The provisions of subparagraph (iii) above for the readjustment of such Conversion Price upon the expiration of rights or options or the rights of conversion of Convertible Securities, shall apply mutatis mutandis to the rights, options and Convertible Securities referred to in this subparagraph (iv).

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(k)           Definition.  The term “Additional Shares of Common Stock” as used herein shall mean all shares of Common Stock issued or deemed issued by the Corporation after the Original Issue Date, whether or not subsequently reacquired or retired by the Corporation, other than (i) shares of Common Stock issued upon conversion of the Series D Preferred Stock and (ii) any shares of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions and combinations) issued to employees, officers, directors, consultants or other persons performing services for the Corporation (if so issued solely because of any such person’s status as an officer, director, employee, consultant or other person performing services for the Corporation and not as part of any offering of the Corporation’s securities) pursuant to any stock option plan, stock purchase plan or management incentive plan, agreement or arrangement approved by the Board.

(l)            Accountants’ Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series D Preferred Stock, the Corporation, at its expense, shall cause independent certified public accountants of recognized standing selected by the Corporation (who may be the independent certified public accountants then auditing the books of the Corporation) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series D Preferred Stock at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Conversion Price at the time in effect for each series of the Series D Preferred Stock and (iii) the number of Additional Shares of Common Stock and the type and amount, if any, of other property which at the time would be received upon conversion of the Series D Preferred Stock.

(m)          Notices of Record Date.  In the event of any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all the assets of the Corporation to any other corporation, entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Corporation shall mail to each holder of Series D Preferred Stock (other than any such holder who is also a holder of record, or the affiliate of a holder of record, of the Corporation’s Common Stock, or is a director or executive officer, or an affiliate of a director or executive officer, of the Corporation) at least 20 days prior to the record date specified therein, a notice specifying (A) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (B) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

(n)           Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of shares of Series D Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of the Corporation’s Common Stock on

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the date of conversion, as determined in good faith by the Corporation’s Board of Directors.  Whether or not the fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series D Preferred Stock the holder holds at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

(o)           Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series D Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series D Preferred Stock.  As a condition precedent to the taking of any action which would cause an adjustment to the Conversion Price, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient in order that it may validly and legally issue the shares of its Common Stock issuable based upon such adjusted Conversion Price.

(p)           Notices.  Any notice required by the provisions of this paragraph 3 to be given to the holder of shares of the Series D Preferred Stock shall be deemed given (i) when delivered by hand, (ii) when delivered by Federal Express or a similar overnight courier to each holder of record at his or her address appearing on the books of the Corporation or (iii) five days after being deposited in any United States Post Office enclosed in a postage prepaid, registered or certified envelope addressed to each holder of record at his or her address appearing on the books of the Corporation.

(q)           Payment of Taxes.  The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series D Preferred Stock or shares of Common Stock or other securities issued on account of Series D Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series D Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series D Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(r)            No Dilution or Impairment.  The Corporation shall not amend its articles of incorporation, as amended, or participate in any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the material terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series D Preferred Stock against dilution or other impairment.

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4.             Voting Rights.

(a)           The Series D Preferred Stock shall have no voting rights except as provided herein or as otherwise from time to time required by law.

(b)           Whenever dividends payable on the Series D Preferred Stock have not been paid for three or more Dividend Periods, whether or not consecutive, the holders shall have the right, with holders of any outstanding Series C Preferred Stock and any other series of securities of the Corporation ranking equally with the Series D Preferred Stock as to dividends that have similar voting rights and on which dividends likewise have not been paid (the “Voting Parity Securities”), voting together as a class, at a special meeting called at the request of holders of at least 20% of the shares of Series D Preferred Stock outstanding or of holders of at least 20% of the shares of any Voting Parity Securities (unless such request for a special meeting is received less than 90 calendar days before the date fixed for the next annual or special meeting of the Corporation’s shareholders, in which event such election shall be held only at such next annual or special meeting of the Corporation’s shareholders) or at the Corporation’s next annual or special meeting of the Corporation’s shareholders, to elect two additional directors to the Board of Directors; provided that the election of any such director does not cause the Corporation to violate the applicable corporate governance requirements or any applicable exchange or trading market where the Common Stock is then listed or quoted, as the case may be; and provided, further, that at no time will the Corporation’s Board of Directors include more than two directors elected pursuant to this paragraph 4(b). At any meeting held for the purpose of electing such a director, the presence in person or by proxy of the holders of shares representing at least a majority of the voting power of the Series D Preferred Stock and any Voting Parity Securities, voting together as a class, shall be required to constitute a quorum of such shares.  The affirmative vote of the holders of Series D Preferred Stock and holders of any Voting Parity Securities, voting together as a class, representing a majority of the voting power of such shares present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(c)           Upon the election of any such directors, the number of directors that comprise the board of directors shall be increased by such number of directors.  Such directors shall be elected to terms that are the shorter of the next annual meeting of the Corporation and such time as full dividends have been paid on the Series D Preferred Stock for at least three consecutive Dividend Periods.  In the event such term expires prior to the time full dividends have been paid on the Series D Preferred Stock for at least three consecutive Dividend Periods, any such directors may be elected to successive terms of similar duration until full dividends have been paid on the Series D Preferred Stock for at least three consecutive Dividend Periods.  Holders of Series D Preferred Stock, together with holders of any Voting Parity Securities, voting together as a class, may remove any director they elected.  Any vacancy created by the removal of any such director shall be filled only by the vote of the holders of the Series D Preferred Stock and holders of any Voting Parity Securities, voting together as a class.  If the office of either such director becomes vacant for any reason other than removal, the remaining director may choose a successor who will hold office for the unexpired term of the vacant office.

(d)           So long as any shares of Series D Preferred Stock remain outstanding, the Corporation shall not, without the vote, in person or by proxy, or written consent of the holders of at least 75% of the shares of the Series D Preferred Stock, voting as a separate class:

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(i)            amend the articles of incorporation, as amended, to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the Series D Preferred Stock with respect to payment of dividends or distribution of assets on liquidation of the Corporation; as well as any amendment of the articles of incorporation, as amended, or amended and restated bylaws that would alter or change the voting powers, preferences or special rights of the Series D Preferred Stock so as to materially and adversely affect them; provided that the amendment of the articles of incorporation, as amended, so as to authorize or create, or to increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of stock of the Corporation ranking on a parity with or junior to the Series D Preferred Stock with respect to dividends and in the distribution of assets on liquidation, dissolution or winding-up of the Corporation shall not be deemed to materially and adversely affect the voting powers, preferences or special rights of the Series D Preferred Stock; or

(ii)           consummate a binding share exchange, a reclassification involving the Series D Preferred Stock or a merger or consolidation of the Corporation with another entity; provided, however, that the holders of Series D Preferred Stock shall have no right to vote under this provision or otherwise under Illinois law if in each case (A) both (1) the Series D Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity (or its ultimate parent) that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) the Series D Preferred Stock remaining outstanding or the new preferred securities, as the case may be, have such powers, preferences and special rights, taken as a whole, as are not materially less favorable to the holders thereof than the powers, preferences and special rights of the Series D Preferred Stock, or (B) the Corporation has exercised its mandatory conversion rights pursuant to paragraph 3(c) hereof in connection with such consummation.

(e)           The number of votes of each share of Series D Preferred Stock and any Voting Parity Securities participating in the votes described above shall be calculated on an as converted basis or, if not all of such stock is convertible or exchangeable for Common Stock, shall be in proportion to the liquidation preference of such share.

5.             Redemption Rights.

(a)           Subject to any restrictions under the terms of any outstanding Series C Stock, the Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date (the “Redemption Date”) to call and redeem all (but not less than all) of the outstanding shares of Series D Preferred Stock at a price of $10,000 per share, plus any authorized, declared and unpaid dividends thereon, without accumulation of any undeclared dividends, through the Redemption Date (the “Redemption Price”). Redemption of the Series D Preferred Stock is subject to receipt by the Corporation of any required prior approvals from the Board of Governors of the Federal Reserve System or any other regulatory authority.

(b)           Not less than 30 days nor more than 60 days prior to the Redemption Date, written notice (the “Redemption Notice”) shall be mailed, first class postage prepaid, to the

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holders of the shares of the Series D Preferred Stock at their address last shown on the records of the Corporation.  The Redemption Notice shall state: (i) the number of shares being redeemed; (ii) what the Redemption Date and Redemption Price are; (iii) that the holders’ voluntary Conversion Rights (as defined in paragraph 3) shall terminate; and (iv) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series D Preferred Stock to be redeemed.

(c)           On or before the Redemption Date, the holders of shares of Series D Preferred Stock being redeemed, unless a holder has exercised his or her right to convert the shares as provided in paragraph 3 hereof, shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

(d)           If the Redemption Notice shall have been duly given, and if on or before the Redemption Date the Redemption Price has been set aside by the Corporation, then all shares of Series D Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series D Preferred Stock shall thereafter represent only the right to receive the Redemption Price.

6.             Liquidation.  Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series D Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, the amount of $10,000 per share, plus any authorized, declared and unpaid dividends through the date of such distribution, without accumulation of any undeclared dividends, before any payment or distribution shall be made on the Common Stock but pro rata with and in proportion to the liquidation rights of the holders of any other series of preferred stock with parity rights upon liquidation that are then outstanding. In the event the assets of the Corporation available for distribution to the holders of shares of the Series D Preferred Stock upon any dissolution, liquidation or winding up of the Corporation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this paragraph 6, then all of the assets of the Corporation to be distributed to such holders of Series D Preferred Stock shall be distributed ratably to the holders of Series D Preferred Stock.  After the payment to the holders of the shares of the Series D Preferred Stock of the full amounts provided for in this paragraph 6, the holders of the Series D Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

7.             Information Rights.  The holders of shares of Series D Preferred Stock shall be entitled to receive audited annual financial statements of the Corporation, as soon as such statements become available.

FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said issue of Series D Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the articles of incorporation, as amended, of the Corporation pursuant to the provisions of the Illinois Business Corporation Act.

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IN WITNESS WHEREOF, New Midland States, Inc. has caused this Statement of Resolution Establishing Series to be signed this 25th day of October, 2010, by a duly authorized officer, who affirms, under penalties of perjury, that the facts stated herein are true.

NEW MIDLAND STATES, INC.
By:	/s/ Douglas J. Tucker
	Name:	Douglas J. Tucker
	Title:	Senior Vice President & Corporate Counsel

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FORM BCA 11.25 (rev. Dec. 2003)

ARTICLES OF MERGER,

CONSOLIDATION OR EXCHANGE

Business Corporation Act

Secretary of State

Department of Business Services

501 S. Second St., Rm. 350

Springfield, IL 62756

217-782-6961

www.cyberdriveillinois.com

Remit payment in the form of a check or money order payable to Secretary of State.

Filing fee is $100, but if merger or consolidation involves more than two corporations, submit $50 for each additional corporation.

EFF 12/31/10 File # 6725-417-1 Filing Fee:  $100.00 Approved: /s/ DS

                Submit in duplicate                Type or Print clearly in black ink                  Do not write above this line                 

NOTE: Strike inapplicable words in Items 1, 3, 4 and 5.

merge

1.Names of Corporations proposing to consolidate and State or Country of incorporation.

exchange shares

Name of Corporation	State or Country of Incorporation	Corporation File Number
Midland States Bancorp, Inc.	Delaware	5520-656-2
New Midland States, Inc.	Illinois	6725-417-1

2.The laws of the state or country under which each Corporation is incorporated permits such merger, consolidation or exchange.

surviving

3.a.  Name of the new corporation: New Midland States, Inc.

acquiring

b.  Corporation shall be governed by the laws of: Illinois

For more space, attach additional sheets of this size.

merger

4.Plan of consolidation is as follow:

exchange

Please see attached Exhibit A.

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merger

5.The consolidation   was approved, as to each Corporation not organized in Illinois, in compliance with the laws of the

exchange       state under which it is organized, and (b) as to each Illinois Corporation, as follows:

The following items are not applicable to mergers under §11.30  —  90 percent-owned subsidiary provisions. (See Article 7 on page 3.)

Mark an “X” in one box only for each Illinois Corporation.

Name of Corporation:	By the shareholders, a resolution of the board of directors having been duly adopted and submitted to a vote at a meeting of shareholders. Not less than the minimum number of votes required by statute and by the Articles of Incorporation voted in favor of the action taken. (§11.20)	By written consent of the shareholders having not less than the minimum number of votes required by statute and by the Articles of Incorporation. Shareholders who have not consented in writing have been given notice in accordance with §7.10 and §11.20.	By written consent of ALL shareholders entitled to vote on the action, in accordance with §7.10 and §11.20.
New Midland States, Inc.	o	o	x
	o	o	o
	o	o	o
	o	o	o
	o	o	o

6.Not applicable if surviving, new or acquiring Corporation is an Illinois Corporation.

It is agreed that, upon and after the filing of the Articles of Merger, Consolidation or Exchange by the Secretary of State of the State of Illinois:

a.The surviving, new or acquiring Corporation may be served with process in the State of Illinois in any proceeding for the enforcement of any obligation of any Corporation organized under the laws of the State of Illinois which is a party to the merger, consolidation or exchange and in any proceeding for the enforcement of the rights of a dissenting shareholder of any such Corporation organized under the laws of the State of Illinois against the surviving, new or acquiring Corporation.

b.The Secretary of State of the State of Illinois shall be and hereby is irrevocably appointed as the agent of the surviving, new or acquiring Corporation to accept service of process in any such proceedings, and

c.The surviving, new or acquiring Corporation will promptly pay to the dissenting shareholders of any Corporation organized under the laws of the State of Illinois which is a party to the merger, consolidation or exchange the amount, if any, to which they shall be entitled under the provisions of The Business Corporation Act of 1983 of the State of Illinois with respect to the rights of dissenting shareholders.

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7.Complete if reporting a merger under §11.30 — 90 percent-owned subsidiary provisions.

a.The number of outstanding shares of each class of each merging subsidiary Corporation and the number of such shares of each class owned immediately prior to the adoption of the plan of merger by the parent Corporation:

		Number of Shares of Each
		Class Owned Immediately
	Total Number of Shares	Prior to Merger by the
Name of Corporation	Outstanding of Each Class	Parent Corporation

b.Not applicable to 100 percent-owned subsidiaries.

The date of mailing a copy of the plan of merger and notice of the right to dissent to the shareholders of each merging subsidiary Corporation was                                   ,                   .

Month & Day    Year

Was written consent for the merger or written waiver of the 30-day period by the holders of all the outstanding shares of all subsidiary Corporations received?   o Yes   o No

(If “No,” duplicate copies of the Articles of Merger may not be delivered to the Secretary of State until after 30 days following the mailing of a copy of the plan of merger and the notice of the right to dissent to the shareholders of each merging subsidiary Corporation.)

8.The undersigned Corporation has caused this statement to be signed by a duly authorized officer who affirms, under penalties of perjury, that the facts stated herein are true and correct. All signatures must be in BLACK INK.

Dated	December 30	,	2010	New Midland States, Inc.
	Month & Day		Year	Exact Name of Corporation
	/s/ JEFF LUDWIG
	Any Authorized Officer’s Signature
	JEFF LUDWIG EVP, CFO
	Name and Title (type or print)
Dated	December 30	,	2010	Midland States Bancorp, Inc.
	Month & Day		Year	Exact Name of Corporation
	/s/ JEFF LUDWIG
	Any Authorized Officer’s Signature
	JEFF LUDWIG EVP, CFO
	Name and Title (type or print)
Dated		,
	Month & Day		Year	Exact Name of Corporation
	Any Authorized Officer’s Signature
	Name and Title (type or print)

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Exhibit A

to the

Articles of Merger

of

Midland States Bancorp, Inc.

and

New Midland States, Inc.

PLAN OF MERGER

A copy of the Agreement and Plan of Merger (the “Agreement”) as entered into as of the 22nd day of October, 2010, between New Midland States, Inc., an Illinois corporation (“Newco”), and Midland States Bancorp, Inc., a Delaware corporation (“Midland”), is on file at the principal office of Newco.

1.The Merger. In accordance with the terms and subject to the conditions of the Agreement, Midland will merge with and into Newco (the “Merger”), and the separate corporate existence of Midland will terminate. Newco will be the surviving corporation and will continue its corporate existence under the laws of the State of Illinois.

2.Effective Time. The Merger shall become effective at 11:59 p.m. central time on December 31, 2010, following the filing of these Articles of Merger with the Illinois Secretary of State (the “Effective Time”).

3.Effects of Merger on Capital Stock. At the Effective Time, each of the 100 shares of the issued and outstanding common stock of Newco owned by the sole shareholder of Newco immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Newco, Midland or the holders of the capital stock of Newco or Midland, shall be cancelled.

At the Effective Time:

(a)each of the shares of the issued and outstanding common stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the common stock of Midland, shall be converted into ten (10) fully paid and non-assessable shares of the common stock of Newco;

(b)each of the shares of the issued and outstanding common stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time that is restricted or not fully vested shall upon conversion have the same restrictions or vesting arrangements applicable to such shares as prior to the conversion;

(c)each of the shares of the issued and outstanding Series C 9% Non- Cumulative Perpetual Convertible Preferred Stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the preferred stock of Midland, shall be converted into one share of the Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock of Newco; and

(d)each of the shares of the issued and outstanding Series D 9% Non- Cumulative Perpetual Convertible Preferred Stock of Midland owned by the stockholders of Midland immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Midland, Newco or the holders of the preferred stock of Midland, shall be converted into one share of the Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock of Newco.

4.Amendment to the Articles of Incorporation. At the Effective Time, Article 1 of the Articles of Incorporation of Newco shall be amended to read in its entirety as follows.

ARTICLE 1

Name of the Corporation: Midland States Bancorp, Inc.

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STATEMENT OF RESOLUTION ESTABLISHING SERIES

OF

SERIES E 9% NON-CUMULATIVE PERPETUAL CONVERTIBLE
PREFERRED STOCK

OF

MIDLAND STATES BANCORP, INC.

Pursuant to and in accordance with Section 6.10 of the Illinois Business Corporation Act of 1983 (the “IBCA”), the undersigned corporation made the following statement:

ARTICLE 1

The name of the corporation is Midland States Bancorp, Inc. (the “Corporation”).

ARTICLE 2

That pursuant to the authority vested in the board of directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the Articles of Incorporation of the Corporation (the “Articles”), the Board of Directors on March 7, 2011, adopted the following resolution creating a series of 630 shares of Preferred Stock designated as “Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Articles, a series of Preferred Stock, par value $2.00 per share, of the Corporation is hereby created, such series to be known as Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:

1.             Issuance.  The Board of Directors (the “Board”) of the Corporation has determined that 630 shares of the authorized and unissued preferred stock be identified as “Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock” and has authorized such shares for issuance at a price of $10,000 per share (hereinafter referred to as the “Series E Preferred Stock”).

2.             Dividends.

(a)           Dividends on the Series E Preferred Stock will be payable semi-annually in arrears, when, as and if authorized by the Board of Directors and declared by the Corporation out of legally available funds, on a non-cumulative basis on the $10,000 per share liquidation preference, at an annual rate equal to 9%.  Subject to the foregoing, dividends will be payable in arrears on December 1 and June 1 of each year (each, a “Dividend Payment Date”), commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date (as defined in paragraph 3(b)), or, if any such day is not a business day, the next business day.  Each dividend will be payable to holders of record as they appear on the

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Corporation’s stock register on the fifteenth day of the month prior to the month in which the relevant Dividend Payment Date occurs.  Each period from and including a Dividend Payment Date (or the date of the issuance of the Series E Preferred Stock) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period.”  Dividends payable for each Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.  If a scheduled Dividend Payment Date falls on a day that is not a business day, the dividend will be paid on the next business day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid.

(b)           Dividends on the Series E Preferred Stock will be non-cumulative.  If for any reason the Board of Directors does not authorize and the Corporation does not declare full cash dividends on the Series E Preferred Stock for a Dividend Period, the Corporation will have no obligation to pay any dividends for that period, whether or not the Board of Directors authorizes and the Corporation declares dividends on the Series E Preferred Stock for any subsequent Dividend Period.  The Corporation is not obligated to and will not pay holders of the Series E Preferred Stock any dividend in excess of the dividends on the Series E Preferred Stock that are payable as described above.  There is no sinking fund with respect to dividends.

(c)           The Series E Preferred Stock created hereby shall rank equally, as to dividends, with the Corporation’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series C Preferred Stock”), Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series D Preferred Stock”) and Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series F Preferred Stock”).  The Corporation may not declare or pay or set apart for payment full dividends on any series of preferred stock ranking, as to dividends, equally with or junior to the Series E Preferred Stock unless the Corporation has previously declared and paid or set apart for payment, or the Corporation contemporaneously declares and pays or sets apart for payment, full dividends on the Series E Preferred Stock for the most recently completed Dividend Period.  When dividends are not paid in full on the Series E Preferred Stock and any series of preferred stock ranking equally as to dividends, all dividends upon the Series E Preferred Stock and such equally ranking series will be declared and paid pro rata.  For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on shares of Series E Preferred Stock and the aggregate of the current and accrued dividends due on any equally ranking series.  The Corporation will not pay interest or any sum of money instead of interest on any dividend payment that may be in arrears on the Series E Preferred Stock.  Unless the Corporation has paid or declared and set aside for payment full dividends on the Series E Preferred Stock for the most recently completed Dividend Period, the Corporation will not:

·declare or make any dividend payment or distribution on any junior ranking stock, other than a dividend paid in junior ranking stock, or

·redeem, purchase, otherwise acquire or set apart money for a sinking fund for the redemption of any junior or equally ranking stock, except by conversion into or exchange for junior ranking stock.

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As used herein, “junior to the Series E Preferred Stock,” “junior ranking stock” and like terms refer to the Corporation’s Common Stock and any other class or series of the Corporation’s capital stock over which the Series E Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up, and “equally ranking” and like terms refer to the Series C Preferred Stock, the Series D Preferred Stock and the Series F Preferred Stock, and any other class or series of the Corporation’s capital stock that ranks on a parity with the Series E Preferred Stock in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up.  Subject to the conditions described above, and not otherwise, dividends (payable in cash, stock, or otherwise), as may be determined by the Board of Directors or a duly authorized committee of the Board of Directors, may be declared and paid on the Corporation’s Common Stock and any other stock ranking equally with or junior to the Series E Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Series E Preferred Stock will not be entitled to participate in those dividends.

3.             Conversion.  The holders of the Series E Preferred Stock shall have the following conversion rights (the “Conversion Rights”) and be subject to the following provisions with respect to the conversion of Series E Preferred Stock:

(a)           Right to Convert.  Each share of Series E Preferred Stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of Common Stock, at the Conversion Price (as hereafter defined) therefor in effect at the time of conversion determined as provided herein, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of the Corporation or any transfer agent for the Series E Preferred Stock or Common Stock.

(b)           Conversion Price.  Each share of Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing $10,000 by the Conversion Price per share in effect at the time of conversion for each share of Preferred Stock.  The Conversion Price per share for the Preferred Stock at the date on which such share of Preferred Stock is originally issued (the “Original Issue Date”) shall be $11.75, provided that if at the date of conversion the Corporation has not declared and paid dividends with respect to two or more Dividend Periods, the Conversion Price shall be $9.243 (the “Conversion Price”).  The Conversion Price shall be subject to adjustment from time to time as provided herein.

(c)           Mandatory Conversion; Unpaid Dividends.

(i)            The Corporation shall have the right at any time (the “Mandatory Conversion Date”) after the fifth anniversary of the Original Issue Date to call and convert all (but not less than all) of the outstanding shares of Series E Preferred Stock into shares of Common Stock if, on the date the Corporation gives the Conversion Notice (as hereinafter defined), the Book Value Per Share of the Corporation’s Common Stock equals or exceeds $10.629.  “Book Value Per Share of the Corporation’s Common Stock” at any date means the result obtained by dividing (i) the Corporation’s total common shareholders’ equity at that date by (ii) the number of shares of Common Stock then outstanding, net of any shares held in the treasury.

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(ii)           Not less than 30 days nor more than 60 days prior to the Mandatory Conversion Date, written notice (the “Conversion Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series E Preferred Stock at their address last shown on the records of the Corporation.  The Conversion Notice shall state: (A) the number of shares being converted; (B) what the Mandatory Conversion Date and Conversion Price are; (C) that the holders’ voluntary Conversion Rights (as herein defined) shall terminate; and (D) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series E Preferred Stock to be converted.

(iii)          On or before the Mandatory Conversion Date, the holders of shares of Series E Preferred Stock being converted shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Conversion Notice, and thereupon a certificate or certificates for the number of shares of Common Stock into which such shares of Series E Preferred Stock have been converted shall be issued to the person whose name appears on such surrendered certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired.

(iv)          If the Conversion Notice shall have been duly given, and if on the Mandatory Conversion Date the required number of shares of Common Stock are issuable, all shares of Series E Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series E Preferred Stock shall thereafter represent only the right to receive (A) the corresponding shares of Common Stock, plus cash in lieu of any fractional shares of Common Stock due upon conversion of shares of Series E Preferred Stock, (B) the amount of dividends or other distributions with a record date after the Mandatory Conversion Date but prior to the surrender date, and with a payment date at, prior or subsequent to the surrender date, not paid with respect to the Common Stock issuable upon conversion, less the amount of any withholding taxes which may be required thereon and (C) the amount equal to any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, on such Series E Preferred Stock (the “Net Accrued Dividends”) through such Mandatory Conversion Date.

(d)           Mechanics of Voluntary Conversion; Unpaid Dividends.

(i)            Before any holder of Series E Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent of the Series E Preferred Stock or Common Stock, and shall give written notice by mail, postage prepaid, to the Corporation at such office that he elects to convert the same and shall state therein the number of shares of Series E Preferred Stock being converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued.  Thereupon the Corporation shall promptly issue and deliver at such office to such holder of Series E Preferred Stock or to the nominee or nominees of such holder a certificate or certificates for the number of shares of Common Stock to which he shall be entitled.

(ii)           Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series E Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable

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upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.  A holder of Series E Preferred Stock who surrenders shares of Series E Preferred Stock for conversion shall be entitled to receive from the Corporation on the date of such surrender an amount in cash equal to the Net Accrued Dividends on such surrendered shares of Series E Preferred Stock, but any future dividends with respect to the surrendered shares of Series E Preferred Stock shall cease to accrue after such surrender and all rights with respect to such shares shall forthwith after such surrender terminate.

(e)           Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased; conversely, if the Corporation shall at any time or from time to time after the Original Issue Date reduce the outstanding shares of Common Stock by a stock combination, the Conversion Price then in effect immediately before the combination shall be proportionately increased.  Any adjustment under this paragraph 3(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)            Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series E Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series E Preferred Stock by a fraction:

(i)            the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series E Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series E Preferred Stock shall be adjusted pursuant to this paragraph 3(f) as of the time of actual payment of such dividends or distributions.

(g)           Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Series E Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received

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had their Series E Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph 3 with respect to the rights of the holders of the Series E Preferred Stock.  Notwithstanding the foregoing, to the extent the Corporation has a rights plan in effect with respect to the Common Stock on any date upon which Series E Preferred Stock is converted, upon conversion, the holder will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such date, the rights have separated from the shares of Common Stock in accordance with the provisions of such rights plan.

(h)           Adjustment for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon the conversion of the Series E Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares of stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph 3), then and in each such event the holder of each share of Series E Preferred Stock shall have the right thereafter to convert such share into the kind and amounts of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series E Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

(i)            Reorganization, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph 3) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Series E Preferred Stock shall thereafter be entitled to receive upon conversion of the Series E Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor Corporation resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Series E Preferred Stock would have been entitled on such capital reorganization, merger, consolidation or sale.  In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph 3 with respect to the rights of the holders of the Series E Preferred Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this paragraph 3 (including adjustment of the Conversion Prices and the number of shares purchasable upon conversion of the Series E Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

(j)            Sale of Shares Below Conversion Price.

(i)            If at any time or from time to time after the Original Issue Date, the Corporation shall issue or sell Additional Shares of Common Stock (as hereinafter defined), other than as a dividend as provided in paragraph 3(f) above, and other than upon a subdivision or combination of shares of Common Stock as provided in paragraph 3(e) above, for a

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consideration per share less than the Conversion Price for the Series E Preferred Stock (or, if an adjusted Conversion Price shall be in effect by reason of a previous adjustment, then less than such adjusted Conversion Price), then and in each case the applicable Conversion Price for the Series E Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (B) the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price, and the denominator of which shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (Y) the number of such Additional Shares of Common Stock so issued.

(ii)           For the purpose of making any adjustment in the Conversion Price or number of shares of Common Stock purchasable on the conversion of Series E Preferred Stock as provided above, the consideration received by the Corporation for any issue or sale of securities shall,

(A)          to the extent it consists of cash, be computed at the net amount of cash received by the Corporation after deduction of any underwriting or similar commissions, concessions or compensation paid or allowed by the Corporation in connection with such issue or sale,

(B)           to the extent it consists of services or property other than cash, be computed at the fair value of such services or property as determined in good faith by the Board of Directors; and

(C)           if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined), or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

(iii)          For the purpose of the adjustment provided in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of, or stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being hereinafter referred to as “Convertible Securities”), then, in each case, if the Effective Price (as hereinafter defined) of such rights, options or Convertible Securities shall be less than the then existing Conversion Price for the Series E Preferred Stock, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such shares, or an amount equal to the total amount of the consideration, if any, received by the Corporation for the rights or options or Convertible Securities, plus, in the case of such options

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or rights, the minimum amounts of consideration, if any, payable to the Corporation upon exercise or conversion of such options or rights.  For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total of all such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities.

If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Corporation on the conversion of such Convertible Securities.

(iv)          For the purpose of the adjustment provided for in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of Convertible Securities, then, in each such case, if the Effective Price thereof is less than the current Conversion Price, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such rights or options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the conversion of such Convertible Securities.  For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total amount of such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of such Conversion Price adjusted upon the issuance of such rights or options shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities.

The provisions of subparagraph (iii) above for the readjustment of such Conversion Price upon the expiration of rights or options or the rights of conversion of Convertible Securities, shall apply mutatis mutandis to the rights, options and Convertible Securities referred to in this subparagraph (iv).

(k)           Definition.  The term “Additional Shares of Common Stock” as used herein shall mean all shares of Common Stock issued or deemed issued by the Corporation after the Original Issue Date, whether or not subsequently reacquired or retired by the Corporation, other than

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(i) shares of Common Stock issued upon conversion of the Series E Preferred Stock and (ii) any shares of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions and combinations) issued to employees, officers, directors, consultants or other persons performing services for the Corporation (if so issued solely because of any such person’s status as an officer, director, employee, consultant or other person performing services for the Corporation and not as part of any offering of the Corporation’s securities) pursuant to any stock option plan, stock purchase plan or management incentive plan, agreement or arrangement approved by the Board.

(l)            Accountants’ Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series E Preferred Stock, the Corporation, at its expense, shall cause independent certified public accountants of recognized standing selected by the Corporation (who may be the independent certified public accountants then auditing the books of the Corporation) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series E Preferred Stock at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Conversion Price at the time in effect for each series of the Series E Preferred Stock and (iii) the number of Additional Shares of Common Stock and the type and amount, if any, of other property which at the time would be received upon conversion of the Series E Preferred Stock.

(m)          Notices of Record Date.  In the event of any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all the assets of the Corporation to any other corporation, entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Corporation shall mail to each holder of Series E Preferred Stock (other than any such holder who is also a holder of record, or the affiliate of a holder of record, of the Corporation’s Common Stock, or is a director or executive officer, or an affiliate of a director or executive officer, of the Corporation) at least 20 days prior to the record date specified therein, a notice specifying (A) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (B) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

(n)           Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of shares of Series E Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of the Corporation’s Common Stock on the date of conversion, as determined in good faith by the Corporation’s Board of Directors.  Whether or not the fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series E Preferred Stock the holder holds at the time

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converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

(o)           Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series E Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series E Preferred Stock.  As a condition precedent to the taking of any action which would cause an adjustment to the Conversion Price, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient in order that it may validly and legally issue the shares of its Common Stock issuable based upon such adjusted Conversion Price.

(p)           Notices.  Any notice required by the provisions of this paragraph 3 to be given to the holder of shares of the Series E Preferred Stock shall be deemed given (i) when delivered by hand, (ii) when delivered by Federal Express or a similar overnight courier to each holder of record at his or her address appearing on the books of the Corporation or (iii) five days after being deposited in any United States Post Office enclosed in a postage prepaid, registered or certified envelope addressed to each holder of record at his or her address appearing on the books of the Corporation.

(q)           Payment of Taxes.  The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series E Preferred Stock or shares of Common Stock or other securities issued on account of Series E Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series E Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series E Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(r)            No Dilution or Impairment.  The Corporation shall not amend its articles of incorporation, as amended, or participate in any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the material terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series E Preferred Stock against dilution or other impairment.

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4.             Voting Rights.

(a)           The Series E Preferred Stock shall have no voting rights except as provided herein or as otherwise from time to time required by law.

(b)           Whenever dividends payable on the Series E Preferred Stock have not been paid for three or more Dividend Periods, whether or not consecutive, the holders shall have the right, with holders of any other series of securities of the Corporation ranking equally with the Series E Preferred Stock as to dividends that have similar voting rights (including, without limitation, the Series C Preferred Stock, the Series D Preferred Stock and the Series F Preferred Stock) and on which dividends likewise have not been paid (the “Voting Parity Securities”), voting together as a class, at a special meeting called at the request of holders of at least 20% of the shares of Series E Preferred Stock outstanding or of holders of at least 20% of the shares of any Voting Parity Securities (unless such request for a special meeting is received less than 90 calendar days before the date fixed for the next annual or special meeting of the Corporation’s shareholders, in which event such election shall be held only at such next annual or special meeting of the Corporation’s shareholders) or at the Corporation’s next annual or special meeting of the Corporation’s shareholders, to elect two additional directors to the Board of Directors; provided that the election of any such director does not cause the Corporation to violate the applicable corporate governance requirements or any applicable exchange or trading market where the Common Stock is then listed or quoted, as the case may be; and provided, further, that at no time will the Corporation’s Board of Directors include more than two directors elected pursuant to this paragraph 4(b).  At any meeting held for the purpose of electing such a director, the presence in person or by proxy of the holders of shares representing at least a majority of the voting power of the Series E Preferred Stock and any Voting Parity Securities, voting together as a class, shall be required to constitute a quorum of such shares.  The affirmative vote of the holders of Series E Preferred Stock and holders of any Voting Parity Securities, voting together as a class, representing a majority of the voting power of such shares present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(c)           Upon the election of any such directors, the number of directors that comprise the board of directors shall be increased by such number of directors.  Such directors shall be elected to terms that are the shorter of the next annual meeting of the Corporation and such time as full dividends have been paid on the Series E Preferred Stock for at least three consecutive Dividend Periods.  In the event such term expires prior to the time full dividends have been paid on the Series E Preferred Stock for at least three consecutive Dividend Periods, any such directors may be elected to successive terms of similar duration until full dividends have been paid on the Series E Preferred Stock for at least three consecutive Dividend Periods.  Holders of Series E Preferred Stock, together with holders of any Voting Parity Securities, voting together as a class, may remove any director they elected.  Any vacancy created by the removal of any such director shall be filled only by the vote of the holders of the Series E Preferred Stock and holders of any Voting Parity Securities, voting together as a class.  If the office of either such director becomes vacant for any reason other than removal, the remaining director may choose a successor who will hold office for the unexpired term of the vacant office.

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(d)           So long as any shares of Series E Preferred Stock remain outstanding, the Corporation shall not, without the vote, in person or by proxy, or written consent of the holders of at least 75% of the shares of the Series E Preferred Stock, voting as a separate class:

(i)            amend the articles of incorporation, as amended, to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the Series E Preferred Stock with respect to payment of dividends or distribution of assets on liquidation of the Corporation; as well as any amendment of the articles of incorporation, as amended, or amended and restated bylaws that would alter or change the voting powers, preferences or special rights of the Series E Preferred Stock so as to materially and adversely affect them; provided that the amendment of the articles of incorporation, as amended, so as to authorize or create, or to increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of stock of the Corporation ranking on a parity with or junior to the Series E Preferred Stock with respect to dividends and in the distribution of assets on liquidation, dissolution or winding-up of the Corporation shall not be deemed to materially and adversely affect the voting powers, preferences or special rights of the Series E Preferred Stock; or

(ii)           consummate a binding share exchange, a reclassification involving the Series E Preferred Stock or a merger or consolidation of the Corporation with another entity; provided, however, that the holders of Series E Preferred Stock shall have no right to vote under this provision or otherwise under Illinois law if in each case (A) both (1) the Series E Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity (or its ultimate parent) that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) the Series E Preferred Stock remaining outstanding or the new preferred securities, as the case may be, have such powers, preferences and special rights, taken as a whole, as are not materially less favorable to the holders thereof than the powers, preferences and special rights of the Series E Preferred Stock, or (B) the Corporation has exercised its mandatory conversion rights pursuant to paragraph 3(c) hereof in connection with such consummation.

(e)           The number of votes of each share of Series E Preferred Stock and any Voting Parity Securities participating in the votes described above shall be calculated on an as converted basis or, if not all of such stock is convertible or exchangeable for Common Stock, shall be in proportion to the liquidation preference of such share.

5.             Redemption Rights.

(a)           The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date (the “Redemption Date”) to call and redeem all (but not less than all) of the outstanding shares of Series E Preferred Stock at a price of $10,000 per share, plus any authorized, declared and unpaid dividends thereon, without accumulation of any undeclared dividends, through the Redemption Date (the “Redemption Price”).  Redemption of the Series E Preferred Stock is subject to receipt by the Corporation of any required prior approvals from the Board of Governors of the Federal Reserve System or any other regulatory authority.

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(b)           Not less than 30 days nor more than 60 days prior to the Redemption Date, written notice (the “Redemption Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series E Preferred Stock at their address last shown on the records of the Corporation.  The Redemption Notice shall state: (i) the number of shares being redeemed; (ii) what the Redemption Date and Redemption Price are; (iii) that the holders’ voluntary Conversion Rights (as defined in paragraph 3) shall terminate; and (iv) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series E Preferred Stock to be redeemed.

(c)           On or before the Redemption Date, the holders of shares of Series E Preferred Stock being redeemed, unless a holder has exercised his or her right to convert the shares as provided in paragraph 3 hereof, shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

(d)           If the Redemption Notice shall have been duly given, and if on or before the Redemption Date the Redemption Price has been set aside by the Corporation, then all shares of Series E Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series E Preferred Stock shall thereafter represent only the right to receive the Redemption Price.

6.             Liquidation.  Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series E Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, the amount of $10,000 per share, plus any authorized, declared and unpaid dividends through the date of such distribution, without accumulation of any undeclared dividends, before any payment or distribution shall be made on the Common Stock but pro rata with and in proportion to the liquidation rights of the holders of any other series of preferred stock with parity rights upon liquidation that are then outstanding.  In the event the assets of the Corporation available for distribution to the holders of shares of the Series E Preferred Stock upon any dissolution, liquidation or winding up of the Corporation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this paragraph 6, then all of the assets of the Corporation to be distributed to such holders of Series E Preferred Stock shall be distributed ratably to the holders of Series E Preferred Stock.  After the payment to the holders of the shares of the Series E Preferred Stock of the full amounts provided for in this paragraph 6, the holders of the Series E Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

7.             Information Rights.  The holders of shares of Series E Preferred Stock shall be entitled to receive audited annual financial statements of the Corporation, as soon as such statements become available.

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FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said issue of Series E Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the articles of incorporation, as amended, of the Corporation pursuant to the provisions of the Illinois Business Corporation Act.

IN WITNESS WHEREOF, Midland States Bancorp, Inc. has caused this Statement of Resolution Establishing Series to be signed this 7th day of March, 2011, by a duly authorized officer, who affirms, under penalties of perjury, that the facts stated herein are true.

MIDLAND STATES BANCORP, INC.
By:	/s/ Douglas J. Tucker
	Name:	Douglas J. Tucker
	Title:	Senior Vice President and Corporate Counsel

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STATEMENT OF RESOLUTION ESTABLISHING SERIES

OF

SERIES F 9% NON-CUMULATIVE PERPETUAL CONVERTIBLE
PREFERRED STOCK

OF

MIDLAND STATES BANCORP, INC.

Pursuant to and in accordance with Section 6.10 of the Illinois Business Corporation Act of 1983 (the “IBCA”), the undersigned corporation made the following statement:

ARTICLE 1

The name of the corporation is Midland States Bancorp, Inc. (the “Corporation”).

ARTICLE 2

That pursuant to the authority vested in the board of directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the Articles of Incorporation of the Corporation (the “Articles”), the Board of Directors on March 7, 2011, adopted the following resolution creating a series of 500 shares of Preferred Stock designated as “Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Articles, a series of Preferred Stock, par value $2.00 per share, of the Corporation is hereby created, such series to be known as Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:

1.Issuance.  The Board of Directors (the “Board”) of the Corporation has determined that 500 shares of the authorized and unissued preferred stock be identified as “Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock” and has authorized such shares for issuance at a price of $10,000 per share (hereinafter referred to as the “Series F Preferred Stock”).  The date on which the Series F Preferred Stock is originally issued shall hereinafter be referred to as the “Original Issue Date.”

2.Dividends.

(a)Dividends on the Series F Preferred Stock will be payable semi-annually in arrears, when, as and if authorized by the Board of Directors and declared by the Corporation out of legally available funds, on a non-cumulative basis on the $10,000 per share liquidation preference, at an annual rate equal to 9%.  Subject to the foregoing, dividends will be payable in arrears on December 1 and June 1 of each year (each, a “Dividend Payment Date”), commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date, or, if any such day is not a business day, the next business day.  Each dividend will

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be payable to holders of record as they appear on the Corporation’s stock register on the fifteenth day of the month prior to the month in which the relevant Dividend Payment Date occurs.  Each period from and including a Dividend Payment Date (or the date of the issuance of the Series F Preferred Stock) to but excluding the following Dividend Payment Date is herein referred to as a “Dividend Period”.  Dividends payable for each Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.  If a scheduled Dividend Payment Date falls on a day that is not a business day, the dividend will be paid on the next business day as if it were paid on the scheduled Dividend Payment Date, and no interest or other amount will accrue on the dividend so payable for the period from and after that Dividend Payment Date to the date the dividend is paid.

(b)Dividends on the Series F Preferred Stock will be non-cumulative.  If for any reason the Board of Directors does not authorize and the Corporation does not declare full cash dividends on the Series F Preferred Stock for a Dividend Period, the Corporation will have no obligation to pay any dividends for that period, whether or not the Board of Directors authorizes and the Corporation declares dividends on the Series F Preferred Stock for any subsequent Dividend Period.  The Corporation is not obligated to and will not pay holders of the Series F Preferred Stock any dividend in excess of the dividends on the Series F Preferred Stock that are payable as described above.  There is no sinking fund with respect to dividends.

(c)The Series F Preferred Stock created hereby shall rank equally, as to dividends, with the Corporation’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series C Preferred Stock”), Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series D Preferred Stock”) and Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series E Preferred Stock”).  The Corporation may not declare or pay or set apart for payment full dividends on any series of preferred stock ranking, as to dividends, equally with or junior to the Series F Preferred Stock unless the Corporation has previously declared and paid or set apart for payment, or the Corporation contemporaneously declares and pays or sets apart for payment, full dividends on the Series F Preferred Stock for the most recently completed Dividend Period.  When dividends are not paid in full on the Series F Preferred Stock and any series of preferred stock ranking equally as to dividends, all dividends upon the Series F Preferred Stock and such equally ranking series will be declared and paid pro rata.  For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on shares of Series F Preferred Stock and the aggregate of the current and accrued dividends due on any equally ranking series.  The Corporation will not pay interest or any sum of money instead of interest on any dividend payment that may be in arrears on the Series F Preferred Stock.  Unless the Corporation has paid or declared and set aside for payment full dividends on the Series F Preferred Stock for the most recently completed Dividend Period, the Corporation will not:

·declare or make any dividend payment or distribution on any junior ranking stock, other than a dividend paid in junior ranking stock, or

·redeem, purchase, otherwise acquire or set apart money for a sinking fund for the redemption of any junior or equally ranking stock, except by conversion into or exchange for junior ranking stock.

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As used herein, “junior to the Series F Preferred Stock,” “junior ranking stock” and like terms refer to the Corporation’s Common Stock and any other class or series of the Corporation’s capital stock over which the Series F Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up, and “equally ranking” and like terms refer to the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock, and any other class or series of the Corporation’s capital stock that ranks on a parity with the Series F Preferred Stock in the payment of dividends or in the distribution of assets on the Corporation’s liquidation, dissolution or winding up. Subject to the conditions described above, and not otherwise, dividends (payable in cash, stock, or otherwise), as may be determined by the Board of Directors or a duly authorized committee of the Board of Directors, may be declared and paid on the Corporation’s Common Stock and any other stock ranking equally with or junior to the Series F Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Series F Preferred Stock will not be entitled to participate in those dividends.

3.Conversion.  The holders of the Series F Preferred Stock shall have the following conversion rights (the “Conversion Rights”) and be subject to the following provisions with respect to the conversion of Series F Preferred Stock:

(a)Right to Convert.  Each share of Series F Preferred Stock may be converted at any time at the option of the holder into fully paid and nonassessable shares of Common Stock, at the Conversion Price (as hereafter defined) as provided herein, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of the Corporation or any transfer agent for the Series F Preferred Stock or Common Stock.

(b)Conversion Price.  Each share of Series F Preferred Stock shall be convertible into the number of shares of Common Stock that results from dividing $10,000 by the Conversion Price per share.  The Conversion Price per share shall be equal to $23.00 (the “Conversion Price”).  The Conversion Price shall be subject to adjustment from time to time as provided herein.

(c)Mandatory Conversion; Unpaid Dividends.

(i)The Corporation shall have the right at any time (the “Mandatory Conversion Date”) after the fifth anniversary of the Original Issue Date to call and convert all (but not less than all) of the outstanding shares of Series F Preferred Stock into shares of Common Stock if, on the date the Corporation gives the Conversion Notice (as hereinafter defined), the Book Value Per Share of the Corporation’s Common Stock equals or exceeds $18.487.  “Book Value Per Share of the Corporation’s Common Stock” at any date means the result obtained by dividing (i) the Corporation’s total common shareholders’ equity at that date, by (ii) the number of shares of Common Stock then outstanding, net of any shares held in the treasury.

(ii)Not less than 30 days nor more than 60 days prior to the Mandatory Conversion Date, written notice (the “Conversion Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series F Preferred Stock at their address last shown on the records of the Corporation.  The Conversion Notice shall state: (A) the number of shares being converted; (B) the Mandatory Conversion Date; (C) that the holders’ voluntary Conversion

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Rights (as herein defined) shall terminate; and (D) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series F Preferred Stock to be converted.

(iii)On or before the Mandatory Conversion Date, the holders of shares of Series F Preferred Stock being converted shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Conversion Notice, and thereupon a certificate or certificates for the number of shares of Common Stock into which such shares of Series F Preferred Stock have been converted shall be issued to the person whose name appears on such surrendered certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired.

(iv)If the Conversion Notice shall have been duly given, and if on the Mandatory Conversion Date the required number of shares of Common Stock are issuable, all shares of Series F Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series F Preferred Stock shall thereafter represent only the right to receive (A) the corresponding shares of Common Stock, plus cash in lieu of any fractional shares of Common Stock due upon conversion of shares of Series F Preferred Stock, (B) the amount of dividends or other distributions with a record date after the Mandatory Conversion Date but prior to the surrender date, and with a payment date at, prior or subsequent to the surrender date, not paid with respect to the Common Stock issuable upon conversion, less the amount of any withholding taxes which may be required thereon and (C) the amount equal to any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, on such Series F Preferred Stock (the “Net Accrued Dividends”) through such Mandatory Conversion Date.

(d)Mechanics of Voluntary Conversion; Unpaid Dividends.

(i)Before any holder of Series F Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent of the Series F Preferred Stock or Common Stock, and shall give written notice by mail, postage prepaid, to the Corporation at such office that he elects to convert the same and shall state therein the number of shares of Series F Preferred Stock being converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Thereupon the Corporation shall promptly issue and deliver at such office to such holder of Series F Preferred Stock or to the nominee or nominees of such holder a certificate or certificates for the number of shares of Common Stock to which he shall be entitled.

(ii)Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series F Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.  A holder of Series F Preferred Stock who surrenders shares of Series F Preferred Stock for conversion shall be entitled to receive from the Corporation on the date of such surrender an amount in cash equal to the Net Accrued Dividends on such surrendered shares of Series F Preferred Stock, but any future dividends with respect to

4

the surrendered shares of Series F Preferred Stock shall cease to accrue after such surrender and all rights with respect to such shares shall forthwith after such surrender terminate.

(e)Adjustment for Stock Splits and Combinations.  If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price shall be proportionately decreased; conversely, if the Corporation shall at any time or from time to time after the Original Issue Date reduce the outstanding shares of Common Stock by a stock combination, the Conversion Price shall be proportionately increased.  Any adjustment under this paragraph 3(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)Adjustment for Certain Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series F Preferred Stock shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series F Preferred Stock by a fraction:

(i)the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series F Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series F Preferred Stock shall be adjusted pursuant to this paragraph 3(f) as of the time of actual payment of such dividends or distributions.

(g)Adjustments for Other Dividends and Distributions.  In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Series F Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series F Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph 3 with respect to the rights of the holders of the Series F Preferred Stock. Notwithstanding the foregoing, to the extent the Corporation has a rights plan in effect with respect to the Common Stock on any date

5

upon which Series F Preferred Stock is converted, upon conversion, the holder will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such date, the rights have separated from the shares of Common Stock in accordance with the provisions of such rights plan.

(h)Adjustment for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon the conversion of the Series F Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares of stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph 3), then and in each such event the holder of each share of Series F Preferred Stock shall have the right thereafter to convert such share into the kind and amounts of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series F Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

(i)Reorganization, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph 3) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Series F Preferred Stock shall thereafter be entitled to receive upon conversion of the Series F Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor Corporation resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Series F Preferred Stock would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph 3 with respect to the rights of the holders of the Series F Preferred Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this paragraph 3 (including adjustment of the Conversion Prices and the number of shares purchasable upon conversion of the Series F Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

(j)Sale of Shares Below Conversion Price.

(i)If at any time or from time to time after the Original Issue Date, the Corporation shall issue or sell Additional Shares of Common Stock (as hereinafter defined), other than as a dividend as provided in paragraph 3(f) above, and other than upon a subdivision or combination of shares of Common Stock as provided in paragraph 3(e) above, for a consideration per share less than the Conversion Price for the Series F Preferred Stock (or, if an adjusted Conversion Price shall be in effect by reason of a previous adjustment, then less than such adjusted Conversion Price), then and in each case the applicable Conversion Price for the Series F Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately

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prior to such issue or sale plus (B) the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price, and the denominator of which shall be the sum of (X) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (Y) the number of such Additional Shares of Common Stock so issued.

(ii)For the purpose of making any adjustment in the Conversion Price or number of shares of Common Stock purchasable on the conversion of Series F Preferred Stock as provided above, the consideration received by the Corporation for any issue or sale of securities shall,

(A) to the extent it consists of cash, be computed at the net amount of cash received by the Corporation after deduction of any underwriting or similar commissions, concessions or compensation paid or allowed by the Corporation in connection with such issue or sale,

(B) to the extent it consists of services or property other than cash, be computed at the fair value of such services or property as determined in good faith by the Board of Directors; and

(C) if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined), or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

(iii)For the purpose of the adjustment provided in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of, or stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being hereinafter referred to as “Convertible Securities”), then, in each case, if the Effective Price (as hereinafter defined) of such rights, options or Convertible Securities shall be less than the then existing Conversion Price for the Series F Preferred Stock, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such shares, or an amount equal to the total amount of the consideration, if any, received by the Corporation for the rights or options or Convertible Securities, plus, in the case of such options or rights, the minimum amounts of consideration, if any, payable to the Corporation upon exercise or conversion of such options or rights. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total of all such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities

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shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such rights or options or the conversion of any such Convertible Securities.

If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Corporation on the conversion of such Convertible Securities.

(iv)For the purpose of the adjustment provided for in subparagraph (i) of this paragraph 3(j), if at any time or from time to time after the Original Issue Date the Corporation shall issue any rights or options for the purchase of Convertible Securities, then, in each such case, if the Effective Price thereof is less than the Conversion Price, the Corporation shall be deemed to have issued at the time of the issuance of such rights or options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such rights or options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such rights or options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the conversion of such Convertible Securities. For purposes of the foregoing, “Effective Price” shall mean the quotient determined by dividing the total amount of such consideration by such maximum number of Additional Shares of Common Stock.  No further adjustment of such Conversion Price adjusted upon the issuance of such rights or options shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such rights or options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities.

The provisions of subparagraph (iii) above for the readjustment of such Conversion Price upon the expiration of rights or options or the rights of conversion of Convertible Securities, shall apply mutatis mutandis to the rights, options and Convertible Securities referred to in this subparagraph (iv).

(k)Definition.  The term “Additional Shares of Common Stock” as used herein shall mean all shares of Common Stock issued or deemed issued by the Corporation after the Original Issue Date, whether or not subsequently reacquired or retired by the Corporation, other than (i) shares of Common Stock issued upon conversion of the Series F Preferred Stock and (ii) any shares of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions and combinations) issued to employees, officers, directors, consultants or other persons performing services for the Corporation (if so issued solely because of any such person’s status as an officer, director, employee, consultant or other person performing services for the Corporation and not as

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part of any offering of the Corporation’s securities) pursuant to any stock option plan, stock purchase plan or management incentive plan, agreement or arrangement approved by the Board.

(l)Accountants’ Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series F Preferred Stock, the Corporation, at its expense, shall cause independent certified public accountants of recognized standing selected by the Corporation (who may be the independent certified public accountants then auditing the books of the Corporation) to compute such adjustment or readjustment in accordance herewith and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series F Preferred Stock at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based including a statement of (i) the consideration received or to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Conversion Price at the time in effect for each series of the Series F Preferred Stock and (iii) the number of Additional Shares of Common Stock and the type and amount, if any, of other property which at the time would be received upon conversion of the Series F Preferred Stock.

(m)Notices of Record Date.  In the event of any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, or any transfer of all or substantially all the assets of the Corporation to any other corporation, entity or person, or any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, the Corporation shall mail to each holder of Series F Preferred Stock (other than any such holder who is also a holder of record, or the affiliate of a holder of record, of the Corporation’s Common Stock, or is a director or executive officer, or an affiliate of a director or executive officer, of the Corporation) at least 20 days prior to the record date specified therein, a notice specifying (A) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (B) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

(n)Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of shares of Series F Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of the Corporation’s Common Stock on the date of conversion, as determined in good faith by the Corporation’s Board of Directors.  Whether or not the fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series F Preferred Stock the holder holds at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

(o)Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the

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purpose of effecting the conversion of the shares of the Series F Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series F Preferred Stock.  As a condition precedent to the taking of any action which would cause an adjustment to the Conversion Price, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient in order that it may validly and legally issue the shares of its Common Stock issuable based upon such adjusted Conversion Price.

(p)Notices.  Any notice required by the provisions of this paragraph 3 to be given to the holder of shares of the Series F Preferred Stock shall be deemed given (i) when delivered by hand, (ii) when delivered by Federal Express or a similar overnight courier to each holder of record at his or her address appearing on the books of the Corporation or (iii) five days after being deposited in any United States Post Office enclosed in a postage prepaid, registered or certified envelope addressed to each holder of record at his or her address appearing on the books of the Corporation.

(q)Payment of Taxes.  The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series F Preferred Stock or shares of Common Stock or other securities issued on account of Series F Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series F Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series F Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(r)No Dilution or Impairment.  The Corporation shall not amend its articles of incorporation, as amended, or participate in any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the material terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series F Preferred Stock against dilution or other impairment.

4.Voting Rights.

(a)The Series F Preferred Stock shall have no voting rights except as provided herein or as otherwise from time to time required by law.

(b)Whenever dividends payable on the Series F Preferred Stock have not been paid for three or more Dividend Periods, whether or not consecutive, the holders shall have the right,

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with holders of any other series of securities of the Corporation ranking equally with the Series F Preferred Stock as to dividends that have similar voting rights (including, without limitation, the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and on which dividends likewise have not been paid (the “Voting Parity Securities”), voting together as a class, at a special meeting called at the request of holders of at least 20% of the shares of Series F Preferred Stock outstanding or of holders of at least 20% of the shares of any Voting Parity Securities (unless such request for a special meeting is received less than 90 calendar days before the date fixed for the next annual or special meeting of the Corporation’s shareholders, in which event such election shall be held only at such next annual or special meeting of the Corporation’s shareholders) or at the Corporation’s next annual or special meeting of the Corporation’s shareholders, to elect two additional directors to the Board of Directors; provided that the election of any such director does not cause the Corporation to violate the applicable corporate governance requirements or any applicable exchange or trading market where the Common Stock is then listed or quoted, as the case may be; and provided, further, that at no time will the Corporation’s Board of Directors include more than two directors elected pursuant to this paragraph 4(b). At any meeting held for the purpose of electing such a director, the presence in person or by proxy of the holders of shares representing at least a majority of the voting power of the Series F Preferred Stock and any Voting Parity Securities, voting together as a class, shall be required to constitute a quorum of such shares.  The affirmative vote of the holders of Series F Preferred Stock and holders of any Voting Parity Securities, voting together as a class, representing a majority of the voting power of such shares present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(c)Upon the election of any such directors, the number of directors that comprise the board of directors shall be increased by such number of directors.  Such directors shall be elected to terms that are the shorter of the next annual meeting of the Corporation and such time as full dividends have been paid on the Series F Preferred Stock for at least three consecutive Dividend Periods.  In the event such term expires prior to the time full dividends have been paid on the Series F Preferred Stock for at least three consecutive Dividend Periods, any such directors may be elected to successive terms of similar duration until full dividends have been paid on the Series F Preferred Stock for at least three consecutive Dividend Periods.  Holders of Series F Preferred Stock, together with holders of any Voting Parity Securities, voting together as a class, may remove any director they elected.  Any vacancy created by the removal of any such director shall be filled only by the vote of the holders of the Series F Preferred Stock and holders of any Voting Parity Securities, voting together as a class.  If the office of either such director becomes vacant for any reason other than removal, the remaining director may choose a successor who will hold office for the unexpired term of the vacant office.

(d)So long as any shares of Series F Preferred Stock remain outstanding, the Corporation shall not, without the vote, in person or by proxy, or written consent of the holders of at least 75% of the shares of the Series F Preferred Stock, voting as a separate class:

(i)amend the articles of incorporation, as amended, to authorize, or increase the authorized amount of, any shares of any class or series of stock ranking senior to the Series F Preferred Stock with respect to payment of dividends or distribution of assets on liquidation of the Corporation; as well as any amendment of the articles of incorporation, as amended, or amended and restated bylaws that would alter or change the voting powers, preferences or

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special rights of the Series F Preferred Stock so as to materially and adversely affect them; provided that the amendment of the articles of incorporation, as amended, so as to authorize or create, or to increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of stock of the Corporation ranking on a parity with or junior to the Series F Preferred Stock with respect to dividends and in the distribution of assets on liquidation, dissolution or winding-up of the Corporation shall not be deemed to materially and adversely affect the voting powers, preferences or special rights of the Series F Preferred Stock; or

(ii)consummate a binding share exchange, a reclassification involving the Series F Preferred Stock or a merger or consolidation of the Corporation with another entity; provided, however, that the holders of Series F Preferred Stock shall have no right to vote under this provision or otherwise under Illinois law if in each case (A) both (1) the Series F Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity (or its ultimate parent) that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) the Series F Preferred Stock remaining outstanding or the new preferred securities, as the case may be, have such powers, preferences and special rights, taken as a whole, as are not materially less favorable to the holders thereof than the powers, preferences and special rights of the Series F Preferred Stock, or (B) the Corporation has exercised its mandatory conversion rights pursuant to paragraph 3(c) hereof in connection with such consummation.

(e)The number of votes of each share of Series F Preferred Stock and any Voting Parity Securities participating in the votes described above shall be calculated on an as converted basis or, if not all of such stock is convertible or exchangeable for Common Stock, shall be in proportion to the liquidation preference of such share.

5.Redemption Rights.

(a)The Corporation shall have the right at any time after the fifth anniversary of the Original Issue Date (the “Redemption Date”) to call and redeem all (but not less than all) of the outstanding shares of Series F Preferred Stock at a price of $10,000 per share, plus any authorized, declared and unpaid dividends thereon, without accumulation of any undeclared dividends, through the Redemption Date (the “Redemption Price”). Redemption of the Series F Preferred Stock is subject to receipt by the Corporation of any required prior approvals from the Board of Governors of the Federal Reserve System or any other regulatory authority.

(b)Not less than 30 days nor more than 60 days prior to the Redemption Date, written notice (the “Redemption Notice”) shall be mailed, first class postage prepaid, to the holders of the shares of the Series F Preferred Stock at their address last shown on the records of the Corporation.  The Redemption Notice shall state: (i) the number of shares being redeemed; (ii) what the Redemption Date and Redemption Price are; (iii) that the holders’ voluntary Conversion Rights (as defined in paragraph 3) shall terminate; and (iv) that each holder is to surrender to the Corporation, in the manner and at the place designated, the certificates representing the shares of Series F Preferred Stock to be redeemed.

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(c)On or before the Redemption Date, the holders of shares of Series F Preferred Stock being redeemed, unless a holder has exercised his or her right to convert the shares as provided in paragraph 3 hereof, shall surrender the certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

(d)If the Redemption Notice shall have been duly given, and if on or before the Redemption Date the Redemption Price has been set aside by the Corporation, then all shares of Series F Preferred Stock shall no longer be outstanding, shall be cancelled and retired and shall cease to exist.  Each certificate formerly representing any shares of the Series F Preferred Stock shall thereafter represent only the right to receive the Redemption Price.

6.Liquidation.  Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series F Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, the amount of $10,000 per share, plus any authorized, declared and unpaid dividends through the date of such distribution, without accumulation of any undeclared dividends, before any payment or distribution shall be made on the Common Stock but pro rata with and in proportion to the liquidation rights of the holders of any other series of preferred stock with parity rights upon liquidation that are then outstanding. In the event the assets of the Corporation available for distribution to the holders of shares of the Series F Preferred Stock upon any dissolution, liquidation or winding up of the Corporation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to this paragraph 6, then all of the assets of the Corporation to be distributed to such holders of Series F Preferred Stock shall be distributed ratably to the holders of Series F Preferred Stock.  After the payment to the holders of the shares of the Series F Preferred Stock of the full amounts provided for in this paragraph 6, the holders of the Series F Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

7.Information Rights.  The holders of shares of Series F Preferred Stock shall be entitled to receive audited annual financial statements of the Corporation, as soon as such statements become available.

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FURTHER RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said issue of Series F Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the articles of incorporation, as amended, of the Corporation pursuant to the provisions of the Illinois Business Corporation Act.

IN WITNESS WHEREOF, Midland States Bancorp, Inc. has caused this Statement of Resolution Establishing Series to be signed this 7th day of March, 2011, by a duly authorized officer, who affirms, under penalties of perjury, that the facts stated herein are true.

MIDLAND STATES BANCORP, INC.
By:	/s/ Douglas J. Tucker
	Name:	Douglas J. Tucker
	Title:	Senior Vice President and Corporate Counsel

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EX-3.2

Exhibit 3.2

BY-LAWS

OF

MIDLAND STATES BANCORP, INC.

ARTICLE I

OFFICES

SECTION 1.REGISTERED OFFICE.  The registered office of the corporation in the State of Illinois shall be 133 West Jefferson Avenue, Effingham, 62401, County of Effingham.  The name of the corporation’s registered agent at such address is Douglas J. Tucker.

SECTION 2.OTHER OFFICES.  The corporation may also have offices at such other places both within and without the State of Illinois as the Board of Directors may from time to time determine or the business of the corporation may require.

SECTION 3.MAIN BANKING PREMISES.  The Main Banking Premises shall be located at 133 West Jefferson Avenue, Effingham, Illinois 62401.

ARTICLE II

SHAREHOLDERS

SECTION 1.ANNUAL MEETING.  An annual meeting of the shareholders shall be held at the Main Banking Premises on the first Monday of May of each year at 7:00 p.m. or at such other time or place as the board of directors may designate for the purpose of electing directors and for the transaction of such other business as may come before the meeting.  If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day.

SECTION 2.SPECIAL MEETINGS.  Special meetings of the shareholders may be called by the president, by the board of directors or by the holders of not less than twenty percent (20%) of all the outstanding shares of the corporation entitled to vote for the purpose or purposes stated in the call of the meeting.

SECTION 3.PLACE OF MEETING.  The board of directors may designate any place as the place of meeting for any annual meetings or for any special meeting called by the board of directors.  If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the Main Banking Premises.

SECTION 4.ACTION BY SHAREHOLDERS.

(a)           At any annual or special meeting of shareholders, only such new business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the meeting by, or at the direction of, the board of directors, or by any shareholder entitled to vote at such meeting, provided, however, that such shareholder has complied with the procedures set forth in this Article II, Section 4.  The provisions of this Article II, Section 4 shall be the exclusive means for a shareholder to submit business (other than matters properly brought

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under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the corporation’s notice of meeting) before an annual or special meeting of shareholders.

(b)           For a proposal to be properly brought before a special or annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the corporation as set forth in this Article II, Section 4.  To be timely, a shareholder’s notice must be delivered, mailed or telegraphed to the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the date of the originally scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that, if less than 100 days’ notice of the date of the scheduled meeting is given or made by the corporation, notice by the shareholder, to be timely, must be so delivered, mailed or telegraphed to the corporation not later than the close of business on the 10th day following the day on which notice of the date of the scheduled meeting was first mailed to shareholders.  Such shareholder’s notice shall set forth as to each matter the shareholder proposes to bring before the meeting:  (i) a brief description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and address, as they appear on the corporation’s books, of the shareholder proposing such business; (iii) the number of shares of the corporation’s common stock beneficially owned by such shareholder on the date of such shareholder’s notice; and (iv) any financial or other interest of such shareholder in the proposal.

(c)           The board of directors may reject any shareholder proposal not timely made in accordance with this Article II, Section 4.  If the board of directors determines that the information provided in a shareholder’s notice does not satisfy the informational requirements hereof, the secretary of the corporation shall promptly notify such shareholder of the deficiency in the notice.  The shareholder shall then have an opportunity to cure the deficiency by providing additional information to the secretary within such period of time, not to exceed 10 days from the date such deficiency notice is given to the shareholder, as the board of directors shall determine.  If the deficiency is not cured within such period, or if the board of directors determines that the additional information provided by the shareholder, together with the information previously provided, does not satisfy the requirements of this Article II, Section 4, then the board of directors may reject such shareholder’s proposal.  The secretary of the corporation shall notify a shareholder in writing whether his or her proposal has been made in accordance with the time and information requirements hereof.

(d)           This Article II, Section 4 shall not prevent the consideration and approval or disapproval at a special or annual meeting of reports of officers, directors and committees of the board of directors, but in connection therewith no new business shall be acted upon at any such meeting unless stated, filed and received as herein provided.

SECTION 5.NOTICE OF MEETINGS.  Written notice stating the place, date, and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, or in the case of a merger, consolidation, dissolution or sale, lease or exchange of assets not less than 20 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the

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meeting, to each shareholder of record entitled to vote at such meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at the shareholder’s address as it appears on the records of the corporation, with postage thereon prepaid.

SECTION 6.NOMINATIONS OF DIRECTORS.

(a)           Only persons who are nominated in accordance with the procedures set forth in this Article II, Section 6 or who are required to be included in the corporation’s proxy materials pursuant to Rule 14a-11 under the Exchange Act shall be eligible for election as directors of the corporation. The nomination procedures contained in this Article II, Section 6 shall not apply to nominees who are required to be included in the corporation’s proxy materials pursuant to Rule 14a-11 under the Exchange Act.

(b)           Nominations, other than those made by, or at the direction of, a majority of the board of directors or a committee thereof shall be made only if timely written notice of such nomination or nominations has been given to the secretary of the corporation.  To be timely, such notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the meeting irrespective of any deferrals, postponements or adjournments thereof to a later date; provided, however, that in the event that less than 100 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of meeting was mailed or such public disclosure was made, whichever first occurs.  Each such notice to the secretary shall set forth:  (i) the name and address of record of the shareholder who intends to make the nomination; (ii) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) the name, age, business and residence addresses, and principal occupation or employment of each nominee; (iv) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or person) pursuant to which the nomination or nominations are to be made by the shareholder; (v) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, as then in effect; and (vi) the consent of each nominee to serve as a director of the corporation if so elected.  The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation.

(c)           The board of directors or a committee thereof may reject any nomination by a shareholder not timely made or otherwise not in accordance with the terms of this Article II, Section 6.  If the board of directors or a committee thereof reasonably determines that the information provided in a shareholder’s notice does not satisfy the informational requirements of this Article II, Section 6 in any material respect, the secretary of the corporation shall promptly notify such shareholder of the deficiency in writing.  The shareholder shall have an opportunity to cure the deficiency by providing additional information to the secretary within such period of time, not to exceed 10 days from the date such deficiency notice is given to the shareholder, as

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the board of directors or a committee thereof shall reasonably determine.  If the deficiency is not cured within such period, or if the board of directors or a committee thereof reasonably determines that the additional information provided by the shareholder, together with the information previously provided, does not satisfy the requirements of this Article II, Section 6 in any material respect, then the board of directors or a committee thereof may reject such shareholder’s nomination.  The secretary of the corporation shall notify a shareholder in writing whether his or her nomination has been made in accordance with the time and information requirements of this Article II, Section 6.

SECTION 7.FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of the corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and for a meeting of shareholders, not less than 10 days, or in the case of a merger, consolidation, dissolution or sale, lease or exchange of assets not less than 20 days before the date of such meeting. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the close of business on the day next preceding the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. A determination of shareholders shall apply to any adjournment of the meeting.

SECTION 8.VOTING LISTS.  The officer or agent having charge of the transfer books for shares of the corporation shall make at least 10 days before every meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of 10 days prior to such meeting, shall be kept on file either within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held, and shall be subject to inspection by any shareholder, and to copying at the shareholder’s expense, at any time during usual business hours.  Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting.  The original share ledger or transfer book, or a duplicate thereof kept in any state in which the corporation is authorized to do business shall be the only evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders.

SECTION 9.QUORUM.  The holders of a majority of the outstanding shares of the corporation entitled to vote on a matter represented in person or by proxy, shall constitute a quorum for consideration of such matter at any meeting of shareholders; provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice.  If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Illinois Business Corporation Act, the articles of incorporation or these by-laws.  Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting.

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SECTION 10.ADJOURNMENT.  Any meeting of shareholders may be adjourned from time to time to any other time and to any other place at which a meeting of shareholders may be held under these bylaws by the chairman of the meeting or by the shareholders present or represented at the meeting and entitled to vote, although less than a quorum.  It shall not be necessary to notify any shareholder of any adjournment of less than 30 days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting.  At the adjourned meeting, the corporation may transact any business that might have been transacted at the original meeting.

SECTION 11.PROXIES.  Each shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed, but no such proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

SECTION 12.VOTING OF SHARES.  Each outstanding share of common stock shall be entitled to one vote in each matter submitted to vote at a meeting of shareholders.  Each shareholder may vote either in person or by proxy as provided above.

SECTION 13.VOTING OF SHARES BY CERTAIN HOLDERS.  Shares held by the corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time.

Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation.

Shares registered in the name of a deceased person, a minor ward or a person under legal disability may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian.  Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy.

Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares unless the shares have been transferred into the name of the pledgee, and thereafter the pledge shall be entitled to vote the shares so transferred.

Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed 10 years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, and by transferring their shares to such trustee or trustees for the purpose of the agreement.  Any such trust agreement shall not become effective until a

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counterpart of the agreement is deposited with the corporation at its registered office.  The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, during business hours for any proper purpose.

Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time.

SECTION 14.CONDUCT OF MEETINGS.  Unless otherwise provided by the board of directors, meetings of shareholders shall be presided over by the chairman of the board, if any, or in the chairman’s absence by the vice chairman of the board, if any, or in the vice chairman’s absence by the president, or in the president’s absence by a vice president, or in the absence of all of the foregoing persons by a chairman designated by the board of directors.  The secretary shall act as secretary of the meeting, but in the secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

The board of directors may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of shareholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of shareholders and proxyholders not physically present at a meeting.  Except to the extent inconsistent with such rules, regulations and procedures as adopted by the board of directors, the chairman of any meeting of shareholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting.  Such rules, regulations or procedures, whether adopted by the board of directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to shareholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants.  Unless and to the extent determined by the board of directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.

The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed.  After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted.

In advance of any meeting of shareholders, the board of directors, the chairman of the board or the president shall appoint one or more inspectors of election to act at the meeting and make a written report thereof.  One or more other persons may be designated as alternate

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inspectors to replace any inspector who fails to act.  If no inspector or alternate is present, ready and willing to act at a meeting of shareholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting.  Unless otherwise required by law, inspectors may be officers, employees or agents of the corporation.  Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.  The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law.  Every vote taken by ballots shall be counted by a duly appointed inspector or duly appointed inspectors.

SECTION 15. NO ACTION BY CONSENT IN LIEU OF A MEETING.  Shareholders of the corporation may not take any action by written consent in lieu of a meeting.

SECTION 16.VOTING BY BALLOT.  All elections of directors shall be by written ballot. Voting on any other question may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.

ARTICLE III

DIRECTORS

SECTION 1.GENERAL POWERS.  The business of the corporation shall be managed by its board of directors.  A majority of the board of directors may establish reasonable compensation for their services and the services of other officers, irrespective of any personal interest.

SECTION 2.CHAIRMAN OF THE BOARD.  The board of directors shall appoint one of its members to be chairman of the board to serve at the pleasure of the board.  The chairman shall: (i) preside at all meetings of the board of directors; (ii) supervise the carrying out of the policies adopted or approved by the board; (iii) have general executive powers, as well as the specific powers conferred by these by-laws; and (iv) have and may exercise such further powers and duties as from time to time may be conferred upon or assigned by the board of directors.

SECTION 3.VICE-CHAIRMAN OF THE BOARD.  The board of directors may appoint one of its members to be vice-chairman of the board to serve at the pleasure of the board.  If appointed, the vice-chairman shall assume the duties of the chairman in his or her absence and shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned by the board of directors.

SECTION 4.REGULAR MEETINGS.  A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders.  The board of directors may provide by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.

SECTION 5.SPECIAL MEETINGS.  Special meetings of the board of directors may be called by or at the request of the chairman of the board, vice-chairman of the board, president or any two directors.  The person or persons authorized to call special meetings of the board of

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directors may fix any place as the place for holding any special meeting of the board of directors called by them.

SECTION 6.NOTICE OF SPECIAL MEETINGS.  Notice of the date, place and time of any special meeting shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting, as applicable.  Notice shall be duly given to each director (a) in person or by telephone at least 24 hours in advance of the meeting, (b) by sending written notice by reputable overnight courier, telecopy, facsimile or electronic transmission, or delivering written notice by hand, to such director’s last known business, home or electronic transmission address at least 48 hours in advance of the meeting, or (c) by sending written notice by first-class mail to such director’s last known business or home address at least 72 hours in advance of the meeting.  The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

All other notices, consents, waivers and other communications required or permitted to be given to directors by these by-laws shall be subject to the same notice provisions and waiver provisions.

SECTION 7.INFORMAL ACTION BY DIRECTORS.  The authority of the board of directors may be exercised without a meeting if a consent in writing, setting forth the action taken, is signed by all of the directors entitled to vote.

SECTION 8.COMPENSATION.  The board of directors or a committee thereof, by the affirmative vote of a majority of directors then in office or by a majority of directors appointed to a committee designated to set board compensation, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers, or otherwise notwithstanding any director conflict of interest.  By resolution of the board of directors or a committee thereof, the directors may be paid their expenses, if any, of attendance at each meeting of the board.  No such payment previously mentioned in this section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

SECTION 9.PRESUMPTION OF ASSENT.  A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless that director’s dissent shall be entered in the minutes of the meeting or written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a director who voted in favor of such action.

SECTION 10.TELEPHONE CONFERENCE MEETINGS.  Unless otherwise restricted by the articles of incorporation or these by-laws, members of the board of directors, or of any committee designated by the board of directors, may participate in and act at any meeting of the

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board of directors or any committee using a conference telephone or other communications equipment that allows all persons participating in the meeting to hear each other.  Participation in such a manner constitutes attendance and presence in person at the meeting.

ARTICLE IV

COMMITTEES

SECTION 1.COMMITTEES.  The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation.  Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, to the extent permitted under the Illinois Business Corporation Act.  The designation of any such committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed by law.

SECTION 2.EXECUTIVE COMMITTEE.  The board of directors by resolution adopted by a majority of the full board of directors, may designate three or more of its members to constitute an executive committee.  The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee and except also that the executive committee shall not have the authority of the board of directors in reference to any action for which the certificate of incorporation or the bylaws would require approval by the vote of greater than a majority of the number of directors as may be fixed from time to time, in the manner prescribed in the certificate of incorporation, by the board of directors of the corporation.

SECTION 3.AUDIT COMMITTEE.  The board of directors by a resolution adopted by a majority of the full board of directors, may designate three or more independent directors to constitute an audit committee.  The audit committee shall have, to the extent provided in the committee’s charter, as adopted and amended from time to time by the board, the authority to retain the independent auditor for the corporation, and to conduct discussions with such auditor concerning the financial statements, operations, internal controls and other related matters and such other authority as may be provided to the audit committee by the board of directors.

SECTION 4.CORPORATE GOVERNANCE AND NOMINATING COMMITTEE.  The board of directors, by a resolution adopted by a majority of the full board of directors, may designate three or more independent directors to constitute a corporate governance and nominating committee.  The corporate governance and nominating committee shall have, to the extent provided in the committee’s charter, as adopted and amended from time to time by the board, the authority to assist the board of directors by identifying individuals qualified to become directors consistent with criteria approved by the board of directors, to recommend to the board of directors for its approval the slate of nominees to be proposed to the shareholders for election to the board of directors, to develop and recommend to the board of the directors the governance principles applicable to the corporation and such other authority as may be provided to the compensation committee by the board of directors.

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SECTION 5.COMPENSATION COMMITTEE.  The board of directors by a resolution adopted by a majority of the full board of directors, may designate three or more directors to constitute a compensation committee.  The compensation committee shall have, to the extent provided in the committee’s charter, as adopted and amended from time to time by the board, the authority to establish the compensation, benefits and perquisites for the executive officers, directors and other employees of the corporation and such other authority as may be provided to the compensation committee by the board of directors.

SECTION 6.TENURE AND QUALIFICATION.  Each member of each committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until his or her successor is designated as a member of such committee and is elected and qualified.

SECTION 7.MEETINGS.  Regular meetings of each committee may be held without notice at such times and places as such committee may fix from time to time by resolution.  Special meetings of each committee may be called by any member thereof by notice of the date, place and time thereof which is duly given to each director by the Secretary or by the officer or one of the directors calling the meeting, as applicable.  Notice shall be duly given to each committee member (a) in person or by telephone at least 24 hours in advance of the meeting, (b) by sending written notice by reputable overnight courier, telecopy, facsimile or electronic transmission, or delivering written notice by hand, to such committee member’s last known business, home or electronic transmission address at least 48 hours in advance of the meeting, or (c) by sending written notice by first-class mail to such committee member’s last known business or home address at least 72 hours in advance of the meeting.  The attendance of a committee member at any committee meeting shall constitute a waiver of notice of such meeting, except where a committee member attends a committee meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of any committee need be specified in the notice or waiver of notice of such meeting.

SECTION 8.QUORUM.  A majority of the members of a committee shall constitute a quorum for the transaction of business at any meeting thereof and action of such committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

SECTION 9.ACTION WITHOUT A MEETING.  The authority of any committee may be exercised without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of such committee entitled to vote.

SECTION 10.VACANCIES.  Any vacancy on a committee may be filled by a resolution adopted by a majority of the full board of directors.

SECTION 11.RESIGNATIONS AND REMOVAL.  Any member of any committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors.  Any member of a committee may resign from such committee at any time by giving written notice to the president or secretary, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

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SECTION 12.         PROCEDURE.  Each committee shall elect a presiding officer from its members and may fix its own rules or procedures which shall not be inconsistent with these bylaws.

ARTICLE V

OFFICERS

SECTION 1.           NUMBER. The officers of the corporation shall be a president, one or more vice-presidents, a chief financial officer, a secretary, and such other officers as may be elected by the board of directors.  Any two or more offices may be held by the same person.

SECTION 2.           ELECTION AND TERM OF OFFICE.  The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders.  If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be.  Vacancies may be filled or new offices created and filled at any meeting of the board of directors.  Each officer shall hold office until a successor shall have been duly elected and shall have qualified or until such officer’s death, resignation or removal in the manner hereinafter provided.  Election of an officer shall not of itself create contract rights.

SECTION 3.           REMOVAL.  Any officer elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

SECTION 4.           VACANCIES.  A vacancy in any office because of death, removal, disqualification or otherwise may be filled by the board of directors for the unexpired portion of the term of such office.

SECTION 5.           PRESIDENT.  The president shall be the principal executive officer of the corporation.  Subject to the direction and control of the board of directors, the president shall: (i) be in charge of the business of the corporation; (ii) ensure that the resolutions and directions of the board of directors are carried into effect, except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and (iii) in general, discharge all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.  The president shall preside at all meetings of the shareholders and of the board of directors unless a chairman of the board of directors has previously been appointed or elected, in which case the chairman shall preside at such meetings or, at the discretion of the chairman, the chairman may delegate all or a portion of such responsibility to the president.  Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed on the board of directors or these by-laws, the president may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto

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authorized by the board of directors, according to the requirements of the form of the instrument.  The president may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors.

SECTION 6.           THE VICE-PRESIDENTS.  The vice-president (or in the event there be more than one vice-president, each of the vice-presidents) shall assist the president in the discharge of his or her duties as the president may direct and shall perform such other duties as from time to time may be assigned by the president or by the board of directors.  In the absence of the president or in the event of the president’s inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the board of directors, or by the president if the board of directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as vice-president) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president.  Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the vice-president (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument.

SECTION 7.           THE CHIEF FINANCIAL OFFICER.  The chief financial officer shall be the principal financial officer of the corporation.  The chief financial officer shall: (i) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (ii) have charge and custody of all funds and securities of the corporation, and be responsible therefor and for the receipt and disbursement thereof; and (iii) perform all the duties incident to the office of chief financial officer and such other duties as from time to time may be assigned by the president or by the board of directors.  If required by the board of directors, the chief financial officer shall give a bond for the faithful discharge of these duties in such sum and with such surety or sureties as the board of directors may determine.

SECTION 8.           THE SECRETARY.  The secretary shall: (i) record the minutes of the shareholders’ and of the board of directors’ meetings in one or more books provided for that purpose; (ii) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (v) sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws; (vi) have general charge of the stock transfer books of the corporation; (vii) have authority to certify the by-laws, resolutions of the shareholders and board of directors and committees

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thereof, and other documents of the corporation as true and correct copies thereof, and (viii) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned by the president or by the board of directors.

SECTION 9.           SALARIES.  The salaries of the offices shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the fact that such officer is also a director of the corporation.

ARTICLE VI

RECORDS AND REPORTS

SECTION 1.           MAINTENANCE AND INSPECTION OF RECORDS.  The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its shareholders listing their names and addresses and the number and class of shares held by each shareholder, a copy of these bylaws, as may be amended to date, minute books, accounting books and other records.

Any such records maintained by the corporation may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.  When records are kept in such manner, a clearly legible paper form produced from or by means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper form accurately portrays the record.

Any shareholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its shareholders, and its other books and records, as permitted under Illinois law, and to make copies or extracts therefrom.  A proper purpose shall mean a purpose reasonably related to such person’s interest as a shareholder.  In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the shareholder.

The demand under oath shall be directed to the corporation at its registered office in Illinois or at its principal executive office.

SECTION 2.           INSPECTION BY DIRECTOR.  Any director shall have the right to examine the corporation’s stock ledger, a list of its shareholders, and its other books and records for a purpose reasonably related to his or her position as a director.

ARTICLE VII

CONTRACTS, LOANS, CHECKS AND DEPOSITS

SECTION 1.           CONTRACTS.  The board of directors may authorize any officer or officers or agent or agents to enter into any contract or agreement, or execute and deliver any instrument, in the name of and on behalf of the corporation, and such authority may be general or

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confined to specific instances.  Subject to the specific directions of the board of directors, all written contracts, instruments and agreements to which the corporation shall be a party may be executed in its name by the president or any vice president or such other officer as may be designated by the board of directors.

SECTION 2.           LOANS.  No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors.

SECTION 3.           CHECKS, DRAFTS, ETC.  All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors.

SECTION 4.           DEPOSITS.  All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the board of directors may select.

ARTICLE VIII

SHARES AND THEIR TRANSFER

SECTION 1.           CERTIFICATES FOR SHARES OF CAPITAL STOCK.  Certificates representing shares of stock of the corporation shall be in such form as may be determined by the board of directors.  Such certificates shall be signed by the president or any executive vice president and the secretary or an assistant secretary.  If any such certificate is manually countersigned by a transfer agent other than the corporation or its employee, any other signature on the certificate may be a facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.  All certificates for shares of stock shall be consecutively numbered or otherwise identified.  The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation.  All certificates surrendered to the corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new certificate may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.

SECTION 2.           UNCERTIFICATED STOCK.  Unless prohibited by the articles of incorporation, the board of directors may provide by resolution that some or all of any class or series of shares shall be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until the certificate has been surrendered to the corporation.  Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate.  Except as otherwise expressly provided by law, the rights and obligations of the holders of

14

uncertificated shares shall be identical to those of the holders of certificates representing shares of the same class and series.

SECTION 3.           STOCK RECORDS OF THE CORPORATION.  The name and address of each shareholder, the number and class of shares held and the date on which the shares were issued shall be entered on the books of the corporation.  The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation.

SECTION 4.           TRANSFER OF SHARES OF STOCK.  Transfers of shares of stock of the corporation represented by certificates, except in the case of a lost or destroyed certificate, shall be made on the books of the corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares.  A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective.  Transfer of an uncertificated share shall be made on receipt by the corporation of an instruction from the registered owner or other appropriate person.  The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the corporation.

SECTION 5.           TRANSFER AGENTS AND REGISTRARS.  The board of directors may appoint one or more transfer agents or assistant transfer agents and one or more registrars of transfers, and may require all certificates for shares of stock of the corporation to bear the signature of a transfer agent or assistant transfer agent and a registrar of transfers.  The board of directors may at any time terminate the appointment of any transfer agent or any assistant transfer agent or any registrar of transfers.

ARTICLE IX

MISCELLANEOUS PROVISIONS

SECTION 1.           FISCAL YEAR.  The fiscal year of the corporation shall be January 1 through December 31, unless otherwise fixed by resolution of the board of directors.

SECTION 2.           DIVIDENDS.  The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares of stock in the manner and upon the terms and conditions provided by the Illinois Business Corporation Act and its articles of incorporation.

SECTION 3.           SEAL.  The corporate seal shall have inscribed thereon the name of the corporation and the words “Corporate Seal, Illinois”.  The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced, provided that the affixing of the corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of the corporate seal is not mandatory.

SECTION 4.           WAIVER OF NOTICE.  Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or

15

under the provisions of the Illinois Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given.

SECTION 5.           INDEMNIFICATION.  The corporation shall indemnify, to the fullest extent allowable under Illinois law and as provided in the corporation’s Articles of Incorporation, those persons as to whom the corporation is obligated to provide indemnification as provided in the corporation’s Articles of Incorporation.

SECTION 6.           VOTING OF SECURITIES.  Except as the board of directors may otherwise designate, the president or the chief financial officer may waive notice of, vote, or appoint any person or persons to vote, on behalf of the corporation at, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of shareholders or securityholders of any other entity, the securities of which may be held by this corporation.

SECTION 7.           EVIDENCE OF AUTHORITY.  A certificate by the secretary, or an assistant secretary, or a temporary secretary, as to any action taken by the shareholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.

SECTION 8.           ARTICLES OF INCORPORATION.  All references in these bylaws to the articles of incorporation shall be deemed to refer to the articles of incorporation of the corporation, as amended and in effect from time to time.

SECTION 9.           SEVERABILITY.  Any determination that any provision of these bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these bylaws.

SECTION 10.         PRONOUNS.  All pronouns used in these bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

ARTICLE X

AMENDMENTS

The by-laws of the corporation may be amended, altered or repealed, in whole or in part, or new bylaws may be adopted by the board of directors or by the shareholders as provided in the articles of incorporation.

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EX-4.1

Exhibit 4.1

COMMON INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS SEE REVERSE SIDE FOR CERTAIN DEFINITIONS CUSIP 597742 10 5 THIS CERTIFIES THAT is the owner of SHARES OF THE $0.01 PAR VALUE COMMON STOCK OF MIDLAND STATES BANCORP, INC. hereinafter called the “corporation,” transferable only on the books of the corporation by the holder hereof in person, or by duly authorized attorney, upon the surrender of this certificate properly endorsed. The amount of the Common Stock of the corporation is set forth on the books of the corporation, and the par value of the shares of Common Stock of the corporation is set forth in the Articles of Incorporation of the corporation, as amended or to be amended hereafter, which Articles of Incorporation and any and all amendments thereof are on file at the office of the corporation and are hereby expressly incorporated herein by reference and to all of which the holder hereby agrees and assents. IN WITNESS WHEREOF, the corporation has caused this certificate to be signed by its duly authorized officers and its seal to be hereunder affixed. Dated: SECRETARY PRESIDENT COUNTERSIGNED: ILLINOIS STOCK TRANSFER COMPANY TRANSFER AGENT BY AUTHORIZED SIGNATURE AMERICAN FINANCIAL PRINTING INCORPORATED – MINNEAPOLIS SHARES NUMBER

EX-4.2

Exhibit 4.2

JT 1335 1/2 COPYRIGHT 1930 BY DWIGHT & M. H. JACKSON CHICAGO PATENT PENDING INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS B004 NUMBER 1234567 SHARES ***99,999*** MIDLAND STATES BANCORP, INC. Shareholder Name 1XXXXXXXXXXXXXXXXXXXXXXXXXXXXX Shareholder Name 2XXXXXXXXXXXXXXXXXXXXXXXXXXXXX Shareholder Name 3XXXXXXXXXXXXXXXXXXXXXXXXXXXXX Shareholder Name 4XXXXXXXXXXXXXXXXXXXXXXXXXXXXX This Certifies That is the owner of *** Ninety-Nine Thousand Nine Hundred Ninety-Nine*** full paid and non-assessable SHARES OF THE PREFERRED STOCK OF $2.00 par value, of Series C 9% Non-Cumulative Perpetual Convertible preferred Stock transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon the surrender of this Certificate properly endorsed. The corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and to be sealed with the seal of the Corporation, this 99th day of May A.D. 2010. SECRETARY PRESIDENT XXX-1234567 END END END END DWIGHT & M.H. JACKSON 205 W. RANDOLPH STREET DIV OF CORPORATION SUPPLY CC CHICAGO, ILLINOIS 60606

EX-4.3

Exhibit 4.3

JT 13351/2 COPYRIGHT 1930 BY DWIGHT & M. H. JACKSON CHICAGO PATENT PENDING INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS B004 NUMBER 1234567 SHARES ***99,999*** MIDLAND STATES BANCORP, INC. Shareholder Name 1XXXXXXXXXXXXXXXXXXXXXXXXXXXXXEND Shareholder Name 2XXXXXXXXXXXXXXXXXXXXXXXXXXXXXEND Shareholder Name 3XXXXXXXXXXXXXXXXXXXXXXXXXXXXXEND Shareholder Name 4XXXXXXXXXXXXXXXXXXXXXXXXXXXXXEND This Certifies That is the owner of *** Ninety-Nine Thousand Nine Hundred Ninety-Nine*** full paid and non-assessable SHARES OF THE PREFERRED STOCK OF $2.00 par value, of Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon the surrender of this Certificate properly endorsed. The corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and to be sealed with the seal of the Corporation, this 99th day of May A.D. 2010. SECRETARY PRESIDENT XXX-1234567

EX-4.4

Exhibit 4.4

JT 13351/2 COPYRIGHT 1930 BY DWIGHT & M. H. JACKSON CHICAGO PATENT PENDING INCORPORATED UNDER THE LAWS OF THE STATE OF Illinois B004 NUMBER 1234567 SHARES ***99,999*** MIDI, AND STATES BANCORP, INC. Shareholder Name 1XXXXXXXXXXXXXXXXXXX Shareholder Name 2XXXXXXXXXXXXXXXXXXX Shareholder Name 3XXXXXXXXXXXXXXXXXXX Shareholder Name 4XXXXXXXXXXXXXXXXXXX This Certifies That is the owner of *** Ninety-Nine Thousand Nine Hundred-Nine*** full paid and non-assessable SHARES OF THE PREFERRED STOCK OF $2.00 par value, of Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon the surrender of this Certificate properly endorsed. The corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and to be sealed with the seal of the Corporation, this 99th day of May A.D. 2010. SECRETARY PRESIDENT END END END END

EX-4.5

Exhibit 4.5

JT 13351/2 COPYRIGHT 1930 BY DWIGHT & M. H. JACKSON CHICAGO PATENT PENDING INCORPORATED UNDER THE LAWS OF THE STATE OF Illinois B004 NUMBER 1234567 SHARES ***99,999*** MIDL AND STATES BANCORP, INC. Shareholder Name 1XXXXXXXXXXXXXXXXXX Shareholder Name 2XXXXXXXXXXXXXXXXXX Shareholder Name 3XXXXXXXXXXXXXXXXXX Shareholder Name 4XXXXXXXXXXXXXXXXXX This Certifies That is the owner of *** Ninety-Nine Thousand Nine Hundred Ninety-Nine*** full paid and non-assessable SHARES OF THE PREFERRED STOCK OF $2.00 par value, of Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon the surrender of this Certificate properly endorsed. The corporation will furnish without charge ot each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights. IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed by its duly authorized officers and to be sealed with the seal of the Corporation, this 99th day of May A.D. 2010. SECRETARY PRESIDENT XXX-1234567 END END END END

EX-10.1

Exhibit 10.1

AMENDED AND RESTATED CREDIT AGREEMENT

between

MIDLAND STATES BANCORP, INC.

and

RICHARD E. WORKMAN 2001 TRUST

Dated as of December 31, 2010

1.	DEFINITIONS		1
	1.1	General Terms	1
	1.2	Accounting Terms	10
	1.3	Other Definitional or Interpretive Provisions	10
2.	CREDIT		10
	2.1	Term Loans	10
	2.2	Mandatory Payments; Prepayments	11
	2.3	Interest	11
	2.4	General Provisions Regarding Payments	12
3.	[INTENTIONALLY OMITTED]		12
4.	DEDUCTIONS AND PAYMENTS		12
5.	AFFIRMATIVE COVENANTS		13
	5.1	Field Examinations	13
	5.2	Reporting	13
	5.3	Insurance	14
	5.4	Taxes	15
	5.5	Maintenance of Property	15
	5.6	Notice of Default or Event of Default	15
	5.7	Accountant	15
	5.8	Corporate Existence	15
	5.9	Compliance with Law	16
	5.10	ERISA Compliance	16
	5.11	Cease and Desist Orders	16
	5.12	Change in Business Activities	17
	5.13	Litigation	17
	5.14	Payment of Indebtedness	17
	5.15	Bank Activities	17
	5.16	Performance	17
	5.17	FR Y-6 Reports	17
	5.18	Accountant’s Reports	18
	5.19	Liens	18
	5.20	FDIC	18
	5.21	Material Events	18
	5.22	GAAP and Certain other Financial Statements	18
	5.23	Payment of Liabilities	19
	5.24	Inspection of Property and Books and Records	19
	5.25	Further Assurances	19
	5.26	Loan Loss Allowance	20
	5.27	Tier 2 Capital	20
6.	NEGATIVE COVENANTS		20

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	6.1	Distributions; Payments on Indebtedness	20
	6.2	Default Under Other Contracts	21
	6.3	Other Agreements	21
	6.4	Non-Performing Assets	21
	6.5	Subsidiaries	21
	6.6	Affiliate Investments	21
	6.7	Transaction with Third Parties	21
	6.8	Certificates	22
	6.9	Consolidations, Conversions, Mergers, Sale of Assets	22
	6.10	Related Documents	22
	6.11	Compliance with Laws and Documents	22
7.	REPRESENTATIONS AND WARRANTIES, ETC		22
	7.1	Existence and Power	22
	7.2	Authorization; No Contravention	23
	7.3	Governmental Authorization	23
	7.4	Binding Effect	23
	7.5	Litigation	23
	7.6	No Default	24
	7.7	Margin Regulations	24
	7.8	Title to Properties	24
	7.9	Taxes	24
	7.10	Financial Condition	24
	7.11	Regulatory Reporting	25
	7.12	Loan Loss Allowance	25
	7.13	Related Documents	25
	7.14	Regulated Entities	25
	7.15	Subsidiaries	26
	7.16	Brokers’ Fees; Transaction Fees	26
	7.17	Insurance	26
	7.18	Full Disclosure	26
	7.19	Solvency	26
	7.20	Regulatory Enforcement Actions	27
	7.21	ERISA; Absence of Reportable Events	27
	7.22	Other Loans and Guaranties	27
	7.23	Multi-Employer Plans	27
	7.24	Intellectual Property	27
	7.25	Environmental Matters	27
	7.26	Indebtedness	28
	7.27	Survival	28
8.	DEFAULT, RIGHTS AND REMEDIES OF LENDER		28
	8.1	Events of Default	28
	8.2	Acceleration	29
	8.3	Other Remedies	29

ii

	8.4	Waiver of Demand	30
9.	MISCELLANEOUS		30
	9.1	Board Observation Rights	30
	9.2	Waiver	30
	9.3	Costs and Attorneys’ Fees	31
	9.4	Expenditures by Lender	31
	9.5	Reliance by Lender	31
	9.6	Parties	32
	9.7	Choice of Law	32
	9.8	Consent to Jurisdiction	32
	9.9	Service of Process	33
	9.10	Waiver of Jury Trial	33
	9.11	Confidentiality	33
	9.12	Severability	33
	9.13	Application of Payments	34
	9.14	Marshaling; Payments Set Aside	34
	9.15	Section Titles	34
	9.16	Continuing Effect	34
	9.17	Notices	34
	9.18	Equitable Relief	35
	9.19	Indemnification	36
	9.20	Amendment and Restatement, Etc	36
	9.21	No Novation	36
	9.22	Counterparts	37
	9.23	Original Issue Discount	37
10.	SUBORDINATION		37

iii

AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 31, 2010, is by and between MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”), and RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”).

RECITALS:

A.            Borrower and Lender are parties to that certain Credit Agreement dated as of May 29, 2009 (as heretofore amended, modified or supplemented from time to time, the “Original Agreement”) and the parties hereto desire to amend and restate the Original Agreement as set forth herein.

B.            The execution and delivery of this Agreement is a condition to the occurrence of the “Amendment Effective Date” (as hereinafter defined) in connection with the restructuring of certain loans as contemplated by the “Amendment Agreement” (as hereinafter defined).

NOW, THEREFORE, in consideration of the premises, the terms and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Original Agreement is hereby amended and restated in its entirety as of the Amendment Effective Date as follows and the parties hereto hereby further agree as follows:

1.             DEFINITIONS.

1.1           General Terms.  When used herein, the following terms shall have the following meanings:

“2009 Default Rate” shall have the meaning given such term in Section 2.3(a).

“2009 Exchange Agreement” shall mean that certain Amended and Restated 2009 Exchange and Warrant Purchase Agreement dated as of December 31, 2010 between Borrower and Lender.

“2009 Term Loans” shall have the meaning given such term in Section 2.1.

“2010 Default Rate” shall have the meaning given such term in Section 2.3(b).

“2010 Exchange Agreement” shall mean that certain Amended and Restated 2010 Exchange and Warrant Purchase Agreement dated as of December 31, 2010 between Borrower and Lender.

“2010 Term Loan” shall have the meaning given such term in Section 2.1.

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“Affiliate” shall mean, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  Without limitation, any director, executive officer or beneficial owner of five percent (5%) or more of the equity of a Person shall, for the purposes of this Agreement, be deemed to control the other Person.  In the absence of designation to the contrary, reference to an Affiliate or Affiliates shall be deemed to be a reference to Affiliates of Borrower.  Notwithstanding the foregoing, Lender shall not be deemed an “Affiliate” of Borrower or of any Subsidiary of Borrower.

“Agreement” shall mean this Amended and Restated Credit Agreement, as amended, modified or supplement from time to time, together with all exhibits and schedules attached hereto.

“Amended 2010 Term Note” shall have the meaning given such term in Section 2.1.

“Amendment Agreement” shall mean that certain Amendment Agreement dated as of December 31, 2010 among Borrower and Lender.

“Amendment Effective Date” shall mean the “Effective Date” (as such term is defined in the Amendment Agreement).

“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.  § 101, et seq.), as amended, reformed or modified from time to time and any rules or regulations issued from time to time thereunder.

“Bank” shall mean Midland States Bank, an Illinois banking corporation.

“Borrower” shall have the meaning given such term in the preamble hereto.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to close.

“Capital Lease” shall mean any leasing or similar arrangement which, in accordance with GAAP, is or should be classified as a capital lease.

“Capital Lease Obligations” shall mean all monetary obligations under any Capital Leases.

“Code” shall mean the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any rules or regulations issued from time to time thereunder.

“Code Provisions” shall have the meaning given such term in Section 8.1.

2

“Contingent Obligation” shall mean, as to any Person, any direct or indirect liability, contingent or otherwise, of such Person: (a) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (b) with respect to any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings; (c) under any Rate Contracts; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any Property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another Person.  The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported.

“Contractual Obligations” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.

“Default” shall mean an Event of Default or an event or condition which with the passage of time or the giving of notice or both would, unless cured or waived, become an Event of Default.

“Depository Institution Subsidiary” shall mean Bank and any other institution that holds deposits insured by the FDIC and becomes a Subsidiary of the Borrower after the date hereof.

“DFPR” shall mean the Department of Financial and Professional Regulation of the State of Illinois.

“Distribution” shall mean (a) the declaration or making of any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock or other Equity Interests, partnership interests, membership interests or other Equity Interests (including warrants), or (b) the purchase, redemption or other acquisition for value by any Person of any shares of its capital stock, partnership interests, membership interests or other Equity Interests or any warrants, rights or options to acquire such shares, Equity Interests or securities now or hereafter outstanding.

“Dollars”, “dollars” and “$” each mean lawful money of the United States of America.

“Equity Interests” shall mean the membership interests, partnership interests, capital stock or any other equity interest of any type or class of any Person and options, warrants

3

and other rights to acquire membership interests, partnership interests, capital stock or other equity interests of any type or class of such Person.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, including (unless the context otherwise requires) any rules or regulations promulgated thereunder.

“Event of Default” shall mean the occurrence or existence of any one or more of the events described in Section 8.1.

“Exchange Agreements” shall mean, collectively, the 2009 Exchange Agreement and the 2010 Exchange Agreement.

“FDIC” shall mean the Federal Deposit Insurance Corporation.

“Financial Statements”, as to any Person, shall mean the consolidated and consolidating balance sheets of such Person and its Subsidiaries, the consolidated and consolidating statements of income, retained earnings, reconciliation of net worth, and changes in financial position Person and its Subsidiaries, plus all notes thereto, and any other financial statements of Borrower or any Bank provided to Lender under this Agreement.

“Financing Document” shall mean, collectively, this Agreement, the Notes, the Exchange Agreements, the Preferred Subscription Documents, the Registration Rights Agreement, the Warrants, and all other documents, instruments and agreements delivered to Lender in connection therewith.

“Fiscal Year” shall mean the fiscal year of Borrower and each Bank ending on December 31 of each year.

“FRB” shall mean the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.

“GAAP” shall mean generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), which are applicable to the circumstances as of the date of determination, applied in a manner consistent with those principles used in preparing the December 31, 2008 financial statements referred to in Section 7.10, unless otherwise provided for herein.

“Governing Documents” shall mean (a) for any bank or other corporation, the charter, certificate or articles of incorporation, the bylaws, any certificate of designations or instrument relating to the rights of shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation, (b) for any partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c) for any limited liability company, the operating agreement, limited

4

liability company agreement or other similar agreement and articles or certificate of formation, and all applicable resolutions of the board of managers (or any committee thereof) of such limited liability company, or (d) for any Person (including any corporation, partnership or limited liability company), any agreement, instrument or document comparable to the foregoing.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing, including any federal or state governmental department, commission, board, regulatory authority or agency that has examination, supervision or oversight authority with respect to the Borrower or any Depository Institution Subsidiary including, but not limited to, the FRB, the Office of the Comptroller of the Currency, the FDIC, the DFPR and the Office of Thrift Supervision.

“Indebtedness” of any Person shall mean, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade payables incurred in the Ordinary Course of Business or accrued expenses paid on customary terms in the Ordinary Course of Business); (c) all reimbursement or payment obligations (whether or not contingent) with respect to letters of credit, surety bonds and other similar instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses (including the Junior Subordinated Debt); (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by such Person (even though the rights and remedies of the seller or the Person providing financing under such agreement in the event of default are limited to repossession or sale of such Property); (f) all Capital Lease Obligations; (g) all Equity Interests of such Person subject to repurchase or redemption (other than at the sole option of such Person); (h) “earnouts” and similar payment obligations under merger, acquisition, purchase or similar or related agreements; (i) all obligations under Rate Contracts; (j) all Indebtedness and obligations referred to in clauses (a) through (i) above secured by (or for which the holder of such Indebtedness or obligations has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness or obligations; and (k) all Contingent Obligations described in clause (a) of the definition thereof in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) above.  For the purpose of computing the “Indebtedness” of any Person, there shall be excluded any particular Indebtedness to the extent that, upon or prior to the maturity thereof, there shall have been deposited with the proper depositary in trust the necessary funds (or evidences of such Indebtedness) for the payment, redemption or satisfaction of such Indebtedness; and thereafter such funds and evidences of Indebtedness so deposited shall not be included in any computation of the assets of such Person.

“Indemnified Matters” shall have the meaning given such term in Section 9.19.

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“Indemnitees” shall have the meaning given such term in Section 9.19.

“Insured Depository Institution” shall have the meaning ascribed to such term in 12 U.S.C.  § 1813.

“Junior Subordinated Debt” shall mean the Indebtedness of Borrower to the TruPS Trustee in the aggregate original principal amount of $10,310,000, as evidenced by the Junior Subordinated Debt Documents.

“Junior Subordinated Debt Documents” shall mean, collectively, the Junior Subordinated Debt Security and any and all agreements, documents and instruments executed and delivered thereunder or in connection therewith.

“Junior Subordinated Debt Security” shall mean that certain Junior Subordinated Debt Security Due 2034 issued by Borrower to the TruPS Trustee in the original principal amount of $10,310,000.

“Lender” shall have the meaning given such term in the preamble hereto, and such term shall include Lender’s successors and assigns.

“Liabilities” shall mean, collectively, all of Borrower’s liabilities, obligations, and indebtedness to Lender or any of its Affiliates of any and every kind and nature, whether heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created, incurred, acquired, or owing, whether individually or collectively, direct or indirect, joint or several, absolute or contingent, primary or secondary, fixed or otherwise (including obligations of performance), and whether arising or existing under any Financing Document or other written agreement, oral agreement or operation of law, including all of Borrower’s other indebtedness and obligations to Lender or any of its Affiliates under or in respect of any of this Agreement and the other Financing Documents.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including, but not limited to, those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law), and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease which is not a Capital Lease.  The term “Lien” shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property.

“Loans” shall mean, collectively, the 2009 Term Loan and the 2010 Term Loan.

“Margin Stock” shall mean “margin stock” as such term is defined in Regulation T, U or X of the FRB.

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“Material Adverse Effect” and “material adverse effect” shall each mean (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or condition (financial or otherwise) of Borrower, any of its Subsidiaries, or of Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of Borrower, any of its Subsidiaries, or of Borrower and its Subsidiaries taken as a whole, to perform in any material respect any obligations under any Financing Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Financing Document.

“Notes” shall have the meaning given such term in Section 2.1.

“Ordinary Course of Business” shall mean, in respect of any transaction involving Borrower or any Subsidiary, the ordinary course of such Person’s business, as conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Financing Document.

“Original 2009 Term Loan” shall have the meaning given such term in Section 2.1.

“Original Agreement” shall have the meaning given such term in the recitals to this Agreement.

“Pension Plan” shall mean any employee’s pension benefit plan as such term is described in Section 3 of the ERISA.

“Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority or other form of entity.

“Preferred Subscription Documents” shall mean, collectively the Series C Preferred Subscription Documents and the Series D Preferred Subscription Documents.

“Property” shall mean any property or interest of any type in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.

“Rate Contracts” shall mean swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates, including any agreement or arrangement which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

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“Registration Rights Agreement” shall mean that certain Registration Rights Agreement dated on or about December 31, 2010 between Borrower and Lender in the form attached hereto as Exhibit 1.1.

“Related Documents” shall mean, collectively, the Junior Subordinated Debt Documents, the Preferred Subscription Documents, the Exchange Agreements, the Original Agreement, the Registration Rights Agreement, the Warrants, and any and all agreements, documents and instruments executed and delivered thereunder or in connection therewith.

“Related Transactions” shall mean the transactions contemplated by the Related Documents.

“Requirement of Law” shall mean, as to any Person, any law (statutory or common), ordinance, treaty, rule, regulation, order, policy, other legal requirement or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

“Responsible Officer” shall mean, as to Borrower, the chief executive officer, chief financial officer, vice president of finance or the president of Borrower, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer or the treasurer of Borrower, or any other officer having substantially the same authority and responsibility.

“SEC” shall mean the Securities and Exchange Commission, or any entity succeeding to any of its principal functions.

“Senior Debt” shall mean all claims of general creditors of Borrower (which shall expressly exclude the Junior Subordinated Debt and any debt which, by its express terms, is pari passu to the Loans, but shall expressly include, as set forth in Federal Reserve Supervisory Letter SR 92-37, all senior claims of general creditors of Borrower for borrowed money, similar obligations arising from off-balance sheet guarantees and direct credit substitutes, and obligations associated with derivative products such as interest rate and foreign exchange contracts, commodity contracts, and similar arrangements), but excluding any debt incurred in connection with this Agreement.

“Series C Preferred Subscription Documents” shall mean, collectively, (a) that certain Confidential Private Placement Memorandum dated May 15, 2009 issued by Borrower regarding its offering for the sale of up to 2,500 shares of its Series C Preferred Stock (the “2009 PPM”), (b) all Subscription Agreements executed in connection therewith (collectively, the “Series C Subscription Agreements”), and (c) any and all agreements, documents and instruments executed and delivered thereunder or in connection therewith.

“Series C Warrant” means that certain Series C Preferred Stock Warrant dated as of December 31, 2010 between Borrower and Lender.

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“Series D Preferred Subscription Documents” shall mean, collectively, (a) that certain Confidential Private Placement Memorandum dated February 22, 2010, as supplemented by the Supplement to Initial Private Placement Memorandum Dated February 22, 2010 dated March 11, 2010, issued by Borrower regarding its offering for the sale of up to 4,000 shares of its Series D Preferred Stock (the “2009 PPM”), (b) all Subscription Agreements executed in connection therewith (collectively, the “Series D Subscription Agreements”), and (c) any and all agreements, documents and instruments executed and delivered thereunder or in connection therewith.

“Series D Warrant” means that certain Series D Preferred Stock Warrant dated as of December 31, 2010 between Borrower and Lender.

“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control (or have the power to be or control) a managing director, manager or general partner of such limited liability company, partnership, association or other business entity.  In the absence of designation to the contrary, reference to a Subsidiary or Subsidiaries shall be deemed to be a reference to Subsidiaries of Borrower.

“Tier 2 Capital” has the definition provided in, and shall be determined in accordance with, the rules and regulations of the FRB.

“Tranche A 2009 Term Note” shall have the meaning given such term in Section 2.1.

“Tranche A 2009 Term Loan” shall have the meaning given such term in Section 2.1.

“Tranche B 2009 Term Note” shall have the meaning given such term in Section 2.1.

“Tranche B 2009 Term Loan” shall have the meaning given such term in Section 2.1.

“TruPS Trustee” shall mean The Bank of New York Mellon Trust Company, National Association (successor trustee to JPMorgan Chase Bank, N.A.), in its capacity as institutional trustee for Midland States Preferred Securities Trust.

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“UFCA” shall have the meaning given such term in Section 7.19.

“UFTA” shall have the meaning given such term in Section 7.19.

“United States” and “U.S.” each shall mean the United States of America.

“Warrants” shall mean, collectively, the Series C Warrant and the Series D Warrant, together with all replacements, reissues or subdivisions thereof.

1.2           Accounting Terms.  Calculations and determinations of financial and accounting terms used and not otherwise specifically defined under this Agreement shall be made and determined, both as to classification of items and as to amount, in accordance with GAAP.

1.3           Other Definitional or Interpretive Provisions.  Whenever the context so requires, the neuter gender includes the masculine and feminine, the singular number includes the plural, and vice versa.  The words “include,” “includes” and “including” shall in any event be deemed to be followed by the phrase “without limitation.”  All references in this Agreement to “this Agreement”, “herein”, “hereunder”, “hereof” shall be deemed to refer to this Agreement and the Exhibits hereto (including their annexes) unless the context requires otherwise.  Sections, subsections, exhibits and schedules shall be construed to refer to sections and subsections of, and exhibits and schedules to, this Agreement unless the context requires otherwise.  Any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, but only to the extent such amendment, restatement, supplement or modification does not breach this Agreement or any other Financing Document.

2.             CREDIT.

2.1           Term Loans.  On May 29, 2009, Lender extended a term loan to Borrower which has an outstanding principal balance as of the date hereof of $11,300,000 (the “Original 2009 Term Loan”).  On or about March 31, 2010, Lender extended a term loan to Borrower which has an outstanding principal balance as of the date hereof of $5,000,000 (the “2010 Term Loan”).  The parties have agreed to split the Original 2009 Term Loan into two (2) separate loans as follows: (a) $6,300,000 of the Original 2009 Term Loan shall be deemed to be the “Tranche A 2009 Term Loan”,  and (b) $5,000,000 of the Original 2009 Term Loan shall be deemed to be the “Tranche B 2009 Term Loan” (the Tranche A 2009 Term Loan and Tranche B 2009 Term Loan are herein referred to, collectively, as the “2009 Term Loans”; the 2009 Term Loans and the 2010 Term Loan are referred to, collectively, as the “Loans”).  The Tranche A 2009 Term Loan shall be evidenced, in part, by and shall be repayable in accordance with the terms of this Agreement and a term note in the form attached hereto as Exhibit 2.1(a) (the “Tranche A 2009 Term Note”).  The Tranche B 2009 Term Loan shall be evidenced, in part, by and shall be repayable in accordance with the terms of this Agreement and a term note in the form attached hereto as Exhibit 2.1(b) (the “Tranche B 2009 Term Note”).  The 2010 Term Loan shall be evidenced, in part, by and shall be repayable in accordance with the terms of this Agreement and a term note in the form attached hereto as Exhibit 2.1(c) (the “Amended 2010 Term Note” and, together with the Tranche A 2009 Term Note and the Tranche B 2009 Term Note, collectively,

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the “Notes”) with the blanks appropriately filled. The provisions of the Notes notwithstanding, the Liabilities evidenced by each of the Notes shall become immediately due and payable as provided in Section 8.2 hereof.

2.2           Mandatory Payments; Prepayments.

(a)           Borrower shall pay the unpaid principal balance of each Loan in one payment in an aggregate amount equal to the unpaid principal balance of such Loan on April 1, 2020.

(b)           Borrower may not voluntarily prepay the principal of any 2009 Term Loan in full or in part at any time prior to July 1, 2013.  At any time on or after July 1, 2013 Borrower may voluntarily prepay, without premium or penalty, each 2009 Term Loan in full or in part; provided, however, that, each prepayment of the principal of each 2009 Term Loan made on or after July 1, 2013 shall be made on two Business Days prior written notice to Lender of the 2009 Term Loan to be prepaid together with the amount to be so prepaid.

(c)           Borrower may not voluntarily prepay the principal of the 2010 Term Loan in full or in part at any time prior to April 1, 2016.  At any time on or after April 1, 2016 Borrower may voluntarily prepay, without premium or penalty, the 2010 Term Loan in full or in part; provided, however, that, each prepayment of the principal of the 2010 Term Loan made on or after April 1, 2016 shall be made on two Business Days prior written notice to Lender of the amount to be so prepaid.

(d)           Any prepayment of any Loan shall be made in integral multiples of $100,000 and, to the extent that any such prepayment is not received by Lender together with notice thereof prior to 11:00 a.m. (Chicago time) on a Business Day, the same shall be deemed to be received on the following Business Day.

(e)           Borrower is required under Regulation Y of the FRB to consult with the FRB prior to prepaying any Loan.  Lender shall have no responsibility to verify whether Borrower has obtained FRB consent for any such prepayment.

2.3           Interest.

(a)           Borrower shall pay to Lender interest on the outstanding principal balance of each 2009 Term Loan and all other Liabilities arising under this Agreement and the Notes (other than the principal of the 2010 Term Loan) at a per annum rate equal to 15%; provided, however, from the date of the occurrence of an Event of Default and during the continuance thereof, Borrower shall pay to Lender interest on the outstanding principal balance of each 2009 Term Loan and all other Liabilities (other than the principal of the 2010 Term Loan) at a per annum rate equal to 17% (the “2009 Default Rate”).

(b)           Borrower shall pay to Lender interest on the outstanding principal balance of the 2010 Term Loan at a per annum rate equal to 12%; provided, however, from the date of the occurrence of an Event of Default and during the continuance thereof, Borrower shall pay to

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Lender interest on the outstanding principal balance of the 2010 Term Loan at a per annum rate equal to 14% (the “2010 Default Rate”).

(c)           Accrued interest shall be payable by Borrower: (i) quarterly in arrears not later than the first day of each calendar quarter, (ii) as to each Loan, upon payment in full of the principal amount of such Loan, and (iii) at any time after the occurrence and during the continuance of an Event of Default, upon demand.  All interest and fees provided for under this Agreement shall be computed on the basis of a 360-day year for the actual number of days elapsed.

(d)           Notwithstanding anything to the contrary set forth in this Section 2.3 or elsewhere in this Agreement, the 2009 Default Rate and the 2010 Default Rate shall only apply with respect to an Event of Default relating to the 2009 Term Loan or the 2010 Term Loan, respectively, if such Event of Default occurs under any one or more of Sections 8.1(a), 8.1(b), 8.1(e) or 8.1(f).

2.4           General Provisions Regarding Payments.  All payments to be made by Borrower under any Financing Document, including payments of principal and interest on the Loans and all fees, expenses, indemnities and reimbursements, shall be made without set off or counterclaim, in lawful money of the United States of America and in immediately available funds.  If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.  Borrower shall make all payments in immediately available funds to Lender before 11:00 a.m.  (Chicago time) on the date when due (and, if received on such day after 11:00 a.m.  (Chicago time), shall be deemed received on the next Business Day).  Lender may in its sole discretion elect to bill Borrower for such amounts in which case the amount shall be immediately due and payable when otherwise due and payable hereunder.

3.             [INTENTIONALLY OMITTED].

4.             DEDUCTIONS AND PAYMENTS.

All payments by Borrower on the Liabilities shall be made without set-off or counterclaim, and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any country or any political subdivision thereof or taxing or other authority therein (unless Borrower is required by law to make such deduction or withholding), excluding, in the case of Lender, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which Lender is organized or any political subdivision thereof (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions in respect of payments on the Liabilities being hereinafter referred to as “Taxes”).  If any such obligation is imposed upon Borrower with respect to any amount payable by it hereunder, Borrower shall pay to Lender on the date on which such amount becomes due and payable hereunder and in Dollars, such additional amount as shall be necessary to enable Lender to receive the same net amount which it

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would have received on such due date had no such obligation been imposed upon Borrower.  If Borrower shall be required by law to make such deduction or withholding it will deliver to Lender tax receipts or other appropriate evidence of payment.  In addition, Borrower shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made by Borrower on the Liabilities or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or the other Financing Documents (hereinafter referred to as “Other Taxes”).  Borrower shall, upon demand by Lender, indemnify Lender for and hold Lender harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed or asserted by any jurisdiction on amounts payable under this Section 4, imposed on or paid by Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto.  A certificate signed by Lender setting forth any additional amount required to be paid by Borrower to Lender under any provision of this Sections 4, and the computations made by Lender to determine such additional amount, shall be submitted by Lender to Borrower in connection with each demand made at any time by Lender upon Borrower under this Section 4.  Such certificate, in the absence of manifest error, shall be conclusive as to the additional amount owed.

5.             AFFIRMATIVE COVENANTS.

Borrower covenants and agrees that, so long as any Loan or any other Liability shall remain unpaid or unsatisfied, unless Lender waives compliance in writing, that Borrower shall:

5.1           Field Examinations.  On three (3) Business Days verbal notice, permit, and cause the Bank to permit, any person(s) designated by Lender to visit, inspect and audit any of the Properties, corporate books, loan documentation, loan portfolios, loan files, investment portfolios and financial records of Borrower and the Bank and to discuss the affairs, finances and accounts of Borrower and the Bank with the directors, officers, employees and certified public accountants of each, all at such reasonable times during normal business hours and as often as Lender may reasonably request; provided, that no such audit or inspection shall occur during an examination or shall otherwise violate any legal or regulatory requirement to which the Borrower or the Bank may be subject.

5.2           Reporting.  Deliver or caused to be delivered to Lender:

(a)           Within forty five (45) days after the required filing day each quarter, a copy of the Bank’s call reports (FFIEC 034) prepared and signed by a duly authorized officer, as prepared for the regulators;

(b)           Within one hundred twenty (120) days after the close of each Fiscal Year a copy of the Borrower’s, and the Bank’s audited financial statements prepared in accordance with GAAP, including but not limited to, a balance sheet, statement of income, statement of changes in financial position, and a reconciliation of net worth as prepared by Borrower’s independent certified public accountant;

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(c)           Within ten (10) days after their completion, copies of all public filings, applications or reports by Borrower, or the Bank to any banking agency or any other official, bureau or agency which asserts authority over their operations, unless the furnishing of such reports to the Lender would constitute a violation of applicable federal or state law or the rules and regulations of such official, bureau, or agency;

(d)           Promptly after the sending or making available or filing of the same, copies of all reports, proxy statements and financial statements that Borrower and/or the Bank sends or makes available to its stockholders and all regular, periodic, or special report, registration statement, and/or prospectus that Borrower and/or the Bank file with the SEC;

(e)           To the extent permitted by law, and so long as such information is not confidential and related to a customer of Borrower or the Bank, deliver to Lender as soon as available, and in any event within twenty-five (25) days after the end of each calendar month, (1) a report as a result of an examination of the assets of Borrower and the Bank, which indicates those assets (if any) classified as “Loss,” “Doubtful,” “Substandard,” or “Other Assets Especially Mentioned,” and (2) a report as a result of an examination of the loans and assets of Borrower or the Bank, which indicates the ratio Non-performing Loans to Total Loans and other real estate of Borrower and the Bank;

(f)            Each of the items listed on Exhibit 5.2(f) on or before the date specified on Exhibit 5.2(f), each of which shall be in form and substance reasonably satisfactory to Lender and its counsel; and

(g)           All other business, financial, corporate and other information or records of Borrower or the Bank upon request by Lender, except to the extent that the furnishing or disclosure of any such information or records would constitute a violation of applicable federal or state law or the rules and regulations of any such official, bureau, or agency described in the foregoing subparagraph (c).

Lender is hereby authorized to deliver a copy of any financial statement or other information made available by Borrower or the Bank to participant lenders and/or any regulatory authority having jurisdiction over Lender, pursuant to any request therefor.

5.3           Insurance.

(a)           (i) Keep adequately insured, and cause the Bank to keep adequately insured, by financially sound and reputable insurers and in reasonable amounts, all Property of Borrower and the Bank of the character usually insured by corporations engaged in the same or similar businesses similarly situated, against loss or damage of the kind customarily insured against by such corporations, (ii) carry and cause the Bank to carry adequate liability insurance and other insurance of a kind and in such amounts as is generally carried by corporations engaged in the same or similar businesses similarly situated and with financially sound and reputable insurers, and (iii) cause the Bank to maintain coverage under a banker’s blanket bond in an amount equal to the greater of the amount of coverage currently maintained by the Bank or the minimum coverage recommended by the American Banker’s Association, plus such excess fidelity coverage as is generally carried by comparable banks.

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(b)           As soon as practicable and in any event within thirty (30) days after the end of each Fiscal Year, Borrower shall provide Lender with evidence that Borrower maintains, and causes the Bank to maintain, the insurance required under this Section 5.3, and evidence of the amount of such insurance.

5.4           Taxes.  Duly file, and cause the Bank to duly file, all Federal, state and local income tax returns and all other material tax returns and reports of Borrower or the Bank, as the case may be, which are required to be filed; pay, and cause the Bank to pay, when due, all taxes and governmental charges assessed against or upon Borrower or the Bank, as the case may be, or upon their respective Properties, assets, income or franchises; provided, however, that neither Borrower, nor the Bank shall be required to pay any such tax, assessment or other governmental charge the payment of which is being contested in good faith and by appropriate proceedings being diligently conducted and for which adequate reserves in form and amount satisfactory to Lender have been provided, except that Borrower and the Bank shall pay or cause to be paid all such taxes, assessments and governmental charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor, unless such foreclosure is stayed by the filing of an appropriate bond.

5.5           Maintenance of Property.  Maintain, and cause the Bank to maintain, all Property, plants and equipment (except obsolete equipment) of Borrower and the Bank in good operating order, and from time to time make, and cause the Bank to make, all needful and proper repairs, renewals, replacements, additions, betterment and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained.

5.6           Notice of Default or Event of Default.  Forthwith upon any officer or director of Borrower obtaining knowledge of a Default or an Event of Default, or of any fact, condition or event that only with the giving of notice or passage of time or both, could become an Event of Default, Borrower will deliver to Lender a written certificate signed by such officer specifying the nature thereof, the period of existence thereof and what action Borrower has taken or proposes to take with respect thereto.

5.7           Accountant.  Give Lender prompt notice of any change of Borrower’s independent certified public accountants and a statement of the reasons for such change.  Borrower must utilize an independent certified public accounting firm of at least regional reputation.

5.8           Corporate Existence.  Do or cause to be done all things necessary to (a) preserve and keep in full force and effect the corporate existence, rights and franchises of itself and the Bank, (b) duly qualify itself and the Bank to do business in all jurisdictions where the nature of Property owned or leased by the Borrower or the Bank or the nature of the business of Borrower or the Bank requires such qualification, and where failure to so qualify would have a material adverse effect on the business, prospects, properties or condition (financial or otherwise) of Borrower or the Bank, as the case may be, (c) cause the Bank to preserve and keep in full force and effect its respective existence, franchise and right to do business as a state bank under the laws of the State of Illinois, and (d) cause the Bank to maintain its status as an Insured Depositary Institution, and to otherwise maintain the Bank’s eligibility with the FDIC for federal deposit insurance.

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5.9           Compliance with Law.  Comply in all material respects with, and cause the Bank to comply in all material respects with, any and all laws, ordinances and governmental and regulatory rules and regulations to which it or the Bank is subject; and obtain, and cause the Bank to obtain, any and all licenses, permits, franchises and other material governmental and regulatory authorizations necessary to the ownership of the Properties of itself or the Bank, or to the conduct of the business of itself or the Bank, which violation or failure to obtain might materially adversely affect the business, prospects, profits, Properties or condition (financial or otherwise) of Borrower or the Bank.

5.10         ERISA Compliance.  If Borrower or the Bank shall have, or in the future create, any Pension Plan, Borrower shall comply, in all material respects with, and shall cause the Bank to comply in all material respects with, all requirements of ERISA relating to such plan.  Without limiting the generality of the foregoing, Borrower will not: (a) permit, or cause or allow the Bank to permit, any Pension Plan maintained by it, to engage in any nonexempt “prohibited transaction”, as such term is defined in Section 4975 of the Code; (b) permit, or cause or, allow the Bank to permit, any Pension Plan maintained by it or the Bank, as the case may be, to incur any “accumulated funding deficiency”, as such term is defined in Section 302 of ERISA, 29 U.S.C.  1082, whether or not waived; (c) terminate, or cause or allow the Bank to terminate, any such Pension Plan in a manner which could result in the imposition of a Lien on the Property of Borrower or the Bank, pursuant to Section 4068 of ERISA, 29 U.S.C.  1368; or (d) take, or cause or allow the Bank to take, any action which would constitute or give rise to a complete or partial withdrawal from a multiemployer plan within the meaning of Sections 4203 and 4205 of Title IV of ERISA.  Notwithstanding any provision contained in this Section 5.10 to the contrary, an act by the Borrower or the Bank shall not be deemed to constitute a violation of the preceding clauses (a) through (d) hereof unless Lender determines in good faith that said action, individually or cumulatively with other acts of the Borrower and the Bank, does have or is likely to cause a material adverse effect upon Borrower or the Bank.  Borrower shall have the affirmative obligation hereunder to report to Lender any of those acts identified in the preceding clauses (a) through (d) hereof, regardless of whether said act does or is likely to cause a material adverse effect upon Borrower or the Bank and failure by Borrower to report such act promptly upon Borrower’s becoming aware of the existence thereof shall constitute an Event of Default hereunder.  Borrower shall furnish Lender, promptly after the filing of the same, with copies of all reports or other statements filed with the United States Department of Labor or the Internal Revenue Service with respect to all such plans, and promptly advise Lender of the occurrence of any reportable Event or Prohibited Transaction (each, as defined in ERISA) with respect to any such Plan.

5.11         Cease and Desist Orders.  Except to the extent that disclosure of any such information would constitute a violation of applicable federal or state law or the rules and regulations of any banking agency or any other official, bureau or agency which asserts authority over Borrower’s or the Bank’s operations, notify Lender immediately of: (a) the issuance of any notice of charges, cease-and-desist order (temporary or otherwise) or order to take a permanent action by any governmental or regulatory authority against Borrower or the Bank or any director, officer, employee, agent, or other Person participating in the conduct of the affairs of Borrower or the Bank; (b) the service of any notice of intention to remove from office or notice of intention to suspend from office by any governmental or regulatory authority upon any director or officer

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of Borrower or the Bank; (c) the issuance of a notice of termination of the status of the Bank as an Insured Depositary Institution; or (d) enter into any agreement or memorandum of understanding between any governmental or regulatory authority and Borrower or the Bank or any director, officer, employee, agent, or other Person participating in the conduct of the affairs of Borrower or the Bank, regardless of whether the same is voluntary or involuntary, and promptly inform Lender of the terms thereof (unless such action would violate applicable law).

5.12         Change in Business Activities.

(a)           Provide Lender with thirty (30) days prior written notice of any plans to conduct or engage, or permit the Bank to conduct or engage, in any business if, as a result thereof, the general nature of the business which would thereafter be engaged in by Borrower or the Bank, as the case may be, would be substantially changed from the general nature of the business engaged in on the date of this Agreement by Borrower or the Bank;

(b)           Provide Lender with thirty (30) days prior written notice of any change in the location of any of Borrower’s or Bank’s places of business, or the establishment of any new, or the discontinuance of any existing, place of business; and

5.13         Litigation.  Give immediate notice to Lender of: (a) pending or any threat of any litigation or proceeding in which Borrower, the Bank, or the directors of each is a party if an adverse decision therein would require it to pay over more than $500,000 or deliver assets the value of which exceeds such sum (whether or not the claim is considered to be covered by insurance): and (b) the institution of any other suit or proceeding involving it that might materially and adversely affect its operations, financial condition, property or business, including a proceeding in bankruptcy or insolvency, an application for a receiver, trustee or conservator of any of their respective properties, or proceeding for reorganization, arrangement, readjustment of debt, conversation, dissolution or liquidation.

5.14         Payment of Indebtedness.  Pay when due (or within applicable grace periods) all Indebtedness due third Persons, except when the amount thereof is being contested in good faith by appropriate proceedings and with adequate reserves therefor being set aside on the books of Borrower or the Bank.

5.15         Bank Activities.  Cause the Bank to maintain at all times (a) a “well capitalized” status, (b) a Tier I Leverage Ratio of 4.50%, (c) a Tier I Risk-Based Ratio of 5.40%, and (d) a Total Risk-Based Capital Ratio of 9.0%.

5.16         Performance.  Duly and punctually pay and cause to be paid the Indebtedness incurred pursuant hereto on the dates, and at the place and in the manner set forth herein and in the Notes issued hereunder, and perform and observe all of its obligations under this Agreement and any document executed in connection herewith.

5.17         FR Y-6 Reports.  Deliver to Lender as soon as possible, in any event within forty-five (45) days after the filing thereof, a copy of the publicly available portions of Borrower’s FR Y-6 annual report, and any FR Y-9C report to the FRB.

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5.18         Accountant’s Reports.  Deliver to Lender promptly upon receipt thereof, a copy of any management letter or written report (and responses from management) submitted to Borrower or Bank by independent certified accountants with respect to the business condition (financial or otherwise), operations, prospects, or properties of Borrower or Bank.

5.19         Liens.  Pay or discharge, and cause Bank to pay or discharge, at or before maturity or before becoming delinquent, all lawful claims for labor, material, and supplies, which, if unpaid, might become a Lien upon any of its property, provided, however, that neither Borrower nor Bank shall be required to pay or discharge any tax, levy, assessment, or governmental charge which is being contested in good faith by appropriate proceedings diligently pursued, and for which adequate reserves have been established.

5.20         FDIC.  Cause Bank to maintain federal deposit insurance and to be a member of the FDIC, or any successor Person.

5.21         Material Events.  Except to the extent that disclosure of any such information would constitute a violation of applicable federal or state law or the rules and regulations of any banking agency or any other official, bureau or agency which asserts authority over Borrower’s or the Bank’s operations, promptly give written notice to Lender of the occurrence of any of the following:

(a)           Any material adverse change in the business, properties, assets, operations or condition, financial or otherwise, of the Borrower or Bank;

(b)           Any condemnation, seizure, attachment, appropriation, or assumption of control of any property, real or personal, by any governmental officials, bureau or agency or any legal process issued by any court materially affecting the Borrower or Bank; or

(c)           The delivery of findings of unsafe or unsound banking or business practices or conditions or an order of correction or similar order or notice to Bank or the commencement of any action to take possession of, reorganize, liquidate or which would otherwise materially or adversely affect Bank or any agency, commission, or authority.

5.22         GAAP and Certain other Financial Statements.

(a)           Borrower shall, and Borrower shall cause each of its Subsidiaries to, maintain a system of accounting established and administered in accordance with sound business practices to permit the preparation of financial statements in conformity with GAAP; provided that monthly financial statements shall not be required to have footnote disclosure and are subject to normal year-end adjustments.

(b)           Borrower shall deliver to Lender in form and detail reasonably satisfactory to Lender as soon as available, but not later than thirty (30) days after the end of each calendar month (i) a copy of the unaudited consolidated and consolidating balance sheets of Borrower and its Subsidiaries as of the end of such calendar month, and the related consolidated and consolidating statements of income, changes in members’ equity and cash flows for such calendar month and for the portion of the Fiscal Year then ended, and setting forth in each case

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comparisons to Borrower’s most recent projections and to the corresponding periods in the preceding Fiscal Year, all certified on behalf of Borrower by an appropriate Responsible Officer as being complete and correct and fairly presenting in all material respects, in accordance with GAAP, the financial position and the results of operations of Borrower and its Subsidiaries on a consolidated and consolidating basis, subject to normal year-end adjustments and absence of footnote disclosure, and (ii) all financial statements filed with any state or federal bank regulatory authority.

(c)           Other Information.  Borrower shall furnish to Lender: (i) all reports, agenda and other information or materials (including any financial management reports or similar financial information or report of operations) distributed to Borrower’s or Bank’s respective boards of directors (or executive committees thereof) for regular or special board meetings, at the same time such reports, agenda and other information or materials are provided to such board or committee; provided, however, that Borrower shall not be required to furnish any material if Borrower’s board of directors believes in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege, to comply with applicable law or regulation regarding the confidentiality of the contents of reports of examination prepared by the FRB, FDIC or DFPR, to maintain the confidentiality of information related to a customer of Borrower or the Bank, or for other similar reasons; (ii) promptly upon receipt thereof, copies of any reports submitted by Borrower’s certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or internal control systems of Borrower and its Subsidiaries made by such accountants, including any comment letters submitted by such accountants to management of such Person in connection with their services; and (iii) promptly upon receipt thereof copies of any notices of any breach, default, event of default, Default or Event of Default and any other material notices, deliveries or communications under any Related Document.

5.23         Payment of Liabilities.  Borrower shall, and Borrower shall cause each of its Subsidiaries to, pay, discharge and perform as the same shall become due and payable or required to be performed, all of their respective obligations and liabilities.

5.24         Inspection of Property and Books and Records.  Borrower shall, and Borrower shall cause each of its Subsidiaries to, maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of Borrower and such Subsidiary.  Borrower shall, and Borrower shall cause each of its Subsidiaries to, permit representatives and independent contractors of Lender to visit and inspect any of their respective Properties, to examine their respective organizational, corporate, limited liability company or partnership, as applicable, financial and operating records (so long as such information is not confidential and related to a customer of Borrower or the Bank), and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, at such reasonable times during normal business hours and as often as may be reasonably desired.

5.25         Further Assurances.  Borrower shall, and Borrower shall cause each of its Subsidiaries to, ensure that all written information, exhibits and reports furnished to Lender do

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not and will not, to its knowledge, contain any untrue statement of a material fact and do not and will not, to its knowledge, omit to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to Lender and correct any defect or error that may be discovered therein or in any Financing Document or in the execution, acknowledgment or recordation thereof.  Promptly upon request by Lender, Borrower shall, and Borrower shall cause each of its Subsidiaries to, take such additional actions as Lender may reasonably require from time to time in order (a) to carry out more effectively the purposes of this Agreement or any other Financing Document, and (b) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to Lender the rights granted or now or hereafter intended to be granted to Lender under any Financing Document or under any other document executed in connection therewith.

5.26         Loan Loss Allowance.  Borrower shall cause each Depository Institution Subsidiary to maintain an allowance for possible loan losses which is adequate in all material respects to provide for probable or specific losses, net of recoveries relating to loans previously charged off, on loans outstanding and which complies in all material respects with the Interagency Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Saving Institutions of the Federal Financial Institutions Examination Council.

5.27         Tier 2 Capital.  If the Notes cease to be deemed to be Tier 2 Capital (other than due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of the subordinated debt), Borrower shall:  (a) immediately notify Lender; and (b) immediately upon request of Lender, execute and deliver all such agreements, including replacement notes, as Lender may reasonably request in order to restructure the obligations evidenced by the Notes as a senior obligation of Borrower.

6.             NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any Loan or any other Liability shall remain unpaid or unsatisfied, unless Lender waives compliance in writing, Borrower shall not and Borrower shall not permit any of its Subsidiaries to, directly or indirectly:

6.1           Distributions; Payments on Indebtedness.

(a)           Make, or agree to make, any extraordinary Distribution (meaning, in the case of Distributions on stock having any preference as to distributions over Common Stock, any Distribution in excess of the amounts provided for in the Certificate of Designations with respect to such stock, and, in the case of Common Stock, any Distribution in excess of the per share amount intended by the Board of Directors at the time of declaration to be declared on a periodic basis going forward) to Borrower’s stockholders, except (i) acquisition for value constituting a redemption, repurchase or similar transaction effected with respect to a director’s shares or other equity interests, or rights convertible into or exchangeable for equity interests to the extent the aggregate amount of all such redemptions, repurchases or similar transactions does not exceed $100,000 in any calendar year, and (ii) acquisitions for value constituting a redemption, repurchase or similar transaction effected with respect to shares or other Equity Interests, or

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rights convertible into or exchangeable for equity interests, in each case issued under or pursuant to the Federal Troubled Assets Relief Program but in each case only to the extent made with the net cash proceeds received from the issuance of common stock of Borrower; or

(b)           if Borrower is in default on any payments required to be made under the Notes: (i) declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (ii) make any payments (whether principal, interest, premium or otherwise) on, or repay, repurchase or redeem, any other indebtedness of Borrower that ranks pari passu with or junior to the Indebtedness evidenced by the Notes (including, without limitation, the Junior Subordinated Debt), or set aside any monies or properties for said purposes; or (iii) make any guarantee payments on any obligations ranking pari passu with or junior to the Notes.

6.2           Default Under Other Contracts.  Allow to occur, or to continue unremedied, any act, event or condition which constitutes an event of default, or which, with the passage of time or giving of notice, or both, would constitute an event of default under, any agreement, document or instrument to which Borrower or the Bank is a party or by which Borrower or the Bank may be bound where such event of default could have a material adverse effect on Borrower or the Bank.

6.3           Other Agreements.  Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith.

6.4           Non-Performing Assets.  Allow, or cause the Bank to allow, any of the Bank’s non-performing ninety (90) day past due loans plus non-accrual, as defined in regulatory call reports, to exceed twenty percent (20%) of the Bank’s total capital.

6.5           Subsidiaries.  Form or otherwise acquire, or allow or cause the Bank to form or otherwise acquire, any Subsidiary (other than Bank), whether or not allowable or under applicable banking or corporate laws without Lender’s prior written consent, which will not be unreasonably withheld.

6.6           Affiliate Investments.  Allow or cause the Bank to make any investments directly or indirectly in the Borrower or any Person which is an Affiliate or an associate of Borrower other than the loans allowed to executive officers and directors of the Bank under Regulation O of the FRB.  As used in this paragraph “investments” shall include any investment in cash or other property whether for acquisition of stock or indebtedness, or by loan, letter of credit, advance, or capital contribution.

6.7           Transaction with Third Parties.  Without Lender’s prior written consent, which will not be unreasonably withheld, make any loans or advances to, or purchase or acquire the obligations or stock, or all or a material portion of the assets, of any Person, other than those of the Bank and as contemplated by the Related Transactions.

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6.8           Certificates.  Furnish Lender any certificate or other document that shall contain any untrue statement of material fact or that shall omit to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished.

6.9           Consolidations, Conversions, Mergers, Sale of Assets.  Convert its status as a type of Person (e.g., corporation, limited liability company, partnership) or the jurisdiction in which it is organized, formed or created, merge or consolidate with or into any Person, or dispose of by sale, lease or otherwise property or assets now owned or hereafter acquired, other than in the ordinary course of business, provided, however, that Borrower shall not be prohibited from merging or consolidating with another Person if (a) the surviving entity (i) is a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia and (ii) executes and delivers to Lender its assumption of the due and punctual payment of the principal or and interest on the Notes, and the due and punctual performance and observation of all of the covenants in the Financing Documents to be performed or observed by Borrower and (b) after giving effect to such merger or consolidation, no Event of Default shall have occurred and be continuing.

6.10         Related Documents.  Enter into or consent to any modification or alteration of any Related Document, or otherwise amend, modify, cancel or supplement in any respect any provisions of any Related Document or any document related thereto.

6.11         Compliance with Laws and Documents.  (a) Engage in any unsafe or unsound business, or (b) breach or fail to perform or observe any of the material terms and conditions of this Agreement, the Notes or the other Financing Documents.

7.             REPRESENTATIONS AND WARRANTIES, ETC.

Borrower represents and warrants that as of the date of the execution of this Agreement, and continuing so long as any Liabilities remain outstanding, as follows:

7.1           Existence and Power.  Borrower and each Subsidiary: (a) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable; (b) has the corporate, limited liability company or limited partnership (as applicable) power and authority and all governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business, (ii) execute, deliver, and perform its obligations under, the Financing Documents and the Related Documents to which it is a party, and (iii) consummate the Related Transactions; (c) is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification or license; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clauses (b)(i), (c) or (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.  Borrower is a Bank Holding Company registered under the Bank Holding Company Act of 1956, as amended, and is subject to and in good standing under all applicable rules and regulations of the FRB, and as such Borrower has filed all necessary reports with and received all necessary approvals from the FRB.  The Bank (i) a state banking corporation duly organized, validly existing and in good standing

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under the laws of the State of Illinois; and (ii) is an Insured Depository Institution in good standing with the FDIC.  Neither the Bank nor the Borrower is subject to a cease and desist order, memorandum of understanding, supervising agreement or any similar type of regulatory agreement with the FDIC, the DFPR or the FRB.

7.2           Authorization; No Contravention.  (a) The execution, delivery and performance by Borrower of this Agreement, and by Borrower and each Subsidiary of each other Financing Document and Related Document to which such Person is a party, and the consummation of the Related Transactions, have been duly authorized by all necessary action, and do not: (i) contravene the terms of any of such Person’s or any Depository Institution Subsidiary’s Governing Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject; or (iii) violate any Requirement of Law binding on the Borrower or any Depository Institution Subsidiary.

(b)           Schedule 7.2 sets forth the authorized Equity Interests of Borrower and each Subsidiary after giving effect to the consummation of the Related Transactions.  All issued and outstanding Equity Interests of Borrower and each Subsidiary are duly authorized and validly issued and fully paid, and where applicable, non-assessable, and free and clear of all Liens, and such securities were issued in compliance with all applicable state and federal laws concerning the issuance of securities.  As of the date of this Agreement, all of the issued and outstanding Equity Interests of Borrower are owned by the Persons and in the amounts set forth on Schedule 7.2.  Except as set forth on Schedule 7.2, there are no pre-emptive or other outstanding rights, options, warrants, conversion rights or other similar agreements or understandings for the purchase or acquisition of any shares of Equity Interests of any such Person.

7.3           Governmental Authorization.  No approval, consent, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, Borrower or any Subsidiary of the Financing Documents and Related Documents to which it is a party, except those obtained or made on or prior to the date of this Agreement.  Borrower and each Subsidiary is in compliance with all laws, orders, regulations and ordinances of all Governmental Authorities relating to its business, operations and assets, except for laws, orders, regulations and ordinances the violation of which could not, in the aggregate, have a Material Adverse Effect.

7.4           Binding Effect.  Each Financing Document and Related Document to which Borrower or each Subsidiary is a party constitutes the legal, valid and binding obligations of Borrower and such Subsidiary which is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

7.5           Litigation.  Except as specifically disclosed in Schedule 7.5, there are no actions, suits, proceedings, claims or disputes pending, or to the knowledge of Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental

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Authority, against Borrower, any Subsidiaries or any of their respective Properties which: (a) purport to affect or pertain to this Agreement, any other Financing Document or Related Document, or any of the transactions contemplated hereby or thereby; or (b) if adversely determined, could reasonably be expected to result in equitable relief or monetary judgment(s) or Liens against Borrower or any Subsidiary, individually or in the aggregate, in excess of $200,000.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement, any other Financing Document or any Related Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.

7.6           No Default.  No Default exists or would result from the making of the Loans or the incurrence of any other Liabilities by Borrower or any Subsidiary.  None of Borrower nor any Subsidiary is, or will be after giving effect to, in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect.  Borrower does not know of any dispute regarding any Contractual Obligation of Borrower or any Subsidiary that could have a Material Adverse Effect.

7.7           Margin Regulations.  None of Borrower nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.  Proceeds of the Loans shall not be used for the purpose of purchasing or carrying Margin Stock.

7.8           Title to Properties.  Each of Borrower and the Bank is the sole and absolute owner of, or has the legal right to use and occupy, all Property it claims to own or which is necessary for Borrower or the Bank to conduct its business.  Neither Borrower nor the Bank has signed any financing statements, security agreements or chattel mortgages with respect to any of its Property, has granted or permitted any Liens with respect to any of its Property or has any knowledge of any Liens with respect to any of its Property.

7.9           Taxes.  Borrower and each Subsidiary have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently prosecuted and for which adequate reserves have been provided in accordance with GAAP.  There is no proposed tax assessment against Borrower or any Subsidiary that could have a Material Adverse Effect, if the assessment was made.

7.10         Financial Condition.  Each of (a) the audited consolidated balance sheets of Borrower and its Subsidiaries dated December 31, 2007, December 31, 2008 and December 31, 2009 and the related audited consolidated statements of income or operations, changes in stockholders’ equity and cash flows for the Fiscal Years then ending; and (b) unaudited consolidated balance sheets of Borrower and its Subsidiaries dated September 30, 2010, and the related unaudited statements of income or operations, changes in stockholders’ equity and cash flows for the nine (9) months then ending:  (i) were prepared in accordance with GAAP

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consistently applied throughout the respective periods covered thereby, except as otherwise expressly noted therein, subject to, in the case of the unaudited interim financial statements, normal year-end adjustments and the lack of footnote disclosures; (ii) present fairly the financial condition of Borrower and its Subsidiaries as of the dates thereof and the results of income or operations and cash flows of Borrower and its Subsidiaries for the periods covered thereby; and (iii) have been prepared in accordance with the rules and regulations of the applicable bank regulatory authority.  Since December 31, 2008, there has been no Material Adverse Effect with respect to Borrower or any of its Subsidiaries.  Neither Borrower nor any Subsidiary has any Indebtedness (other than Indebtedness shown on the September 30, 2010 consolidated balance sheet of Borrower and its Subsidiaries referenced in this Section 7.10 and Indebtedness of Bank incurred since such date in the ordinary course of its business).

7.11         Regulatory Reporting.  Borrower and each of its Subsidiaries has filed all reports, notices and other statements, together with any amendments required to be made with respect thereto, if any, that they were each required to file with the FRB, the DFPR, the FDIC and any other Governmental Authority with jurisdiction over Borrower or any of its Subsidiaries, and each of such reports, notices and other statements, including the financial statements, exhibits and schedules thereto, complied in all material respects with the relevant statutes, rules and regulations enforced or promulgated by the regulatory authority with which they were filed.  Each Depository Institution Subsidiary has complied with all laws and regulations relating to the extension of credit.  Borrower has delivered to Lender copies of the Reports of Income and the Reports of Condition filed by Bank for the years ended December 31, 2008 and December 31, 2009, and the nine month period ended September 30, 2010.  These reports are complete and correct, are in accordance with the books of account and records of Bank, have been prepared in accordance with applicable banking regulations, rules and guidelines on a basis consistent with prior periods, and fairly and accurately present the financial condition of Bank and its assets and liabilities and the results of its respective operations as at such date.

7.12         Loan Loss Allowance.  The allowance for possible loan and lease losses shown on the financial statements and reports described in Section 7.10 for each Depositary Institution Subsidiary are adequate in all material respects to provide for estimated losses, net of recoveries relating to loans previously charged off, on loans outstanding, as of the date of such statements, and Borrower has no reason to believe that the loan portfolio of each Depositary Institution Subsidiary at such date will incur losses in excess of such allowance.

7.13         Related Documents.  All representations and warranties of Borrower and each Subsidiary or any other party (other than Lender) to any Related Document (when made or deemed to be made thereunder) contained in any Related Document are true and correct in all material respects (except to the extent such representations and warranties expressly refer to a specific date, in which case they shall be true and correct in all material respects as of such date).

7.14         Regulated Entities.  None of Borrower nor any Subsidiary or Person controlling Borrower is (a) an “investment company” or required to be registered as an “investment company” within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any state public

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utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness.

7.15         Subsidiaries.  Borrower has no Subsidiaries or Equity Interests in any other Person, other than Bank.

7.16         Brokers’ Fees; Transaction Fees.  None of Borrower nor any Subsidiary has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee or other fee in connection with the transactions contemplated hereby.

7.17         Insurance.  Borrower and each Subsidiary and their respective Properties are insured with financially sound and reputable insurance companies which are not Affiliates of Borrower or any Subsidiary, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where Borrower or any Subsidiary operates.  A true and complete listing of such insurance, including issuers, coverages and deductibles, has been provided to Lender.  The deposit accounts of each Depository Institution Subsidiary are insured by the FDIC.

7.18         Full Disclosure.  None of the representations or warranties made by Borrower or any Subsidiary in the Financing Documents as of the date such representations and warranties were made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of Borrower or any Subsidiary in connection with the Financing Documents (including offering and disclosure materials, if any, delivered by or on behalf of Borrower or any Subsidiary to Lender prior to the date of this Agreement) contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading as of the time when made or delivered in light of the circumstances at the time made; provided, that with respect to any projections delivered to Lender, Borrower represents only that such information was prepared in good faith based upon assumptions believed to be fair and reasonable at the time in light of current market conditions and that such projections are not to be viewed as facts, and that the actual results during such period or periods covered by any such projections may differ significantly from projected results.

7.19         Solvency.  None of Borrower nor any Subsidiary: (a) is “insolvent” as that term is defined in Section 101(32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”); (b) has “unreasonably small capital,” as that term is used in Section 548 (a)(2)(B)(ii) of the Bankruptcy Code or Section 5 of the UFCA; (c) is engaged or about to engage in a business or a transaction for which its remaining Property is “unreasonably small” in relation to such business or transaction as that term is used in Section 4 of the UFTA; (d) is unable to pay its debts as they mature or become due, within the meaning of Section 548(a)(2)(B)(iii) of the Bankruptcy Code, Section 4 of the UFTA and Section 6 of the UFCA; or (e) fails to own assets having a value both at “fair valuation” and at “present fair salable value” greater than the amount required to pay such Person’s “debts” as such terms are used in Section 2 of the UFTA and Section 2 of the UFCA.  None of Borrower nor any Subsidiary shall be rendered insolvent (as such term is

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defined above) by the execution and delivery of this Agreement or any of the other Financing Documents or by the transactions contemplated hereunder or thereunder.

7.20         Regulatory Enforcement Actions.  None of Borrower, any of its Subsidiaries or any of their respective officers or directors is now operating under any restrictions, agreements, memoranda, or commitments (other than restrictions generally applicable to banks, bank holding companies or their subsidiaries and affiliates) imposed by any Governmental Authority nor are any such restrictions threatened or agreements, memoranda or commitments being sought by any Governmental Authority.  Neither Borrower nor any Depositary Institution Subsidiary has received any notice or other information indicating that any Depositary Institution Subsidiary is not an “insured depository institution” as defined in 12 U.S.C.  1813.

7.21         ERISA; Absence of Reportable Events.  Borrower and the Bank have complied in all material respects with those provisions of ERISA and the regulations and public interpretations thereunder which are applicable to Borrower and the Bank.  No Reportable Event as defined in ERISA and the rules and regulations thereunder has occurred and is continuing with respect to any employee benefit plan or other plan maintained for employees of Borrower or the Bank and covered by ERISA, which materially and adversely affects the ability of Borrower to perform its obligations hereunder or under the Notes, and the minimum funding standards imposed by ERISA on each such plan have been satisfied.

7.22         Other Loans and Guaranties.  Except for Indebtedness to Lender or as disclosed on Schedule 7.22 attached hereto, neither Borrower nor the Bank is a borrower, guarantor or obligor (other than as a lender) with respect to any loan transaction, Guarantee or other Indebtedness for borrowed money (and excluding deposit accounts of the Bank).  Neither Borrower nor the Bank is in default with respect to any of its existing Indebtedness.

7.23         Multi-Employer Plans.  To the extent applicable, Borrower and the Bank have complied in all material respects with the Multi-Employer Pension Plan Amendments Act of 1980, as the same may from time to time be amended (“MEPP”), and have no liability from pension contributions pursuant to MEPP.

7.24         Intellectual Property.  Each of Borrower and the Bank possesses all necessary licenses, trademarks, trademark rights, trade names, trade name rights and copyrights to conduct its business without conflict with any license, trademark, trade name or copyright of any other Person.  Lender acknowledges that neither Borrower nor the Bank has a federally registered trademark.

7.25         Environmental Matters.  There are no disputes pending (nor, to the best knowledge of Borrower, are there any disputes threatened nor, to the best knowledge of Borrower, is there any basis therefor) affecting Borrower or the Bank, whether or not in or before any court or arbitrator of any kind or involving any governmental or regulatory body, which, if adversely determined would, singly or in the aggregate, have a material adverse effect on the business, Properties, assets, liabilities, financial condition, results of operations or business prospects of Borrower or the Bank, or on the ability of Borrower or the Bank to perform its obligations hereunder or under the Notes or any other Financing Document relating to

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environmental matters, including, without limitation, any notice from any agency, state or federal, that Borrower or the Bank is a potentially responsible party for the clean up of any environmental waste site, that Borrower or the Bank is in violation of any environmental permit or regulation, that Borrower or the Bank has been placed on any registry of solid or hazardous waste disposal sites, or of the expiration, revocation or denial of any environmental permit or other loss of interim status or other current authorization to operate any unit or portion of the facilities of Borrower or the Bank.

7.26         Indebtedness.  As of the date of this Agreement, Borrower has no material Indebtedness of any nature other than disclosed on Schedule 7.22, including, but without limitation, liabilities for taxes and any interest or penalties relating thereto, except to the extent reflected (in a footnote or otherwise) and reserved against in the Financial Statements or as disclosed in or permitted by this Agreement; Borrower does not know and has no reasonable ground to know of any basis for the assertion against it as of the date hereof, of any material Indebtedness of any nature not fully reflected and reserved against in such Financial Statements.

7.27         Survival.  All representations and warranties contained in this Agreement or any of the other Financing Documents shall survive the execution and delivery of this Agreement and the transactions contemplated hereby and the other Financing Documents.

8.             DEFAULT, RIGHTS AND REMEDIES OF LENDER.

8.1           Events of Default.  As used herein, the term “Events of Default” shall mean the occurrence of any one or more of the following events:

(a)           Borrower fails to pay interest on any Note when the same becomes due and payable and such failure continues for a period of 30 days;

(b)           Borrower fails to pay the Principal of any Note when the same becomes due and payable at maturity, upon redemption or otherwise;

(c)           Borrower fails to comply with any of its other agreements in the Notes or this Agreement and such failure continues for a period of 30 days;

(d)           any proceedings involving Borrower or the Bank are commenced by or against Borrower or the Bank under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute of the federal government or any state government and, if such proceedings are instituted against Borrower or the Bank, Borrower or the Bank (as the case may be) by any action or failure to act indicates its approval of, consent to or acquiescence therein, or an order shall have been entered approving the petition in such proceedings and within sixty (60) days after the entry thereof such order shall not have been vacated or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect;

(e)           Borrower applies for, consents to or acquiesces in the appointment of a trustee, receiver, conservator or liquidator for itself under Chapter 7 or Chapter 11 of the Bankruptcy Code (the “Code Provisions”), or in the absence of such application, consent or

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acquiescence, a trustee, conservator, receiver or liquidator is appointed for Borrower under the Code Provisions, and is not discharged within thirty (30) days, or any bankruptcy, reorganization, debt arrangement or other proceeding or any dissolution, liquidation, or conservatorship proceeding is instituted by or against Borrower under the Code Provisions, and if instituted against Borrower, is consented or acquiesced in by it or remains for thirty (30) days undismissed, or if Borrower is enjoined, restrained or in any way prevented from conducting all or any material part of its business under the Code Provisions; or

(f)            the Bank applies for, consents to or acquiesces in the appointment of a receiver for itself, or in the absence of such application, consent or acquiescence, a receiver is appointed for the Bank, and is not discharged within thirty (30) days.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default, whether it is voluntary or involuntary, or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

8.2           Acceleration.

(a)           If an Event of Default under Section 8.1(e) or 8.1(f) occurs, the principal of and accrued and unpaid interest on the Notes and all other amounts due Lender hereunder shall become immediately due and payable, without presentment, demand, protest or notice of any kind.

(b)           Notwithstanding anything to the contrary herein, and for the avoidance of doubt, the right to accelerate payment set forth in Section 8.2(a) may be exercised only in circumstances contemplated by Section 8.1(e) or 8.1(f).  If an Event of Default under any of Section 8.1(a), (b), (c) or (d) occurs and is continuing then, except as set forth in Section 8.2(c), Lender shall not have the right to declare any amounts outstanding on any Note immediately due and payable solely as a result of such Event or Default and Lender’s rights will be limited to those set forth in Section 8.3.

(c)           If Borrower receives a written notification from the FRB that the Notes no longer constitute Tier 2 Capital (other than due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of the subordinated debt), then if an Event of Default exists or thereafter occurs, Lender may declare the Notes and any other amounts due Lender hereunder immediately due and payable, whereupon the Notes and such other amounts payable hereunder shall immediately become due and payable, without presentment, demand, protest or notice of any kind.

8.3           Other Remedies.

(a)           If an Event of Default occurs and is continuing, Lender may pursue any available remedy to collect the payment of principal or interest on the Notes to which such Event of Default pertains or to enforce the performance of any provision of such Notes or this Agreement to which such Event of Default pertains.

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(b)           A delay or omission by Lender in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. Upon the occurrence of an Event of Default, notwithstanding any continuation or curing of such Event of Default, Borrower shall not be released from any of its covenants hereunder unless and until the Loans are repaid in full. All remedies are cumulative to the extent permitted by law.

8.4           Waiver of Demand.  Demand, presentment, protest and notice of nonpayment are hereby waived by Borrower.  Borrower also waives the benefit of all valuation, appraisal and exemption laws.

9.             MISCELLANEOUS.

9.1           Board Observation Rights.  Borrower covenants and agrees that, so long as any Loan or any other Liability shall remain unpaid or unsatisfied and so long as Lender has any rights under any Warrant, and subject to receipt of any required FRB approvals, Borrower shall, and shall cause Bank to, give Lender written notice of each meeting of such Person’s board of directors or other governing body (which shall be held at least quarterly) and each committee thereof at the same time and in the same manner as notice is given to the directors or other members thereof (which notice Borrower or Bank, as applicable, shall promptly confirm in writing to Lender), and Borrower shall, and shall cause Bank to, permit one (1) representative of Lender to attend as an observer all meetings of such Person’s board of directors (or other governing body) and all committees thereof.  Such representative shall be entitled to receive all written materials and other information (including copies of meeting minutes) given to the directors (or other governing body) or other members thereof in connection with such meetings at the same time such materials and information are given to the directors or other members thereof.  If Borrower or Bank proposes to take any action by written consent in lieu of a meeting of such Person’s board of directors (or other governing body) or of any committee thereof, Borrower shall, and shall cause Bank to, give written notice thereof to Lender prior to the effective date of such consent describing in reasonable detail the nature and substance of such action.  Notwithstanding the foregoing, the representative of Lender may be excluded from access to any meeting or material or portion thereof if the applicable board of directors of Borrower or Bank believes in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege, to comply with applicable law or regulation regarding the confidentiality of the contents of reports of examination prepared by the FRB, the FDIC or the DFPR, to maintain the confidentiality of information related to a customer of Borrower or Bank, or for other similar reasons.

9.2           Waiver.  Lender’s failure, at any time or times hereafter, to require strict performance by Borrower of any provision of this Agreement shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith.  Any suspension or waiver by Lender of a Default or Event of Default under this Agreement or any of the other Financing Documents shall not suspend, waive or affect any other Default or Event of Default under this Agreement or any of the other Financing Documents, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character.  None of the undertakings, agreements, warranties, covenants and representations of Borrower contained

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in this Agreement or any of the other Financing Documents and no Default or Event of Default under this Agreement or any of the other Financing Documents shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing signed by Lender, and directed to Borrower specifying such suspension or waiver.  All Events of Default shall continue until the same are waived by Lender in accordance with the preceding sentence.

9.3           Costs and Attorneys’ Fees.  Borrower shall reimburse Lender on demand for all reasonable expenses and fees paid or incurred in connection with the analysis, documentation, negotiation and closing of this Agreement, the other Financing Documents and the Loans, including the reasonable fees and expenses of Lender’s attorneys and paralegals and consultants (whether such attorneys and paralegals are employees of Lender or are separately engaged by Lender), whether such expenses and fees are incurred prior to or after the date hereof; all costs and expenses incurred by Lender in connection therewith or with respect to the negotiation, documentation, enforcement and collection shall be payable on demand, together with interest following demand for payment thereof at the from time to time rate applicable to the Loans prescribed in Section 2.3 hereof, and shall be part of the Liabilities.  If at any time or times hereafter Lender employs counsel in connection with any matters contemplated by or arising out of this Agreement or any of the other Financing Documents, whether (a) to prepare, negotiate or execute (i) any amendment to or modification or extension of this Agreement, any other Financing Documents or any instrument, document or agreement executed by any Person in connection with the transactions contemplated by this Agreement, (ii) any new or supplemental Financing Documents, or any instrument, document or agreement to be executed by any Person in connection with the transactions contemplated by this Agreement, or (iii) any instrument, document or agreement in connection with any sale or attempted sale of any interest herein, (b) to commence, defend, or intervene in any litigation or to file a petition, complaint, answer, motion or other pleadings, (c) to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise), (d) to consult with officers of Lender to advise Lender, or (e) to enforce any rights of Lender, including Lender’s rights to collect any of the Liabilities, then in any of such events, all of the reasonable attorneys’ fees arising from such services, and any expenses, costs and charges relating thereto, including all reasonable fees of all paralegals and other staff employed by such attorneys, together with interest following demand for payment thereof at the from time to time rate applicable to the Loans prescribed in Section 2.3 hereof, shall be part of the Liabilities, payable by Borrower on demand.

9.4           Expenditures by Lender.  In the event Borrower shall fail to pay taxes, insurance, assessments, costs or expenses which Borrower is, under any of the terms hereof, required to pay, except as permitted herein, Lender may, in its sole discretion, make expenditures for any or all of such purposes, and the amount so expended, together with interest thereon after demand for the payment thereof at the rate applicable to the Loans prescribed in Section 2.3 hereof, shall be part of the Liabilities, payable by Borrower on demand.

9.5           Reliance by Lender.  All covenants, agreements, representations and warranties made herein by Borrower shall, notwithstanding any investigation by Lender, be deemed to be material to and to have been relied upon by Lender.

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9.6           Parties.  Whenever in this Agreement there is reference made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and assigns of Borrower and the successors and assigns of Lender, and the provisions of this Agreement shall be binding upon and shall inure to the benefit of said successors and assigns.  Notwithstanding anything herein to the contrary, Borrower shall not assign or otherwise transfer its rights or obligations under this Agreement without the prior written consent of Lender.  Lender shall have the right to sell participations in the Liabilities at any time and from time to time to one or more other Persons.  In addition, Lender shall have the right at any time to sell, assign, transfer or negotiate all or any part of its rights and obligations under the Financing Documents.  In connection with any such proposed participations or assignments, Lender may disclose information required to be kept confidential hereunder provided such disclosure shall not be made unless the party to whom it is disclosed shall have agreed to keep such information confidential as set forth herein.

9.7           Choice of Law.  This Agreement shall be deemed to be executed and has been delivered and accepted in Chicago, Illinois by signing and delivering it there.  This Agreement and the other Financing Agreements shall be governed and controlled by, and construed in accordance with the laws of the State of Illinois as to interpretation, enforcement, validity, construction, effect, choice of law, and in all other respects including, but not limited to, the legality of the interest rate and other charges.  Any dispute between the parties hereto arising out of, connected with, related to, or incidental to the relationship established between them in connection with this Agreement, and whether arising in contract, tort, equity, or otherwise, shall be resolved in accordance with the internal laws and not the conflicts of law provisions of the State of Illinois.

9.8           Consent to Jurisdiction.

(a)           Exclusive Jurisdiction.  Except as provided in Section 9.8(b), Lender and Borrower agree that all disputes between them arising out of, connected with, related to or incidental to the relationship established between them in connection with this Agreement, and whether arising in contract, tort, equity or otherwise, shall be resolved only by state or federal courts located in Cook County, Illinois, and Lender and Borrower waive any objection based on venue or forum non conveniens with respect to any action instituted therein, but Lender and Borrower acknowledge that any appeals from those courts may have to be heard by a court located outside of Cook County, Illinois.  Borrower waives in all disputes any objection that it may have to the location of the court considering the dispute.

(b)           Other Jurisdictions.  Borrower agrees that Lender shall have the right to proceed against Borrower or its property in a court in any location to enable lender to realize on any security for the Liabilities, or to enforce a judgment or other court order entered in favor of Lender.  Borrower agrees that it will not assert any permissive counterclaim in any proceeding brought by Lender to realize on property or any security for the Liabilities, or to enforce a judgment or other court order in favor of Lender.  Borrower waives any objection that it may have to the location of the court in which Lender has commenced a proceeding described in this Section 9.8(b).

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9.9           Service of Process.  Borrower irrevocably consents to the service of process out of the courts referred to in Section 9.8 in any such action or proceeding by mailing copies of such service by certified mail, postage prepaid to borrower at its address set forth in Section 9.17.  Nothing in this agreement shall affect the right of Lender to serve process in any other manner permitted by law.

9.10         Waiver of Jury Trial.  Borrower and Lender waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise, between Lender and Borrower arising out of, connected with, related to or incidental to the relationship established between them in connection with this Agreement or any other instrument, document or agreement executed or delivered in connection therewith or the transactions related thereto.  Borrower and Lender hereby agree and consent that any such claim, demand, action or cause of action shall be decided by court trial without a jury and that any party may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.

9.11         Confidentiality.  Lender shall exercise reasonable efforts to keep such information, and all information acquired as a result of any inspection conducted in accordance with this Agreement, confidential; provided that Lender may communicate such information and any other information received pursuant to this Agreement and the other Financing Documents (i) to any other Person in accordance with the customary practices of commercial lenders relating to routine trade inquiries, (ii) to any regulatory authority having jurisdiction over Lender, (iii) to any other Person in connection with Lender’s sale of any participations in the Liabilities or assignment of any rights and obligations of Lender under this Agreement and the other Financing Documents, (iv) to any other Person in connection with the exercise of Lender’s or any Indemnitee’s rights hereunder or under any of the other Financing Documents, (v) to any Person in any litigation in which Lender is a party, or (vi) to any Person if Lender believes in its discretion that disclosure is necessary or appropriate to comply with any applicable law, rule or regulation or in response to a subpoena, order or other legal process or informal investigative demand, whether issued by a court, judicial or administrative or legislative body or committee or other Governmental Authority.  Notwithstanding the foregoing, information shall not be deemed to be confidential to the extent such information (x) is available in the public domain, (y) becomes available in the public domain other than as a result of unauthorized disclosure by Lender, or (z) is received from a Person not known by Lender to be in breach of an obligation of confidentiality to Borrower.  Borrower authorizes Lender to discuss the financial condition of Borrower and each Subsidiary with Borrower’s independent certified public accountants and agrees that such discussion or communication shall be without liability to either Lender or such accountants.

9.12         Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

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9.13         Application of Payments.  Notwithstanding any contrary provision contained in this Agreement or in any of the other Financing Documents, Borrower hereby irrevocably waives the right to direct the application of any and all payments at any time or times hereafter received by Lender from Borrower, and Borrower hereby irrevocably agrees that Lender shall have the continuing exclusive right to apply and reapply any and all payments received at any time or times hereafter against the Liabilities in such manner as Lender may deem advisable notwithstanding any entry by Lender upon any of its books and records.

9.14         Marshaling; Payments Set Aside.  Lender shall be under no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the Liabilities.  To the extent that Borrower makes a payment or payments to Lender, and such payment or payments, or the proceeds of such enforcement or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement had not occurred.

9.15         Section Titles.  Article, section and subsection titles contained in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties.

9.16         Continuing Effect.  This Agreement, all of the other Financing Documents and all of Lender’s rights and remedies thereunder shall continue in full force and effect so long as any Liabilities shall be owed to Lender.

9.17         Notices.  Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

If to Borrower, at:
Midland States Bancorp, Inc.
133 West Jefferson Avenue
Effingham, Illinois 62401
Attention: Douglas J. Tucker
Sr. Vice President and Corporate Counsel
Electronic Mail:	dtucker@midlandstatesbank.com
Telecopy: (217) 342-9462
Confirmation: (217) 342-7566

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With a copy to:
Barack Ferrazzano Kirschbaum & Nagelberg, LLP
200 West Madison Street, Suite 3900
Chicago, Illinois 60606
Attention: Dennis R. Wendte
Electronic Mail:	Dennis.Wendte@bfkn.com
Telecopy: (312) 984-3150
Confirmation: (312) 984-3188
If to Lender, at:
Richard E. Workman 2001 Trust
9800 Walzer Court
Windermere, Florida 34786
Attention: Dr.  Richard Workman, Trustee
Electronic Mail:	rworkman@heartlanddentalcare.com
Telecopy: 217-540-5629
Confirmation: 217-540-5100
With a copy to:
Travis Franklin
1200 Network Centre Drive
Suite 2
Effingham, Illinois 62401
Electronic Mail:	tfranklin@heartlanddentalcare.com
Telecopy: (217) 540-5629
Confirmation: (217) 540-5155
Schiff Hardin, LLP
233 S. Wacker Drive, Suite 6600
Chicago, Illinois 60606
Attention: Robert R. Pluth
Electronic Mail:	rpluth@schiffhardin.com
Telecopy: (312) 258-5600
Confirmation: (312) 258-5535

or to such other address or number as each party designates to the other in the manner herein prescribed.

9.18         Equitable Relief.  Borrower recognizes that, in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy at law may prove to be inadequate relief to Lender; therefore, Borrower agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and the granting of any such relief shall not preclude Lender from pursuing any other relief or remedies for such breach.

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9.19         Indemnification.  Borrower shall defend, protect, indemnify and hold harmless Lender and each of its Affiliates, officers, directors, employees, attorneys, consultants and agents (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for and consultants of such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect, or consequential and whether based on any federal or state laws or other statutory regulations, including securities, environmental and commercial laws and regulations, under common law or at equitable cause or on contract or otherwise) in any manner relating to or arising out of the Liabilities, this Agreement or any of the other Financing Documents, or any act, event or transaction related or attendant thereto, the agreements of Lender contained herein, the making of the Loans, the incurrence of any Liabilities or the management of the Loans (including any liability under federal, state or local environmental laws or regulations) or the use or intended use of the proceeds of the Loans (collectively, the “Indemnified Matters”); provided, however, that Borrower shall have no obligation to any Indemnitee hereunder with respect to Indemnified Matters found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnitee’s willful misconduct or gross negligence.  To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 9.19 may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.

9.20         Amendment and Restatement, Etc.  The Original Agreement is amended and restated in its entirety in the form hereof as of the Amendment Effective Date; provided, however, that any representations and warranties made by Borrower to Lender in the Original Agreement shall survive the execution and delivery hereof and any existing “Default” or “Event of Default” (as such terms are defined in the Original Agreement) shall be a Default and an Event of Default, respectively, hereunder to the extent not waived under the Amendment Agreement (for the avoidance of doubt, however, Lender shall have rights and remedies with respect to any such Default or Event of Default under Section 8 of this Agreement rather than under Section 8 of the Original Agreement).  Thereafter, the principal amounts outstanding under the Original Agreement and the “Notes” (as such term is defined in the Original Agreement) (the “Original Notes”) shall be deemed principal amounts outstanding under this Agreement and the Notes and shall constitute for all purposes indebtedness of Borrower and Liabilities.  Lender shall have no obligation to make or extend any further loans or credit to Borrower.

9.21         No Novation.  The terms and conditions of the Original Agreement and the Original Notes are amended as set forth in, and restated in their entirety and superseded by, this Agreement and the Notes.  It is expressly understood and acknowledged that nothing in this Agreement shall be deemed to cause or otherwise give rise to a novation of the Original Notes.  Notwithstanding any provision of this Agreement or any other Financing Document, the execution and delivery of the Notes in favor of Lender shall be in substitution for, but not in payment of, the Original Notes.  All “Liabilities” under the Original Agreement and this Agreement shall not be deemed to evidence or result in a novation or repayment and re-

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borrowing of such “Liabilities”.  From and after the Amendment Effective Date, this Agreement shall govern the terms of the “Liabilities” under the Original Agreement.  To the extent not replaced by the Financing Documents dated as of the Amendment Effective Date, any “Loan Documents” (as defined in the Original Agreement) executed in connection with the Original Agreement shall continue to be effective, and all references in those prior Loan Documents to the Original Agreement shall be deemed to refer to this Agreement without further amendment thereof.  All references made to the Original Agreement in the Loan Documents or in any other instrument or document executed and/or delivered pursuant thereto shall, without anything further, be deemed to refer to this Agreement and the Original Agreement shall be deemed amended and restated in its entirety hereby.  This Agreement and the Financing Documents executed and delivered in connection herewith are entered into and delivered to Lender in replacement of and substitution for, and not in payment of or satisfaction for, the Original Agreement or any of the Loan Documents.  All Financing Documents, including the other instruments, documents and agreements executed and delivered in connection with the Original Agreement, are hereby reaffirmed and shall continue in full force and effect.

9.22         Counterparts.  This Agreement may be executed and accepted in any number of counterparts, each of which shall be an original with the same effect as if the signatures were on the same instrument.  The delivery of a copy of an executed counterpart of the signature page to this Agreement by telecopier or other electronic means (including by email) shall be effective as delivery of a manually executed counterpart of this Agreement.

9.23         Original Issue Discount.  Borrower and Lender acknowledge and agree that either no, or a de minimis amount of, original issue discount (“OID”) as determined pursuant under the Internal Revenue Code of 1986, as amended (the “Code”), including without limitation, Code Sections 1271 through 1274, and the applicable Treasury Regulations promulgated thereunder, was, is or will be created for federal, state or local income tax purposes as a result of the execution of the Financing Documents or, as applicable, the predecessor documents thereto.  Consequently, the only interest income to be reported on behalf of the Lender for income tax purposes shall be the amount of interest actually paid to the Lender pursuant to Section 2.3 hereof in respect of the Loans.

10.           SUBORDINATION.

So long as the Notes are Tier 2 Capital (or if the Notes are not deemed to be Tier 2 Capital solely due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of the subordinated debt), the rights of Lender to the principal sum of the Loans or any part thereof and to any accrued interest thereon shall remain subject and subordinate to the rights of holders of Senior Debt of Borrower (which shall expressly exclude the Junior Subordinated Debt and all indebtedness incurred in connection with, or relating to, any preferred securities caused to be issued by, or reflected in the consolidated financial statements of, Borrower) and, upon dissolution or liquidation of Borrower, no payment of principal, interest or premium (including post-default interest) shall be due and payable under the terms of this Agreement or any Note until all Senior Debt of Borrower (which shall expressly exclude the Junior Subordinated Debt and all indebtedness incurred in connection

37

with, or relating to, any preferred securities caused to be issued by, or reflected in the consolidated financial statements of, Borrower) shall have been paid in full.  Notwithstanding anything in this Agreement or any other Financing Document to the contrary, any holder of any Note may at any time and from time to time exchange any Note or any part thereof pursuant to any Exchange Agreement or Warrant.

[Signatures appear on next page]

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IN WITNESS WHEREOF, this Amended and Restated Credit Agreement has been duly executed as of the day and year first above written.

MIDLAND STATES BANCORP, INC.
By:	/s/ Jeff Ludwig
Name: Jeff Ludwig
Title: Executive Vice President and Chief Financial Officer
RICHARD E.  WORKMAN 2001 TRUST
By:	/s/ Richard E. Workman
Name: Richard E.  Workman
Title: Trustee

EXHIBIT 2.1(a)

THIS OBLIGATION IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY.  THIS OBLIGATION IS SUBORDINATED TO THE RIGHTS OF HOLDERS OF SENIOR DEBT (AS DEFINED IN THE CREDIT AGREEMENT) OF BORROWER TO THE EXTENT AND IN THE MANNER SET FORTH IN THE CREDIT AGREEMENT.

2009 TRANCHE A TERM NOTE

$6,300,000	Chicago, Illinois
	December 31, 2010

FOR VALUE RECEIVED, the undersigned, MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay to the order of RICHARD E.  WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”) at Richard E. Workman 2001 Trust, 9800 Walzer Court, Windermere, Florida 34786, or at such other address as Lender may from time to time direct Borrower, on April 1, 2020, in accordance with the provisions of the Amended and Restated Credit Agreement dated as of December 31, 2010 between Borrower and Lender, as the same may be amended, modified or supplemented from time to time (the “Credit Agreement”), in lawful money of the United States of America and in immediately available funds, the principal sum of $6,300,000.  This 2009 Tranche A Term Note (this “Note”) is the Tranche A 2009 Term Note referred to in, and was executed and delivered pursuant to, the Credit Agreement and the Amendment Agreement, to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby was made and is to be repaid.  All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Credit Agreement shall be used in this Note as defined in the Credit Agreement.

Borrower promises to make principal payments as specified in the Credit Agreement, and to pay interest on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement.  Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.

The principal amount hereof may not be prepaid at any time in whole or in part, except as expressly provided in the Credit Agreement.

The indebtedness of Borrower evidenced by this Note, including the principal, interest and premium, if any, is not secured by any assets or commitments of Borrower and, so long as this Note is Tier 2 Capital (or if this Note is not deemed to be Tier 2 Capital solely due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of

the subordinated debt), the rights of Lender to the principal sum of this Note or any part thereof and to any accrued interest thereon shall remain subject and subordinate to the rights of holders of Senior Debt of Borrower (which shall expressly exclude the Junior Subordinated Debt and all indebtedness incurred in connection with, or relating to, any preferred securities caused to be issued by, or reflected in the consolidated financial statements of, Borrower) to the extent and in the manner set forth in the Credit Agreement.

If any payment hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon during such extension at the applicable rate specified in the Credit Agreement.  In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall promptly refund such excess interest to Borrower.

Borrower, and all endorsers and other Persons obligated hereon, hereby waive presentment, demand, protest, notice of demand, notice of protest and notice of nonpayment and agree to pay all costs of collection, including reasonable attorneys’ fees and expenses.

This Note may only be declared, and thereupon become, immediately due and payable upon the occurrence of certain Events of Default as set forth in the Credit Agreement.

If any holder of this Note is a depository institution, such holder expressly waives any right of offset it may have against Borrower.

This Note has been delivered at and shall be deemed to have been made at Chicago, Illinois and shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the internal laws (as opposed to conflicts of law provisions) and decisions of the State of Illinois.  Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

The unpaid balance of the indebtedness hitherto evidenced by that certain Term Note dated March 31, 2010, made by Borrower to the order of Lender in the principal amount of $11,300,000 (the “Existing Note”) remains outstanding as of the date hereof.  To the extent that the principal balance of this Note includes all or part of the indebtedness hitherto evidenced by the Existing Note, this Note (i) merely re-evidences the indebtedness hitherto evidenced by the Existing Note, (ii) is given in substitution for, and not as payment of, the Existing Note and (iii) is in no way intended to constitute a novation of the Existing Note or any prior promissory note.

[Signature appears on next page]

Whenever in this Note reference is made to Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and permitted assigns.  The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns.  Borrower’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.

MIDLAND STATES BANCORP, INC.
By:	/s/ Jeff Ludwig
Name: Jeff Ludwig
Title: Executive Vice President and Chief Financial Officer

EXHIBIT 2.1(b)

THIS OBLIGATION IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY.  THIS OBLIGATION IS SUBORDINATED TO THE RIGHTS OF HOLDERS OF SENIOR DEBT (AS DEFINED IN THE CREDIT AGREEMENT) OF BORROWER TO THE EXTENT AND IN THE MANNER SET FORTH IN THE CREDIT AGREEMENT.

2009 TRANCHE B TERM NOTE

$5,000,000	Chicago, Illinois
	December 31, 2010

FOR VALUE RECEIVED, the undersigned, MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay to the order of RICHARD E.  WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”) at Richard E. Workman 2001 Trust, 9800 Walzer Court, Windermere, Florida 34786, or at such other address as Lender may from time to time direct Borrower, on April 1, 2020, in accordance with the provisions of the Amended and Restated Credit Agreement dated as of December 31, 2010 between Borrower and Lender, as the same may be amended, modified or supplemented from time to time (the “Credit Agreement”), in lawful money of the United States of America and in immediately available funds, the principal sum of $5,000,000.  This 2009 Tranche B Term Note (this “Note”) is the Tranche B 2009 Term Note referred to in, and was executed and delivered pursuant to, the Credit Agreement and the Amendment Agreement, to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby was made and is to be repaid.  All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Credit Agreement shall be used in this Note as defined in the Credit Agreement.

Borrower promises to make principal payments as specified in the Credit Agreement, and to pay interest on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement.  Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.

The principal amount hereof may not be prepaid at any time in whole or in part, except as expressly provided in the Credit Agreement.

The indebtedness of Borrower evidenced by this Note, including the principal, interest and premium, if any, is not secured by any assets or commitments of Borrower and, so long as this Note is Tier 2 Capital (or if this Note is not deemed to be Tier 2 Capital solely due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of

the subordinated debt), the rights of Lender to the principal sum of this Note or any part thereof and to any accrued interest thereon shall remain subject and subordinate to the rights of holders of Senior Debt of Borrower (which shall expressly exclude the Junior Subordinated Debt and all indebtedness incurred in connection with, or relating to, any preferred securities caused to be issued by, or reflected in the consolidated financial statements of, Borrower) to the extent and in the manner set forth in the Credit Agreement.

If any payment hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon during such extension at the applicable rate specified in the Credit Agreement.  In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall promptly refund such excess interest to Borrower.

Borrower, and all endorsers and other Persons obligated hereon, hereby waive presentment, demand, protest, notice of demand, notice of protest and notice of nonpayment and agree to pay all costs of collection, including reasonable attorneys’ fees and expenses.

This Note may only be declared, and thereupon become, immediately due and payable upon the occurrence of certain Events of Default as set forth in the Credit Agreement.

If any holder of this Note is a depository institution, such holder expressly waives any right of offset it may have against Borrower.

This Note has been delivered at and shall be deemed to have been made at Chicago, Illinois and shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the internal laws (as opposed to conflicts of law provisions) and decisions of the State of Illinois.  Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

The unpaid balance of the indebtedness hitherto evidenced by that certain Term Note dated March 31, 2010, made by Borrower to the order of Lender in the principal amount of $11,300,000 (the “Existing Note”) remains outstanding as of the date hereof.  To the extent that the principal balance of this Note includes all or part of the indebtedness hitherto evidenced by the Existing Note, this Note (i) merely re-evidences the indebtedness hitherto evidenced by the Existing Note, (ii) is given in substitution for, and not as payment of, the Existing Note and (iii) is in no way intended to constitute a novation of the Existing Note or any prior promissory note.

[Signature appears on next page]

Whenever in this Note reference is made to Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and permitted assigns.  The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns.  Borrower’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.

MIDLAND STATES BANCORP, INC.
By:	/s/ Jeff Ludwig
Name: Jeff Ludwig
Title: Executive Vice President and Chief Financial Officer

EXHIBIT 2.1(c)

THIS OBLIGATION IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR ANY OTHER FEDERAL AGENCY.  THIS OBLIGATION IS SUBORDINATED TO THE RIGHTS OF HOLDERS OF SENIOR DEBT (AS DEFINED IN THE CREDIT AGREEMENT) OF BORROWER TO THE EXTENT AND IN THE MANNER SET FORTH IN THE CREDIT AGREEMENT.

AMENDED 2010 TERM NOTE

$5,000,000	Chicago, Illinois
	December 31, 2010

FOR VALUE RECEIVED, the undersigned, MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay to the order of RICHARD E.  WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”) at Richard E. Workman 2001 Trust, 9800 Walzer Court, Windermere, Florida 34786, or at such other address as Lender may from time to time direct Borrower, on April 1, 2020, in accordance with the provisions of the Amended and Restated Credit Agreement dated as of December 31, 2010 between Borrower and Lender, as the same may be amended, modified or supplemented from time to time (the “Credit Agreement”), in lawful money of the United States of America and in immediately available funds, the principal sum of $5,000,000.  This Amended 2010 Term Note (this “Note”) is the 2010 Note referred to in, and was executed and delivered pursuant to, the Credit Agreement and the Amendment Agreement, to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby was made and is to be repaid.  All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Credit Agreement shall be used in this Note as defined in the Credit Agreement.

Borrower promises to make principal payments as specified in the Credit Agreement, and to pay interest on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement.  Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.

The principal amount hereof may not be prepaid at any time in whole or in part, except as expressly provided in the Credit Agreement.

The indebtedness of Borrower evidenced by this Note, including the principal, interest and premium, if any, is not secured by any assets or commitments of Borrower and, so long as this Note is Tier 2 Capital (or if this Note is not deemed to be Tier 2 Capital solely due to the limitation imposed by the second sentence of 12 C.F.R. §250.166(e), which limits the capital treatment of subordinated debt during the five years immediately preceding the maturity date of the subordinated debt), the rights of Lender to the principal sum of this Note or any part thereof

and to any accrued interest thereon shall remain subject and subordinate to the rights of holders of Senior Debt of Borrower (which shall expressly exclude the Junior Subordinated Debt and all indebtedness incurred in connection with, or relating to, any preferred securities caused to be issued by, or reflected in the consolidated financial statements of, Borrower) to the extent and in the manner set forth in the Credit Agreement.

If any payment hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon during such extension at the applicable rate specified in the Credit Agreement.  In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall promptly refund such excess interest to Borrower.

Borrower, and all endorsers and other Persons obligated hereon, hereby waive presentment, demand, protest, notice of demand, notice of protest and notice of nonpayment and agree to pay all costs of collection, including reasonable attorneys’ fees and expenses.

This Note may only be declared, and thereupon become, immediately due and payable upon the occurrence of certain Events of Default as set forth in the Credit Agreement.

If any holder of this Note is a depository institution, such holder expressly waives any right of offset it may have against Borrower.

This Note has been delivered at and shall be deemed to have been made at Chicago, Illinois and shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the internal laws (as opposed to conflicts of law provisions) and decisions of the State of Illinois.  Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

The unpaid balance of the indebtedness hitherto evidenced by that certain Term Note dated March 31, 2010, made by Borrower to the order of Lender in the principal amount of $5,000,000 (the “Existing Note”) remains outstanding as of the date hereof.  To the extent that the principal balance of this Note includes all or part of the indebtedness hitherto evidenced by the Existing Note, this Note (i) merely re-evidences the indebtedness hitherto evidenced by the Existing Note, (ii) is given in substitution for, and not as payment of, the Existing Note and (iii) is in no way intended to constitute a novation of the Existing Note or any prior promissory note.

[Signature appears on next page]

Whenever in this Note reference is made to Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and permitted assigns.  The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns.  Borrower’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.

MIDLAND STATES BANCORP, INC.
By:	/s/ Jeff Ludwig
Name: Jeff Ludwig
Title: Executive Vice President and Chief Financial Officer

EXHIBIT 5.2(f)

Post Closing Delivery Requirements

1.On or before January 3, 2011, a Secretary’s Certificate signed by the Secretary and one other officer of Successor Borrower (as defined below) certifying, as of January 1, 2011, true and complete copies of each of the following:

(a)Agreement and Plan of Merger between Midland States Bancorp, Inc., a Delaware corporation (“Original Borrower”), and New Midland States, Inc., an Illinois corporation (to be renamed Midland States Bancorp, Inc.) (“Successor Borrower”)

(b)Articles of Merger of Original Borrower with and into Successor Borrower certified by the Secretary of State of Illinois

(c)Certificate of Merger of Original Borrower with and into Successor Borrower certified by the Secretary of State of Delaware

(d)Resolutions duly adopted at a meeting and/or executed unanimous written consent of the board of directors and shareholders of Original Borrower authorizing the foregoing Agreement of Plan of Merger, the Articles of Merger and the Certificate of Merger

(e)Resolutions duly adopted at a meeting and/or executed unanimous written consent of the board of directors and shareholder of Successor Borrower authorizing the foregoing Agreement of Plan of Merger, the Articles of Merger and the Certificate of Merger

2.On or before January 3, 2011, an assumption agreement between Successor Borrower and Lender in the form attached hereto as Annex I

3.On or before January 3, 2011, a Secretary’s Certificate signed by the Secretary and one other officer of Successor Borrower certifying, as of January 1, 2011, (a) as to the name, titles and true signatures of the officers of Successor Borrower authorized to sign the Assumption Agreement dated as of January 1, 2011 between Successor Borrower and Lender (the “Assumption Agreement”), (b) that attached thereto is a true, accurate and complete copy of the articles of incorporation of Successor Borrower, certified by the Secretary of State of the State of Illinois as of a recent date, (c) that attached thereto is a true, accurate and complete copy of the by-laws of Successor Borrower which were duly adopted and are in effect as of January 1, 2011 and have been in effect immediately prior to and at all times since the adoption of the resolutions referred to in paragraph 4 below; and (d) that no dissolution or liquidation proceedings as to Successor Borrower have been commenced or are contemplated.

4.On or before January 21, 2011, a Secretary’s Certificate signed by the Secretary and one other officer of Successor Borrower certifying (a) that attached thereto is a true, accurate and complete copy of the resolutions of the board of directors of Successor Borrower, duly adopted at a meeting or by unanimous written consent of such board of directors, authorizing and ratifying the execution, delivery and performance of the Assumption

Agreement, this Agreement and the other Financing Documents and that such resolutions have not been amended, modified, revoked or rescinded, are in full force and effect and are the only resolutions of the shareholders Successor Borrower or of such board of directors or any committee thereof relating to the subject matter thereof and (b) that the Assumption Agreement, this Agreement and the other Financing Documents are in the form approved and ratified by its board of directors in the resolutions referred to in clause (a)

4.On or before January 4, 2011, the following certificates of good standing: (a) with respect to Original Borrower from the Secretary of State of the State of Delaware, dated not more than 10 days prior to December 31, 2010, and (b) with respect to Successor Borrower from the Secretary of State of the State of Illinois, dated January 3, 2011

5.On or before January 21, 2011, a registration rights agreement between Successor Borrower and Lender in the form attached hereto as Annex II

6.On or before January 7, 2011, original signature pages to all Financing Documents, opinions and certificates delivered to Lender via facsimile or other electronic transmission on or before the date hereof

7.Promptly as reasonably possible, and in any event on or before January 21, 2011, an opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP, counsel to Original Borrower and Successor Borrower, substantially in the form attached hereto as Annex III

8.On or before January 3, 2011, a Secretary’s Certificate signed by the Secretary and one other officer of Original Borrower certifying, as of December 31, 2010, (a) as to the name, titles and true signatures of the officers of Original Borrower authorized to sign this Agreement and the other Financing Documents, (b) that attached thereto is a true, accurate and complete copy of the certificate of incorporation of Original Borrower, certified by the Secretary of State of the State of Delaware as of a recent date, (c) that attached thereto is a true, accurate and complete copy of the by-laws of Original Borrower which were duly adopted and are in effect as of December 31, (d) that no dissolution or liquidation proceedings as to Original Borrower have been commenced or are contemplated

9.On or before January 31, 2011, such other documents, instruments, agreements and certificates as Lender may reasonably request with respect to or related to the items set forth on this Exhibit 5.2(f)

EX-10.2

Exhibit 10.2

ASSUMPTION AGREEMENT

THIS ASSUMPTION AGREEMENT, dated as of January 1, 2011, is by and between MIDLAND STATES BANCORP, INC. (f/k/a New Midland States, Inc.), an Illinois corporation (“Successor Borrower”), and RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”).

R E C I T A L S:

A.Midland States Bancorp, Inc., a Delaware corporation (“Original Borrower”), and Lender are parties to: (a) that certain Amended and Restated Credit Agreement, dated as of December 31, 2010 (as heretofore amended, the “Credit Agreement”), (b) that certain Amendment Agreement, dated as of December 31, 2010 (as heretofore amended, the “Amendment Agreement”), (c) that certain Amended and Restated 2009 Exchange and Warrant Agreement, dated as of December 31, 2010 (as heretofore amended, the “2009 Exchange Agreement”), (d) that certain Amended and Restated 2010 Exchange and Warrant Agreement, dated as of December 31, 2010 (as heretofore amended, the “2010 Exchange Agreement”), and (e) that certain Investment letter, dated as of December 31, 2010 (as heretofore amended, the “Investment Letter”).

B.Successor Borrower has issued to Lender: (a) that certain Tranche A Term Note, dated December 31, 2010 in the principal amount of $6,300,000 (as heretofore amended, the “Tranche A Term Note”), (b) that certain Tranche B Term Note, dated December 31, 2010 in the principal amount of $5,000,000 (as heretofore amended, the “Tranche B Term Note”), (c) that certain Amended 2010 Term Note, dated December 31, 2010 in the principal amount of $5,000,000 (as heretofore amended, the “2010 Term Note”; the Tranche A Term Note, the Tranche B Term Note and the 2010 Term Note are referred to herein, collectively, as the “Notes”), (d) that certain Preferred Stock Purchase Warrant dated December 31, 2010 regarding Successor Borrower’s Series C Preferred Stock (as heretofore amended, the “Series C Warrant”), and (e) that certain Preferred Stock Purchase Warrant dated December 31, 2010 regarding Successor Borrower’s Series D Preferred Stock (as heretofore amended, the “Series D Warrant”; the Series C Warrant and the Series D Warrant are referred to herein, collectively, as the “Warrants”; the Credit Agreement, the Amendment Agreement, the 2009 Exchange Agreement, the 2010 Exchange Agreement, the Investment Letter, the Tranche A Term note, the Tranche B Term Note, the Warrants and the other Financing Documents (as defined in the Credit Agreement) are referred to herein, collectively, as the “Financing Documents”).

C.Pursuant to and in accordance with the Articles of Merger, dated December 30, 2010, filed with the Secretary of State of the State of Illinois, the Certificate of Merger, dated December 30, 2010, filed with the Secretary of State of the State of Delaware, and the Agreement and Plan of Merger, dated as of October 25, 2010 (the “Merger Agreement”), by and between Original Borrower and Successor Borrower, on December 31, 2010 at 11:59 p.m.,

Original Borrower merged with and into Successor Borrower (the “Merger”) with Successor Borrower as the surviving corporation.

D.Pursuant to Section 11.50 of the Illinois Business Corporation Act of 1983, as amended, and Section 4 of the Merger Agreement, as a result of the consummation of the Merger, Successor Borrower, as the surviving corporation in such Merger, became responsible and liable for all the liabilities and obligations of Original Borrower.

E.The parties are entering into this Assumption Agreement pursuant to, and in accordance with, Section 6.9 of the Credit Agreement and Section 2C of each of the Warrants to evidence its assumption of the due and punctual payment of the principal of and interest on the Notes, and the due and punctual performance and observation of all of the covenants in the Credit Agreement and other Financing Documents to be performed by Original Borrower.

NOW, THEREFORE, in consideration of the premises, the terms and conditions herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby further agree as follows:

Section 1.  Definitions.  All capitalized terms used herein that are defined in the Credit Agreement, either directly or by reference therein, shall have the respective meanings assigned them in the Credit Agreement except as otherwise provided herein or unless the context otherwise requires.

Section 2.  Assumption of Liabilities and Obligations.

(a)Pursuant to, and in compliance and accordance with, Section 6.9 of the Credit Agreement, Section 2C of each of the Warrants and applicable law, Successor Borrower hereby expressly assumes and agrees to perform as fully as if it were originally a party thereto (i) the due and punctual payment of the principal of, interest on and all other amounts due under the Notes and each other Financing Document, (ii) the due and punctual performance and observation of all of the agreements, covenants, conditions and other terms and provisions of the Credit Agreement and the other Financing Documents to be performed or observed by Original Borrower; and (iii) all of the other obligations and liabilities of Original Borrower under the Notes, the Credit Agreement and the other Financing Documents.  It is expressly understood and acknowledged that nothing in this Agreement shall be deemed to cause or otherwise give rise to a novation of the Notes.

(b)Successor Borrower succeeds to and is substituted for Original Borrower, with the same effect as if Successor Borrower had originally been named in the Notes, the Credit Agreement and the other Financing Documents as Original Borrower.

(c)Pursuant to and in compliance with Section 2C of each of the Warrants, Successor Borrower hereby represents and warrants that (i) each of the Warrants shall continue in full force and effect following the Merger and is enforceable against Successor Borrower in accordance with its terms, (ii) the Series C Warrant shall be exercisable, following the Merger, for the same

2

number of shares of Successor Borrower’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Successor Borrower’s Series C Preferred Stock”) as the number of Original Borrower’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Original Series C Preferred Stock”) issuable upon the exercise of the Series C Warrant immediately prior to the Merger, (iii) the Series D Warrant shall be exercisable, following the Merger, for the same number of shares of Successor Borrower’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Successor Borrower’s Series D Preferred Stock”) as the number of Original Borrower’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Original Series D Preferred Stock”) issuable upon the exercise of the Series D Warrant immediately prior to the Merger, and (iv) the terms and conditions of the Certificates of Designation for Successor Borrower’s Series C Preferred Stock and Successor Borrower’s Series D Preferred Stock are identical to the Certificates of Designation for the Original Series C Preferred Stock and the Original Series D Preferred Stock, respectively, except for changes in the references to the state of incorporation of Successor Borrower and changes to reflect the conversion of each one share of the common stock of Original Borrower into ten shares of Successor Borrower’s common stock,.

Section 3.  Representations and Warranties.  Successor Borrower represents and warrants that: (a) it has all necessary power and authority to execute and deliver this Assumption Agreement and to perform the Notes, the Credit Agreement and the other Financing Documents; (b) it is the successor of Original Borrower pursuant to a valid merger effected in accordance with applicable law; (c)  it is a corporation incorporated, organized and existing under the laws of the State of Illinois; (d)  both immediately before and after giving effect to this Assumption Agreement and the Merger, no Default or Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; (e) this Assumption Agreement has been duly and validly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

Section 4.  Conditions of Effectiveness.  This Assumption Agreement shall become effective simultaneously with the effectiveness of the Merger; provided, however, that:

(a)Lender shall have executed a counterpart of this Assumption Agreement and shall have received one or more counterparts of this Assumption Agreement executed by Successor Borrower; and

(b)Successor Borrower and Original Borrower shall have duly executed and filed with the Secretary of the State of the State of Illinois the Articles of Merger.

Section 5.  Reference to the Credit Agreement.

(a)Upon the effectiveness of this Assumption Agreement, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “herein” or words of like import shall mean and be a reference to the Credit Agreement, as affected, amended and supplemented hereby.

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(b)Upon the effectiveness of this Assumption Agreement, each reference in the Notes to the Credit Agreement including each term defined by reference to the Credit Agreement shall mean and be a reference to the Credit Agreement or such term, as the case may be, as affected, amended and supplemented hereby.

(c)Upon the effectiveness of this Assumption Agreement, each reference in the other Financing Documents to the Credit Agreement including each term defined by reference to the Credit Agreement shall mean and be a reference to the Credit Agreement or such term, as the case may be, as affected, amended and supplemented hereby.

(d)The Credit Agreement, as amended and supplemented hereby, shall remain in full force and effect and is hereby ratified and confirmed.

Section 6.  Reaffirmation.  Successor Borrower hereby repeats and restates, and Successor Borrower hereby makes, as of the date hereof, all of the representations and warranties contained in the Credit Agreement and each of the other Financing Documents.  Successor Borrower represents that such representations and warranties, as so repeated and restated and as so made, are true and correct.  The execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of Lender, nor constitute a waiver of, or consent to any departure from, any provision of the Credit Agreement or any of the other Financing Documents.

Section 7.  Further Assurances.  Successor Borrower hereby agrees from time to time, as and when reasonably requested by Lender, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as Lender may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Agreement.

Section 8.  Execution in Counterparts.  This Assumption Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which, when taken together, shall constitute but one and the same instrument.

Section 9.  Governing Law; Binding Effect.  This Assumption Agreement shall be governed by and construed in accordance with the laws of the State of Illinois and shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.

[SIGNATURES ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be duly executed as of the day and year first written above.

MIDLAND STATES BANCORP, INC. (F/K/A NEW MIDLAND STATES, INC.)
By:	/s/ Jeff Ludwig
Name: Jeff Ludwig
Title: Executive Vice President & Chief Financial Officer
RICHARD E. WORKMAN 2001 TRUST
By:	/s/ Richard E. Workman
Name:		Richard E. Workman
Title:		Trustee

(Signature Page to Assumption Agreement)

EX-10.3

Exhibit 10.3

AMENDED AND RESTATED

2009 EXCHANGE AND WARRANT PURCHASE AGREEMENT

Effective December 31, 2010

THIS AMENDED AND RESTATED 2009 EXCHANGE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made as of December 31, 2010 by and between RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”), and MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”).

R E C I T A L S:

A.Borrower and Lender are parties to that certain Credit Agreement dated as of May 29, 2009, as amended by Amendment No. 1 to Credit Agreement, dated as of March 31, 2010 (the “Existing Credit Agreement”) pursuant to which Lender made the 2009 Term Loan (as defined in the Existing Credit Agreement) and the 2010 Term Loan (as defined in the Existing Credit Agreement) to Borrower .

B.Borrower and Lender entered into that certain Amended and Restated 2009 Exchange Agreement, dated as of March 31, 2010 (the “Existing Exchange Agreement”).

C.Concurrently herewith, Borrower and Lender are entering into an Amended and Restated Credit Agreement, dated as of December 31, 2010 (the “Amended and Restated Credit Agreement”), pursuant to which Lender has agreed to subordinate certain of its rights as a Lender under the Existing Credit Agreement, and Borrower is executing and delivering to Lender (i) two amended notes evidencing the 2009 Term Loan, one in the principal amount of $6,300,000 (the “Tranche A 2009 Note”) and the other in the principal amount of $5,000,000 (the “Tranche B 2009 Note) and (ii) a note evidencing the 2010 Term Loan in the principal amount of $5,000,000.

D.Borrower and Lender wish to amend and restate the Existing Exchange Agreement in its entirety as set forth herein.

E.Concurrently herewith, Borrower and Lender are also entering into an Amended and Restated 2010 Exchange and Warrant Purchase Agreement, dated the date hereof, pursuant to which the Borrower will issue and grant to the Lender a warrant to acquire shares of the Borrower’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock on the terms and conditions specified therein (the “Series D Warrant”).

F.The execution, delivery and effectiveness of this Agreement and the performance of Borrower’s obligations under Section 2 hereof are conditions to Lender’s agreement to subordinate certain of its rights as a Lender under the Existing Credit Agreement and to enter into the Amended and Restated Credit Agreement.

NOW, THEREFORE, in consideration of the premises, Lender’s execution and delivery of the Amended and Restated Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given such terms in the Amended and Restated Credit Agreement.  Unless the

context requires otherwise, the term “including” when used in this Agreement means “including, without limitation,” and all references to Sections or Exhibits are to Sections or Exhibits of or to this Agreement.  The following term shall have the meaning set forth below:

“Series C Preferred Stock” shall mean Borrower’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock.

2.Note Exchange and Warrant Purchase Agreement.  Concurrently with the execution and delivery of this Agreement, Borrower shall issue and grant to Lender a Preferred Stock Purchase Warrant, substantially in the form of Exhibit A, pursuant to which Lender shall have the right to purchase up to 630 shares of Series C Preferred Stock, subject to adjustment as provided therein and on the terms and conditions specified therein (the “Series C Warrant” and, together with the Series D Warrant, the “Warrants”).  On or before January 21, 2011, Borrower and Lender also shall enter into a Registration Rights Agreement, substantially in the form of Exhibit B (the “Registration Rights Agreement” and, together with the Series C Warrant, the “Equity Agreements”).

3.Federal Reserve Board Approval.  Borrower and Lender shall continue to attempt to obtain, as promptly as possible after the date hereof, any approval of the Board of Governors of the Federal Reserve System (“Federal Reserve Board Approval”) required to permit the Lender to exercise, in full, the Series C Warrant and to acquire all of the Series C Preferred Stock issuable upon such exercise; provided, however, that neither party will be liable for its failure to obtain such Federal Reserve Board Approval.  Lender hereby agrees to exercise the Series C Warrant promptly following the receipt of such Federal Reserve Board Approval but in no event later than 10 Business Days following the receipt thereof.  Nothing in this Section 3 shall require Lender to sell any shares of Common Stock currently owned by Lender in order to obtain the Federal Reserve Board Approval required to exercise the Series C Warrant.  Furthermore, nothing in this Section 3 shall preclude Lender from assigning or otherwise transferring the Tranche A 2009 Note and Series C Warrant in accordance with the terms and conditions of the Amended and Restated Credit Agreement and the Series C Warrant in the event that Lender reasonably determines that it will not be able to obtain, within six months of the date of this Agreement, Federal Reserve Board Approval to exercise the Series C Warrant; provided, however, that (i) the Series C Warrant may not be transferred to any “bank holding company” or “bank” as such terms are defined in the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and (ii) at least 10 Business Days prior to assigning or otherwise transferring the Series C Warrant, Lender shall provide written notice to Borrower of the name of the proposed assignee(s) or transferee(s).

4.Partial Exercises of Warrant.  If Lender is unable to obtain the Federal Reserve Board Approval required to exercise, in full, both of the Warrants, Borrower shall have the right, from time to time, upon written notice to Lender, to require Lender to exercise, in part, one or both of the Warrants then held by the Lender, to the maximum extent possible without causing Lender or any of its Affiliates to be deemed, for purposes of the BHC Act or the Change in Bank Control Act of 1978, as amended (the “CBC Act”), to own 10% or more of the outstanding shares of any class of voting securities or to otherwise control Borrower, based on the number of outstanding shares of such class at the time of such notice.  Such written notice shall contain information or documentation reasonably sufficient to enable Lender to determine the extent to which the Warrants may be exercised under the BHC Act and the CBC Act without Federal Reserve Board Approval.  Any such determination shall take into account the appropriate regulatory treatment of convertible securities.  Upon the receipt of any such written notice, Lender shall first exercise one of the Warrants, to the maximum extent permitted under the BHC Act and the CBC Act without Federal Reserve Board Approval (in minimum increments of $100,000), before exercising its rights under the other Warrant.  Lender shall exercise such Warrant promptly following receipt of written notice from Borrower that complies with this Section 4 but in no event later

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than 10 Business Days following Lender’s receipt of such notice.  Lender shall have the right, in its sole discretion, to determine which of the two Warrants to exercise first.

5.Representations, Warranties and Covenants.  Borrower represents and warrants to, and agrees with, Lender on the date hereof and on each date on which the Series C Warrant is exercised as follows: (a) Borrower is a Delaware corporation validly existing and in good standing under the laws of the State of Delaware (provided, however, that Borrower expects to reincorporate under the laws of the State of Illinois effective on December 31, 2010 at 11:59 p.m. and shall be, on each date on which the Series C Warrant is exercised after such time, an Illinois corporation validly existing and in good standing under the laws of the State of Illinois); (b) Borrower has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and the Equity Agreements and to consummate the transactions contemplated hereby and thereby; (c) this Agreement and the Equity Agreements have been duly executed and delivered by Borrower; (d) the execution, delivery and performance of this Agreement and the Equity Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action of Borrower and do not violate or conflict with, or, with or without the giving of notice, the passage of time or both, constitute a default under, or result in any Lien, in or on property of Borrower under, any provision of Borrower’s charter or articles of incorporation or by-laws, any law, rule, regulation, order, writ, injunction or decree of any court, administrative agency or any other governmental authority applicable to Borrower or any of its properties or any agreement or other document or instrument to which Borrower is a party or by which Borrower or any of its property is bound; (e) this Agreement and the Equity Agreements constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms; (f) no notices, reports or other filings are required to be made by Borrower with, and no consents, registrations, approvals, permits, licenses, orders or authorizations are required to be obtained by Borrower from, any Governmental Authority or any other Person in connection with the execution, delivery and performance of this Agreement or the Equity Agreements, or the consummation of the transactions contemplated hereby or thereby; and (g) no Person acting on Borrower’s behalf has any claim for a brokerage commission, finder’s fee or other like payment in connection with this Agreement or the Equity Agreements or the transactions contemplated by this Agreement or the Equity Agreements. Lender represents and warrants to, and agrees with, Borrower that, on the date hereof and on each date on which the Series C Warrant is exercised, Lender is and shall be an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, unless Lender has provided Borrower with a Representation Notice under Section 10(1) of the Series C Warrant.  The representations, warranties and agreements made in this Agreement, or in any document delivered pursuant hereto, shall survive the execution and delivery of this Agreement and the consummation of the transactions described herein, including the exercise of one or both of the Warrants or the repayment of the Tranche A 2009 Note.

6.Miscellaneous.  Any notices or other communications required or permitted hereby shall be given to the places and in the manner, and shall be effective, as set forth in the Amended and Restated Credit Agreement.  This Agreement, including any exhibits and schedules hereto, the Equity Agreements and all other documents and agreements referred to herein or to be delivered pursuant hereto, constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior written or oral agreements and understandings between the parties hereto relating to the subject matter hereof.  In addition to the obligations expressly set forth in this Agreement and the Equity Agreements, Borrower shall execute and deliver, or cause to be executed and delivered, to Lender all such further instruments and documents as may reasonably be requested by Lender in order fully to carry out the intent, and to accomplish the purposes, of the transactions referred to herein and therein.  Captions used herein are inserted for reference purposes only and shall not affect the interpretation or construction of this Agreement.  This Agreement and the Equity Agreements shall be binding upon Borrower and its successors and assigns and shall inure to the benefit of Lender and its successors and assigns, including

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without limitation any Person or Persons to which Lender has transferred (i) the Series C Warrant, in whole or in part, in accordance with Section 9 of the Series C Warrant and (ii) any related rights of Lender under the Registration Rights Agreement.  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party.  Each party shall bear its own expenses relating to the exchange or purchase of capital stock contemplated by this Agreement, including without limitation attorneys’ fees and costs.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.  Borrower recognizes that in the event Borrower fails to perform, observe or discharge any of its obligations under this Agreement, any remedy at law may prove inadequate relief to Lender; therefore, Borrower agrees that, if Lender so requests, Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages or the inadequacy of money damages and the granting of any such relief shall not preclude Lender from pursuing any other relief or remedies for such breach.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.  Delivery of a copy of an executed counterpart hereof by telecopy, email, pdf or other electronic means shall be effective as delivery of an originally executed counterpart hereof.  The Amended and Restated Credit Agreement (other than Sections 2 and 3 thereof) are incorporated herein by reference and shall continue for the purposes hereof notwithstanding termination of the Amended and Restated Credit Agreement.  This Agreement shall be governed by and interpreted under the laws of the State of Illinois applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws thereof.

7.Notices.  Any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission or electronic mail, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

If to Borrower, at:

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois  62401

Attention:  Douglas J. Tucker

Sr. Vice President and Corporate Counsel

Electronic Mail:  dtucker@midlandstatesbank.com

Telecopy:  (217) 342-9462

Confirmation:  (217) 342-7566

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With a copy to:

Barack Ferrazzano Kirschbaum & Nagelberg, LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attention:  Dennis R. Wendte

Electronic Mail:  Dennis.Wendte@bfkn.com

Telecopy:  (312) 984-3150

Confirmation:  (312) 984-3188

If to Lender, at:

Richard E.  Workman 2001 Trust

9800 Walzer Court

Windermere, Florida 34786

Attention:  Dr.  Richard Workman, Trustee

Electronic Mail:  rworkman@heartlanddentalcare.com

Telecopy:  (217) 540-5629

Confirmation:  (217) 540-5100

With a copy to:

Travis Franklin

1200 Network Centre Drive

Suite 2

Effingham, Illinois 62401

Electronic Mail:  tfranklin@heartlanddentalcare.com

Telecopy:  (217) 540-5629

Confirmation:  (217) 540-5155

Schiff Hardin, LLP

6600 Sears Tower

Chicago, Illinois 60606

Attention:  Robert R. Pluth

Electronic Mail:  rpluth@schiffhardin.com

Telecopy:  (312) 258-5600

Confirmation:  (312) 258-5535

or to such other address or number as each party designates to the other in the manner herein prescribed.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above.

Borrower:		Lender:
MIDLAND STATES BANCORP, INC.		RICHARD E. WORKMAN 2001 TRUST
By:	/s/ Jeff Ludwig
Name:	Jeff Ludwig	By:	/s/ Richard E. Workman
Title:	Executive Vice President and Chief Financial Officer		Richard E. Workman, Trustee

EX-10.4

Exhibit 10.4

AMENDED AND RESTATED

2010 EXCHANGE AND WARRANT PURCHASE AGREEMENT

Effective December 31, 2010

THIS AMENDED AND RESTATED 2010 EXCHANGE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made as of December 31, 2010 by and between RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”), and MIDLAND STATES BANCORP, INC., a Delaware corporation (“Borrower”).

R E C I T A L S:

A.Borrower and Lender are parties to that certain Credit Agreement dated as of May 29, 2009, as amended by Amendment No. 1 to Credit Agreement, dated as of March 31, 2010 (the “Existing Credit Agreement”) pursuant to which Lender made the 2009 Term Loan (as defined in the Existing Credit Agreement) and the 2010 Term Loan (as defined in the Existing Credit Agreement) to Borrower .

B.Borrower and Lender entered into that certain 2010 Exchange Agreement, dated as of March 31, 2010 (the “Existing Exchange Agreement”).

C.Concurrently herewith, Borrower and Lender are entering into an Amended and Restated Credit Agreement, dated as of December 31, 2010 (the “Amended and Restated Credit Agreement”), pursuant to which Lender has agreed to subordinate certain of its rights as a Lender under the Existing Credit Agreement, and Borrower is executing and delivering to Lender (i) two amended notes evidencing the 2009 Term Loan, one in the principal amount of $6,300,000 (the “Tranche A 2009 Note”) and the other in the principal amount of $5,000,000 (the “Tranche B 2009 Note) and (ii) a note evidencing the 2010 Term Loan in the principal amount of $5,000,000 (the “Amended 2010 Term Note”).

D.Borrower and Lender wish to amend and restate the Existing Exchange Agreement in its entirety as set forth herein.

E.Concurrently herewith, Borrower and Lender are also entering into an Amended and Restated 2009 Exchange and Warrant Purchase Agreement, dated the date hereof, pursuant to which the Borrower will issue and grant to the Lender a warrant to acquire shares of the Borrower’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock on the terms and conditions specified therein (the “Series C Warrant”).

F.The execution, delivery and effectiveness of this Agreement and the performance of Borrower’s obligations under Section 2 hereof are conditions to Lender’s agreement to subordinate certain of its rights as a Lender under the Existing Credit Agreement and to enter into the Amended and Restated Credit Agreement.

NOW, THEREFORE, in consideration of the premises, Lender’s execution and delivery of the Amended and Restated Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings given such terms in the Amended and Restated Credit Agreement.  Unless the

context requires otherwise, the term “including” when used in this Agreement means “including, without limitation,” and all references to Sections or Exhibits are to Sections or Exhibits of or to this Agreement.  The following term shall have the meaning set forth below:

“Series D Preferred Stock” shall mean Borrower’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock.

2.Note Exchange and Warrant Purchase Agreement.  Concurrently with the execution and delivery of this Agreement, Borrower shall issue and grant to Lender a Preferred Stock Purchase Warrant, substantially in the form of Exhibit A, pursuant to which Lender shall have the right to purchase up to 500 shares of Series D Preferred Stock, subject to adjustment as provided therein and on the terms and conditions specified therein (the “Series D Warrant” and, together with the Series C Warrant, the “Warrants”).  On or before January 21, 2011, Borrower and Lender also shall enter into a Registration Rights Agreement, substantially in the form of Exhibit B (the “Registration Rights Agreement” and, together with the Series D Warrant, the “Equity Agreements”).

3.Federal Reserve Board Approval.  Borrower and Lender shall continue to attempt to obtain, as promptly as possible after the date hereof, any approval of the Board of Governors of the Federal Reserve System (“Federal Reserve Board Approval”) required to permit the Lender to exercise, in full, the Series D Warrant and to acquire all of the Series D Preferred Stock issuable upon such exercise; provided, however, that neither party will be liable for its failure to obtain such Federal Reserve Board Approval.  Lender hereby agrees to exercise the Series D Warrant promptly following the receipt of such Federal Reserve Board Approval but in no event later than 10 Business Days following the receipt thereof.  Nothing in this Section 3 shall require Lender to sell any shares of Common Stock currently owned by Lender in order to obtain the Federal Reserve Board Approval required to exercise the Series D Warrant.  Furthermore, nothing in this Section 3 shall preclude Lender from assigning or otherwise transferring the Amended 2010 Term Note and Series D Warrant in accordance with the terms and conditions of the Amended and Restated Credit Agreement and the Series D Warrant in the event that Lender reasonably determines that it will not be able to obtain, within six months of the date of this Agreement, Federal Reserve Board Approval to exercise the Series D Warrant; provided, however, that (i) the Series D Warrant may not be transferred to any “bank holding company” or “bank” as such terms are defined in the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and (ii) at least 10 Business Days prior to assigning or otherwise transferring the Series D Warrant, Lender shall provide written notice to Borrower of the name of the proposed assignee(s) or transferee(s).

4.Partial Exercises of Warrant.  If Lender is unable to obtain the Federal Reserve Board Approval required to exercise, in full, both of the Warrants, Borrower shall have the right, from time to time, upon written notice to Lender, to require Lender to exercise, in part, one or both of the Warrants then held by the Lender, to the maximum extent possible without causing Lender or any of its Affiliates to be deemed, for purposes of the BHC Act or the Change in Bank Control Act of 1978, as amended (the “CBC Act”), to own 10% or more of the outstanding shares of any class of voting securities or to otherwise control Borrower, based on the number of outstanding shares of such class at the time of such notice.  Such written notice shall contain information or documentation reasonably sufficient to enable Lender to determine the extent to which the Warrants may be exercised under the BHC Act and the CBC Act without Federal Reserve Board Approval.  Any such determination shall take into account the appropriate regulatory treatment of convertible securities.  Upon the receipt of any such written notice, Lender shall first exercise one of the Warrants, to the maximum extent permitted under the BHC Act and the CBC Act without Federal Reserve Board Approval (in minimum increments of $100,000), before exercising its rights under the other Warrant.  Lender shall exercise such Warrant promptly following receipt of written notice from Borrower that complies with this Section 4 but in no event later

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than 10 Business Days following Lender’s receipt of such notice.  Lender shall have the right, in its sole discretion, to determine which of the two Warrants to exercise first.

5.Representations, Warranties and Covenants.  Borrower represents and warrants to, and agrees with, Lender on the date hereof and on each date on which the Series D Warrant is exercised as follows: (a) Borrower is a Delaware corporation validly existing and in good standing under the laws of the State of Delaware (provided, however, that Borrower expects to reincorporate under the laws of the State of Illinois effective on December 31, 2010 at 11:59 p.m. and shall be, on each date on which the Series D Warrant is exercised after such time, an Illinois corporation validly existing and in good standing under the laws of the State of Illinois); (b) Borrower has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and the Equity Agreements and to consummate the transactions contemplated hereby and thereby; (c) this Agreement and the Equity Agreements have been duly executed and delivered by Borrower; (d) the execution, delivery and performance of this Agreement and the Equity Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action of Borrower and do not violate or conflict with, or, with or without the giving of notice, the passage of time or both, constitute a default under, or result in any Lien, in or on property of Borrower under, any provision of Borrower’s charter or articles of incorporation or by-laws, any law, rule, regulation, order, writ, injunction or decree of any court, administrative agency or any other governmental authority applicable to Borrower or any of its properties or any agreement or other document or instrument to which Borrower is a party or by which Borrower or any of its property is bound; (e) this Agreement and the Equity Agreements constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms; (f) no notices, reports or other filings are required to be made by Borrower with, and no consents, registrations, approvals, permits, licenses, orders or authorizations are required to be obtained by Borrower from, any Governmental Authority or any other Person in connection with the execution, delivery and performance of this Agreement or the Equity Agreements, or the consummation of the transactions contemplated hereby or thereby; and (g) no Person acting on Borrower’s behalf has any claim for a brokerage commission, finder’s fee or other like payment in connection with this Agreement or the Equity Agreements or the transactions contemplated by this Agreement or the Equity Agreements. Lender represents and warrants to, and agrees with, Borrower that, on the date hereof and on each date on which the Series D Warrant is exercised, Lender is and shall be an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, unless Lender has provided Borrower with a Representation Notice under Section 10(1) of the Series D Warrant.  The representations, warranties and agreements made in this Agreement, or in any document delivered pursuant hereto, shall survive the execution and delivery of this Agreement and the consummation of the transactions described herein, including the exercise of one or both of the Warrants or the repayment of the Amended 2010 Term Note.

6.Miscellaneous.  Any notices or other communications required or permitted hereby shall be given to the places and in the manner, and shall be effective, as set forth in the Amended and Restated Credit Agreement.  This Agreement, including any exhibits and schedules hereto, the Equity Agreements and all other documents and agreements referred to herein or to be delivered pursuant hereto, constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior written or oral agreements and understandings between the parties hereto relating to the subject matter hereof.  In addition to the obligations expressly set forth in this Agreement and the Equity Agreements, Borrower shall execute and deliver, or cause to be executed and delivered, to Lender all such further instruments and documents as may reasonably be requested by Lender in order fully to carry out the intent, and to accomplish the purposes, of the transactions referred to herein and therein.  Captions used herein are inserted for reference purposes only and shall not affect the interpretation or construction of this Agreement.  This Agreement and the Equity Agreements shall be binding upon Borrower and its successors and assigns and shall inure to the benefit of Lender and its successors and assigns, including

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without limitation any Person or Persons to which Lender has transferred (i) the Series D Warrant, in whole or in part, in accordance with Section 9 of the Series D Warrant and (ii) any related rights of Lender under the Registration Rights Agreement.  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party.  Each party shall bear its own expenses relating to the exchange or purchase of capital stock contemplated by this Agreement, including without limitation attorneys’ fees and costs.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.  Borrower recognizes that in the event Borrower fails to perform, observe or discharge any of its obligations under this Agreement, any remedy at law may prove inadequate relief to Lender; therefore, Borrower agrees that, if Lender so requests, Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages or the inadequacy of money damages and the granting of any such relief shall not preclude Lender from pursuing any other relief or remedies for such breach.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.  Delivery of a copy of an executed counterpart hereof by telecopy, email, pdf or other electronic means shall be effective as delivery of an originally executed counterpart hereof.  The Amended and Restated Credit Agreement (other than Sections 2 and 3 thereof) are incorporated herein by reference and shall continue for the purposes hereof notwithstanding termination of the Amended and Restated Credit Agreement.  This Agreement shall be governed by and interpreted under the laws of the State of Illinois applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws thereof.

7.Notices.  Any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission or electronic mail, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

If to Borrower, at:

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois  62401

Attention:  Douglas J. Tucker

Sr. Vice President and Corporate Counsel

Electronic Mail:  dtucker@midlandstatesbank.com

Telecopy:  (217) 342-9462

Confirmation:  (217) 342-7566

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With a copy to:

Barack Ferrazzano Kirschbaum & Nagelberg, LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attention:  Dennis R. Wendte

Electronic Mail:  Dennis.Wendte@bfkn.com

Telecopy:  (312) 984-3150

Confirmation:  (312) 984-3188

If to Lender, at:

Richard E.  Workman 2001 Trust

9800 Walzer Court

Windermere, Florida 34786

Attention:  Dr.  Richard Workman, Trustee

Electronic Mail:  rworkman@heartlanddentalcare.com

Telecopy:  (217) 540-5629

Confirmation:  (217) 540-5100

With a copy to:

Travis Franklin

1200 Network Centre Drive

Suite 2

Effingham, Illinois 62401

Electronic Mail:  tfranklin@heartlanddentalcare.com

Telecopy:  (217) 540-5629

Confirmation:  (217) 540-5155

Schiff Hardin, LLP

6600 Sears Tower

Chicago, Illinois 60606

Attention:  Robert R. Pluth

Electronic Mail:  rpluth@schiffhardin.com

Telecopy:  (312) 258-5600

Confirmation:  (312) 258-5535

or to such other address or number as each party designates to the other in the manner herein prescribed.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above.

Borrower:		Lender:
MIDLAND STATES BANCORP, INC.		RICHARD E. WORKMAN 2001 TRUST
By:	/s/ Jeff Ludwig
Name:	Jeff Ludwig	By:	/s/ Richard E. Workman
Title:	Executive Vice President and Chief Financial Officer		Richard E. Workman, Trustee

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EX-10.5

Exhibit 10.5

Series E Preferred Stock

Warrant No. P-1

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

MIDLAND STATES BANCORP, INC.

Preferred Stock Purchase Warrant
Expiring April 1, 2016

Effingham, Illinois
May 11, 2011

MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), for value received, hereby certifies that RICHARD E. WORKMAN 2001 TRUST (Richard E. Workman 2001 Trust and each Person to whom this Warrant has been assigned or transferred in accordance with the terms hereof is referred to herein as a “holder”) is entitled to purchase from the Company six hundred thirty (630) duly authorized, validly issued, fully paid and nonassessable shares of the Company’s Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock, $2.00 par value per share (the “Original Preferred Stock”), at an initial exercise price per share of $10,000 per share, at any time or from time to time after the date of this Warrant and prior to 5:00 p.m., Chicago time, on April 1, 2016, subject to extension as provided in Section 1G (such time and date, as extended pursuant to Section 1G, if applicable, the “Expiration Date”), all subject to the terms, conditions and adjustments set forth below in this Warrant.

This Warrant (the “Warrant”, such term to include each Warrant issued in substitution herefor) is being issued in exchange for that certain Series C Preferred Stock Purchase Warrant, dated December 31, 2010, which was issued in connection with the issuance by the Company of the Company’s Tranche A 2009 Note due April 1, 2020, in the aggregate principal amount of $6,300,000 (the “Tranche A 2009 Note”) pursuant to that certain Amended and Restated Credit Agreement, dated as of December 31, 2010, between the Company and Richard E. Workman 2001 Trust, as Lender (as amended from time to time, the “Amended and Restated Credit Agreement”).  The Warrant originally issued hereby evidences rights to purchase six hundred thirty (630) shares of Original Preferred Stock, subject to adjustment as provided herein.  The term “Tranche A 2009 Note” as used herein shall include any note delivered in substitution or exchange for the Tranche A 2009 Note pursuant to the Amended and Restated Credit Agreement.  Certain capitalized terms used in this Warrant are defined in Section 15.

Section 1.Exercise of Warrant.

1A.Manner of Exercise.  This Warrant may be exercised by the holder hereof, in whole or in part, during normal business hours on any Business Day on or after the date of this Warrant to and including the Expiration Date, by surrender of this Warrant, with the form of subscription at the end hereof (or a reasonable facsimile thereof) duly executed by such holder, to the Company at its principal office at 133 West Jefferson Avenue, Effingham, Illinois 62401, Attention: Douglas J. Tucker, Senior Vice President and Corporate Counsel, or such other office or agency of the Company as the Company

may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company (or, if such exercise shall be in connection with an underwritten public offering of shares of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) subject to this Warrant, at the location at which the underwriters shall have agreed to accept delivery thereof), accompanied by payment in the amount (the “Exercise Payment Amount”) obtained by multiplying (a) the number of shares of Original Preferred Stock (without giving effect to any adjustment therein) designated in such form of subscription by (b) $10,000.  If this Warrant is exercised before July 1, 2013, the Exercise Payment Amount may be paid solely by the exchange of an amount of the principal of the Tranche A 2009 Note then outstanding equal to the Exercise Payment Amount.  If this Warrant is exercised on or after July 1, 2013, the Exercise Payment Amount may be paid, at the option of the holder, (i) in cash, by certified or official bank check payable to the order of the Company or by wire transfer of funds to the Company, (ii) by the exchange of an amount of the principal of the Tranche A 2009 Note then outstanding equal to the Exercise Payment Amount, or (iii) in accordance with Section 1F.

1B.Adjustment to Number of Shares of Preferred Stock.  The number of duly authorized, validly issued, fully paid and nonassessable shares of Preferred Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Preferred Stock which would otherwise (but for the provisions of Section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to Section 1A, by a fraction of which (x) the numerator is $10,000 and (y) the denominator is the Exercise Price in effect on the date of such exercise.  The “Exercise Price” shall initially be $10,000 per share, shall be adjusted and readjusted from time to time as provided in Section 2 and, as so adjusted and readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 2 (and the term “Exercise Price” at any time, as used herein, shall mean such price as last adjusted or readjusted).

1C.When Exercise Effective.  Each exercise of this Warrant shall be deemed to have been effected and the Exercise Price shall be determined immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1A, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Original Preferred Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 1D shall be deemed to have become the holder or holders of record thereof.  Notwithstanding the foregoing, if an exercise of all or any portion of this Warrant is being made in connection with (i) a proposed public offering of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) subject to this Warrant, (ii) a proposed Transaction, or (iii) a proposed sale of outstanding shares of Preferred Stock (or Other Securities) or Common Stock issuable upon the conversion of Preferred Stock (or Other Securities) subject to this Warrant, then, at the election of the holder of this Warrant, such exercise may be conditioned upon the consummation of such public offering, Transaction or sale, in which case such exercise shall be effective concurrently with the consummation of such public offering, Transaction or sale.

1D.Delivery of Stock Certificates, etc.  Promptly after the exercise of this Warrant, in whole or in part, and in any event within three Business Days thereafter (unless such exercise shall be in connection with a public offering of shares of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) or in connection with any Transaction or sale of outstanding shares of Preferred Stock (or Other Securities) or Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities), in which event, at the election of the holder of this Warrant, concurrently with the effectiveness of such exercise, as provided in Section 1C, the Company at its expense will cause to be issued in the name of and delivered to the holder hereof or, subject to Section 8, as such holder may direct,

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(1)a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Preferred Stock (or Other Securities) to which such holder shall be entitled upon such exercise, and

(2)in case such exercise is in part only, a new Warrant or Warrants of like tenor, specifying the aggregate on the face or faces thereof the number of shares of Preferred Stock equal to the number of such shares specified on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in Section 1A.

1E.Fractional Shares.  No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Preferred Stock or Other Securities issued upon such exercise.  If any fractional interest in a share of Preferred Stock would, except for the provisions of the first sentence of this Section 1E, be deliverable upon the exercise of this Warrant, the Company shall, in lieu of delivering the fractional share therefor, pay to the holder exercising this Warrant an amount in cash equal to the Market Price of such fractional interest.

1F.Cashless Exercise.  The holder of this Warrant may exercise its right to purchase some or all of the shares of Preferred Stock pursuant to this Warrant on a net basis without the exchange of any funds (a “Cashless Exercise”), such that, upon the exercise hereof, the holder hereof receives that number of shares of Preferred Stock subscribed to pursuant to this Warrant less that number of shares of Preferred Stock, valued at Market Price at the time of exercise, equal to the aggregate Exercise Price that would otherwise have been paid by the holder of this Warrant for such shares of Preferred Stock subscribed to.  (For example: a holder exercises the right to purchase 100 shares.  At that time the Market Price is $12,000 and the exercise price is $10,000.  The aggregate Exercise Price for 100 shares would be $1,000,000.  Therefore $1,000,000 ÷ $12,000 = 83.3.  The holder would receive 16.7 shares [100-83.3] under a Cashless Exercise).

1G.Notice of Expiration Date.  The Company shall provide the holder of this Warrant with written notice of its expiration no more than 45 days before April 1, 2016, and this Warrant shall not expire until the later of (i) April 1, 2016 or (ii) the 30th day after the date such notice of expiration is given to the holder by the Company.

Section 2.Protection Against Impairment of Rights; Adjustment of Exercise Price.

2A.Adjustments for Combinations of Stock Dividends or Stock Splits.  In case the outstanding shares of Preferred Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Preferred Stock, the Exercise Price in effect immediately prior to such combination or consolidation shall be proportionately increased.  In case the Company shall, at any time or from time to time after the date hereof, pay a dividend or make a distribution in respect of its Preferred Stock, in each case in shares of its Preferred Stock, or subdivide its outstanding shares of Preferred Stock, by reclassification or otherwise, into a greater number of shares of Preferred Stock, the Exercise Price in effect immediately prior to such dividend, distribution, or subdivision shall be proportionately reduced.  Such adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a combination, consolidation, or subdivision.  Such adjustments shall be made successively whenever any such event shall occur.

2B.Minimum Adjustment of Exercise Price.  If the amount of any adjustment of the Exercise Price required hereunder would be less than one percent of the Exercise Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which,

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together with such amount and any other amount or amounts so carried forward, shall aggregate at least one percent of such Exercise Price; provided, that upon the exercise of this Warrant, all adjustments carried forward and not theretofore made up to and including the date of such exercise shall be made to the nearest .00001 of a cent.

2C.Changes in Preferred Stock.  If any capital reorganization or reclassification of the capital stock of the Company, any consolidation or merger of the Company with another Person (regardless of which entity is the surviving entity), the sale of all or substantially all of the assets of the Company to another Person, any liquidation of the Company or any other transaction (each such transaction being herein called a “Transaction”) shall be effected in such a way that holders of Preferred Stock shall be entitled to receive stock, securities or assets (including cash) upon conversion of or in exchange for Preferred Stock, then, as a condition of the consummation of the Transaction, lawful and adequate provisions (in form satisfactory to the Required Holders) shall be made whereby the holder of this Warrant shall thereafter have the right to receive upon the exercise hereof, upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and this Warrant shall thereafter represent the right to receive, such shares of stock, securities or assets (including cash) as may be issued or payable upon conversion of or in exchange for a number of outstanding shares of Preferred Stock equal to the number of shares of Preferred Stock which immediately theretofore were purchasable and receivable upon the exercise of the rights represented hereby had such Transaction not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise hereof.  In the event of a merger or consolidation of the Company with or into another Person as a result of which a number of shares of Preferred stock or other equity interests of the surviving Person greater or less than the number of shares of Preferred Stock of the Company outstanding immediately prior to such merger or consolidation are issuable to holders of Preferred Stock of the Company, then the Exercise Price in effect immediately prior to such merger or consolidation shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Preferred Stock of the Company.  Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property as to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity of the Warrants in accordance with the terms hereof and thereof, together with such other matters as such holders may reasonably request.  If a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding shares of Preferred Stock of the Company, the Company shall not effect any consolidation, merger or sale with the Person having made such offer or with any Affiliate of such Person, unless prior to the consummation of such consolidation, merger or sale, the holder of this Warrant shall have been given a reasonable opportunity to then elect to receive upon the exercise of this Warrant either the stock, securities or assets then issuable with respect to the Preferred Stock of the Company or the stock, securities or assets (including cash), or the equivalent, issued to previous holders of the Preferred Stock in accordance with such offer as if the shares of Preferred Stock issued upon the exercise of this Warrant had been issued.

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2D.Notice of Adjustment.  Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to the holder of this Warrant an Officer’s Certificate stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Preferred Stock issuable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by the holder of this Warrant stating that such holder contemplates the exercise of such Warrant, the Company will obtain and deliver to the holder of this Warrant the opinion of its regular independent auditors or another firm of independent public accountants of recognized national or regional standing selected by the Company’s Board of Directors, which opinion shall confirm the statements in the most recent Officer’s Certificate delivered under this Section 2D.

2E.Other Notices.  In case at any time:

(1)the Company shall declare or pay to the holders of Preferred Stock any dividend, other than a cash dividend in accordance with Section 2(a) of the Certificate of Designation;

(2)the Company shall offer for subscription pro rata to the holders of Preferred Stock any additional shares of stock of any class or other rights;

(3)any matter shall be submitted to the holders of the Preferred Stock for their vote or written consent;

(4)there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity;

(5)there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company;

(6)the Company, subject to Section 2G(2), shall (i) exercise its right to call and convert all of the then outstanding shares of Preferred Stock into shares of Common Stock pursuant to Section 3(c) of the Certificate of Designation (the “Mandatory Conversion Right”), or (ii) exercise its right to call and redeem all of the then outstanding shares of Preferred Stock pursuant to Section 5 of the Certificate of Designation (the “Mandatory Redemption Right”);

(7)there shall be made any tender offer for any shares of capital stock of the Company; or

(8)there shall be any other Transaction;

then, in any one or more of such cases, the Company shall give to the holder of this Warrant, (i) at least 15 days prior to (A) the date on which the books of the Company shall close or a record shall be taken (each, a “Record Date”) with respect to any event referred to in subsections (1) through (6) above or, if no Record Date is fixed for an event referred to in subsection (6), (B) the date on which it gives notice of exercise of the Mandatory Conversion Right or notice of exercise of the Mandatory Redemption Right, and within five days after it has knowledge of any pending tender offer or other Transaction, written notice of the Record Date for such dividend, distribution or  subscription rights, for the exercise of the Mandatory Conversion Right or Mandatory Redemption Right or for determining rights to vote in respect of any matter submitted to the holders of Preferred Stock for their vote or written consent or in respect of

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such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction or of the date by which shareholders must tender shares in any tender offer and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or tender offer or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place.  Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Preferred Stock shall be entitled thereto, or in the case of the exercise of the Mandatory Conversion Right or Mandatory Redemption Right, the conversion date or redemption date, as applicable, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, tender offer or Transaction, as the case may be.  Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required.

2F.Certain Events.  If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company, the other provisions of this Warrant are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company shall appoint its regular independent auditors or another firm of independent public accountants of recognized national or regional standing which shall give their opinion upon the adjustment, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of the holders of the Warrants.  Upon receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments described therein; provided, that no such adjustment shall have the effect of increasing the Exercise Price as otherwise determined pursuant to this Warrant.  The Company may make such reductions in the Exercise Price as it deems advisable, including any reductions necessary to ensure that any event treated for Federal income tax purposes as a distribution of stock or stock rights not be taxable to recipients.

2G.Prohibition of Certain Actions.

(1)The Company shall not, without the prior written consent of the Required Holders:

(a)amend the Certificate of Designation;

(b)declare or pay any dividend or distribution on the Preferred Stock in excess of the dividends payable thereon under Section 2(a) of the Certificate of Designation; or

(c)take any action that requires, under the Certificate of Designation, the vote or written consent of the holders of at least 75% of the shares of Preferred Stock if, as of the record date for such vote or the date of such written consent, the shares of Preferred Stock issuable upon exercise of the Warrants would constitute, after giving effect to such exercise, more than 25% of the then outstanding Preferred Stock.

(2)The Company shall not exercise (a) the Mandatory Conversion Right, or (b) the Mandatory Redemption Right prior to the fifth anniversary of the date on which the Company first issues one or more shares of Preferred Stock upon the exercise of the Warrant.

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(3)For so long as any Warrant is outstanding, the Company shall not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant.  Without limiting the generality of the foregoing, the Company

(a)shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock upon the exercise of all Warrants from time to time outstanding; and

(b)shall not take any action which results in any adjustment of the Exercise Price if the total number of shares of Preferred Stock or Other Securities issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Preferred Stock or Other Securities then authorized by the Company’s certificate of incorporation and available for the purpose of issue upon such conversion.

Section 3.Stock to be Reserved.  The Company will at all times reserve and keep available out of the authorized Preferred Stock, solely for the purpose of issue upon the exercise of the Warrants as herein provided, such number of shares of Preferred Stock as shall then be issuable upon the exercise of all outstanding Warrants, and the Company will maintain at all times all other rights and privileges sufficient to enable it to fulfill all its obligations hereunder.  The Company covenants that all shares of Preferred Stock which shall be so issuable shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and that the issuance of such shares of Preferred Stock shall be free from preemptive or similar rights on the part of the holders of any shares of capital stock or securities of the Company or any other Person, and free from all taxes, liens and charges with respect to the issue thereof (not including any income taxes payable by the holders of Warrants being exercised in respect of gains thereon), and the Exercise Price will be credited to the capital and surplus of the Company.  The Company will take all such action as may be necessary to assure that such shares of Preferred Stock may be so issued without violation of any applicable law or regulation, or of any applicable requirements of the National Association of Securities Dealers, Inc. and of any domestic securities exchange upon which the Preferred Stock may be listed.

Section 4.Federal Reserve Board and Other Approvals.

(a)Notwithstanding any other provision of this Warrant, the holder shall not have the right to exercise this Warrant, and the Company shall have no obligation to deliver shares of Preferred Stock upon the exercise hereof, if the issuance of such shares to the holder requires the approval of the Board of Governors of the Federal Reserve System (including, without limitation, any approval pursuant to the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, of the holder’s ownership of 10% or more of the outstanding shares of any class of voting securities or control of the Company) (“Federal Reserve Board Approval”) and such approval is not obtained on or before the date of exercise of the Warrant.  The Company will, at its expense and as expeditiously as possible, cooperate with the holder to obtain any required Federal Reserve Board Approval.

(b)At any such time as the Preferred Stock is listed on any national securities exchange, the Company will, at its expense, obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Preferred Stock issuable upon exercise of

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the then outstanding Warrants and maintain the listing of such shares after their issuance so long as the Preferred Stock is so listed or quoted; and the Company will also cause to be so listed, will register under the Exchange Act and will maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.

Section 5.Issue Tax.  The issuance of certificates for shares of Preferred Stock upon exercise of this Warrant shall be made without charge to the holders hereof for any issuance tax in respect thereto.

Section 6.Closing of Books.  The Company will at no time close its transfer books against the transfer of any Warrant or of any share of Preferred Stock (or Other Securities) issued or issuable upon the exercise of any Warrant in any manner which interferes with the timely exercise of such Warrant.

Section 7.No Rights or Liabilities as Stockholders.  This Warrant shall not entitle the holder thereof to any of the rights of a stockholder of the Company, except as expressly contemplated herein.  No provision of this Warrant, in the absence of the actual exercise of such Warrant and receipt by the holder thereof of Preferred Stock issuable upon such conversion, shall give rise to any liability on the part of such holder as a stockholder of the Company, whether such liability shall be asserted by the Company or by creditors of the Company.

Section 8.Restrictive Legends.  Except as otherwise permitted by this Section 8, each Warrant originally issued and each Warrant issued upon direct or indirect transfer of, or in substitution for, any Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:

“This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act.”

Except as otherwise permitted by this Section 8, (a) each certificate for Preferred Stock (or Other Securities) issued upon the exercise of any Warrant, and (b) each certificate issued upon the direct or indirect transfer of any such Preferred Stock (or Other Securities) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act.”

The holder of any Restricted Securities shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the applicable legend set forth above in this Section 8 when such securities shall have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering such Restricted Securities, (b) sold to the public pursuant to Rule 144 or any comparable rule under the Securities Act, or (c) when, in the opinion of independent counsel for the holder thereof experienced in Securities Act matters, such restrictions are no longer required in order to insure compliance with the Securities Act.

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Section 9.Transfers.

9A.Transfers Prior to the Initial Exercise Date.  Subject to Section 9C, prior to July 1, 2013, this Warrant may not be transferred in whole, or in part, except to one or more Persons to whom all or a portion of the indebtedness evidenced by the Tranche A 2009 Note has been transferred.  If, prior to July 1, 2013, less than all of the principal amount of the Tranche A 2009 Note is transferred to any Person, then the holder of this Warrant may transfer to such Person only Warrants for that number of shares of Preferred Stock equal to the product of (a) the number of shares of Original Preferred Stock times (b) a fraction, the numerator of which is the principal amount of the Tranche A 2009 Note transferred to such Person, and the denominator of which is $6,300,000.

9B.Transfers On or After July 1, 2013.  Subject to Section 9C, on or after July 1, 2013, this Warrant is detachable from the Tranche A 2009 Note and may be transferred, in whole or in part, to one or more Persons, separate from the Tranche A 2009 Note.

9C.Requirement that Transfers Be Made Only to Accredited Investors.  Notwithstanding the provisions of Section 9A and 9B, this Warrant (i) may be transferred only to one or more “accredited investors” as such term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act (an “Accredited Investor”) and (ii) may not be transferred to any “bank holding company” or “bank” as such terms are defined in the Bank Holding Company Act of 1956, as amended.  At least 10 Business Days prior to transferring this Warrant, in whole or in part, the holder shall provide written notice to the Company of the name of the proposed transferee(s).

Section 10.  Representations and Warranties of the Holder.  The holder of this Warrant, by the acceptance hereof, represents and warrants and agrees as follows:

(1)Such holder is an Accredited Investor, is acquiring this Warrant and, upon exercise hereof, will acquire the shares of Preferred Stock (or Other Securities) and any shares of Common Stock into which such shares of Preferred Stock are convertible (collectively, the “Warrant Securities”), for such holder’s own account and not with a view towards, or for resale in connection with, the public sale or distribution of the Warrant Securities, except pursuant to sales registered or exempted from registration under the Securities Act.  The delivery of this Warrant for exercise shall constitute confirmation at such time by the holder of the representations concerning the Warrant Securities set forth in the preceding sentence, unless contemporaneous with the delivery of this Warrant for exercise, the holder notifies the Company in writing that it is not making such representation (a “Representation Notice”).  If a holder delivers a Representation Notice in connection with an exercise, it shall be a condition to such holder’s exercise of this Warrant and the Company’s obligations under Section 1 in connection with such exercise, that the Company receive such other representations as the Company reasonably considers necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any United States or state securities laws, and the time periods for the Company’s compliance with its obligations under Section 1D shall be tolled until such holder provides the Company with such other representations;

(2)Such holder understands that the Warrant Securities are “restricted securities” under the federal securities laws in as much as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations neither this Warrant nor the Warrant Securities issuable upon its exercise may be resold without registration under the Securities Act or an exemption from such registration;

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(3)Such holder will not offer or sell this Warrant or any of the Warrant Securities in the absence of an effective registration statement for the Warrant or the Warrant Securities, as applicable, under the Securities Act and such state or other laws as may be applicable, or receipt by the Company of a written opinion of counsel, in form and substance reasonably acceptable to the Company, that such registration is not required; provided, however, that no such opinion shall be required in connection with (i) a transaction pursuant to Rule 144 in which the holder provides the Company with certifications reasonably requested by the Company regarding compliance with the terms and provisions of Rule 144 or (ii) a distribution of any Warrant Securities to an Affiliate of the holder, so long as such Affiliate does not pay any consideration in connection with such distribution (other than the issuance of equity securities in such Affiliate) and the holder provides the Company with certifications reasonably requested by the Company in connection therewith.

(4)Such holder acknowledges and understands that the Warrant and each certificate for the Warrant and Warrant Securities will bear the legends set forth in Section 8 under the terms and circumstances set forth therein; and

(5)Such holder acknowledges and understands that the holder shall not have the right to exercise this Warrant, and the Company shall have no obligation to deliver shares of Preferred Stock upon the exercise hereof, if any Federal Reserve Board Approval required in connection with the issuance of such shares of Preferred Stock to the holder is not obtained by the holder on or before the date of exercise of the Warrant.

Section 11.Information Required By Rule 144A.  The Company will, upon the request of the holder of this Warrant or of any shares of Preferred Stock issued upon the exercise of this Warrant, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Warrants or shares of Preferred Stock, except at such times as the Company is subject to and in compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act.  For the purpose of this Section 11, the term “qualified institutional buyer” shall have the meaning specified in Rule 144A under the Securities Act.

Section 12.Ownership, Transfer and Replacement of Warrants.

12A.Ownership of Warrants.  Except as otherwise required by law, the Company may treat the Person in whose name any Warrant is registered on the register kept at the principal office of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company, in its discretion, may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the Company to the contrary.  Subject to Section 8, a Warrant, if properly assigned, may be exercised by a new holder without first having a new Warrant issued.

12B.Transfer and Exchange of Warrants.  Upon the surrender of any Warrant, properly endorsed, for registration of transfer or for exchange at the principal office of the Company, the Company at its expense will (subject to compliance with Section 8, if applicable, and Section 10), execute and deliver to or upon the order of the holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Original Preferred Stock called for on the face or faces of the Warrant or Warrants so surrendered.

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12C.Replacement of Warrants.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant held by a Person other than any institutional investor, upon delivery of its unsecured indemnity or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal office of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

Section 13.Registration Rights.  The holder of this Warrant shall be entitled to certain registration rights under a registration rights agreement to be entered into between the Company or its successor and the Richard E. Workman 2001 Trust (the “Registration Rights Agreement”) in connection with the offer and sale of shares of Common Stock issuable upon the conversion of Preferred Stock (or Other Securities) issued upon exercise of this Warrant, upon the execution and delivery by the holder of the Registration Rights Agreement or a joinder to the Registration Rights Agreement.

Section 14.Information Rights.  Each holder of Warrants shall be entitled to receive audited annual financial statements of the Company, as soon as such statements become available.

Section 15.Definitions.  As used herein, unless the context otherwise requires, the following terms have the following respective meanings:

“Affiliate” shall mean, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  The grantor of a revocable trust shall be deemed to control such revocable trust.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to close.

“Cashless Exercise” shall have the meaning specified in Section 1F.

“Certificate of Designation” shall mean the Statement of Resolution Establishing Series of Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company, as filed with the Secretary of State of the State of Illinois prior to the date hereof.

“Common Stock” shall mean the common stock of the Company, $0.01 par value per share, or the common equity securities of any successor to the Company, including any surviving Person in a Transaction.

“Company” shall have the meaning specified in the opening paragraphs of this Warrant.

“Current Market Value” shall mean on any date specified herein, with respect to the Common Stock, (a) if the Common Stock is listed or admitted to trading on any securities exchange, the closing price, regular way, on such day on the principal exchange on which such Common Stock is traded, or if no sale takes place on such day, the average of the closing bid and asked prices on such day; (b) if the Common Stock is not then listed or admitted to trading on any securities exchange, the last reported sale price on such day, or if there is no such last reported sale price on such day, the average of the closing bid and the asked prices on such day, as reported by a reputable quotation source designated by the Company, (c) if neither clause (a) nor (b) is applicable, the average of the reported high bid and low asked prices on such day, as reported by a reputable quotation service designated by the Company, or

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(d) if no such reported prices are available, the value of the Common Stock determined in good faith by the Board of Directors of the Company and certified in a board resolution, based, where possible, on the most recently completed arm’s length transaction between the Company and a person other than an Affiliate of the Company in which such determination is necessary.

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

“Exercise Price” shall have the meaning specified in Section 1B.

“Liquidation Preference” shall mean for each share of Preferred Stock, the liquidation preference then in effect for each such share of Preferred Stock, as provided for in the Certificate of Designation.

“Market Price” shall mean on any date specified herein, with respect to Preferred Stock, the amount per share equal to the greater of (a) the sum of the Liquidation Preference of such Preferred Stock plus all authorized, declared and unpaid dividends thereon as of such date and (b) the aggregate Current Market Value of the aggregate number of shares of Common Stock into which such share of Preferred Stock is convertible as of such date.

“Officer’s Certificate” shall mean a certificate signed in the name of the Company by its President, one of its Vice Presidents or its Treasurer.

“Original Preferred Stock” shall have the meaning specified in the opening paragraphs of this Warrant.

“Other Securities” shall mean any stock (other than Preferred Stock) and any other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Preferred Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Preferred Stock or Other Securities pursuant to Section 2C or otherwise.

“Person” shall mean and include an individual, a partnership, an association, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization and a government or any department or agency thereof.

“Preferred Stock” shall mean the Original Preferred Stock, any stock into which such stock shall have been converted or changed or any stock resulting from any reclassification of such stock.

“Required Holders” shall mean the holders of at least a majority of all the Warrants at the time outstanding, determined on the basis of the number of shares of Preferred Stock then purchasable upon the exercise of all Warrants then outstanding.

“Restricted Securities” shall mean (a) any Warrants bearing the applicable legend set forth in Section 8 and (b) any shares of Preferred Stock (or Other Securities) which have been issued upon the exercise of Warrants and which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (c) unless the context otherwise requires, any shares of Preferred Stock (or Other Securities) which are at the time issuable upon the exercise of Warrants and which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section.

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“Securities Act” shall mean the Securities Act of 1933, as amended.

“Tranche A 2009 Note” shall have the meaning specified in the opening paragraphs of this Warrant.

“Transaction” shall have the meaning specified in Section 2C.

“Warrant” shall have the meaning specified in the opening paragraphs of this Warrant.

Section 16.Remedies.  The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

Section 17.Notices.  Any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission or electronic mail, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

(i)if to the Company, to

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois  62401

Attention:  Douglas J. Tucker

Sr. Vice President and Corporate Counsel

Electronic Mail:  dtucker@midlandstatesbank.com

Telecopy:  (217) 342-9462

Confirmation:  (217) 342-7566

With a copy to:

Barack Ferrazzano Kirschbaum & Nagelberg, LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attention:  Dennis R. Wendte

Electronic Mail:Dennis.Wendte@bfkn.com

Telecopy:  (312) 984-3150

Confirmation:  (312) 984-3188

(ii)if to any holder of any Warrant or any holder of any Preferred Stock (or Other Securities), at the registered address of such holder as set forth in the applicable register kept at the principal office of the Company;

provided that the exercise of any Warrant shall be effected in the manner provided in Section 1.

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Section 18.Miscellaneous.

(a)This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

(b)The agreements of the Company contained in this Warrant other than those applicable solely to the Warrants and the holders thereof shall inure to the benefit of and be enforceable by any holder or holders at the time of any Preferred Stock (or Other Securities) issued upon the exercise of Warrants, whether so expressed or not, and shall survive the exercise of this Warrant.

(c)THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS WARRANT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

(d)ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE BROUGHT IN STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS WARRANT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 17, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS WARRANT BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(e)The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.

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IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the day and year first above written.

MIDLAND STATES BANCORP, INC.
By:	/s/ Douglas J. Tucker
		Name: Douglas J. Tucker
		Title: Senior Vice President and Corporate Counsel

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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)

To:  Midland States Bancorp, Inc.:

The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder,            shares(1) of Original Preferred Stock of Midland States Bancorp, Inc., [and herewith makes payment of $                               in cash therefor](2)/[surrenders $                       in principal amount of the Tranche A 2009 Note] (3)/[in a Cashless Exercise pursuant to Section 1F of the within Warrant](4), and requests that the certificates for such shares be issued in the name of, and delivered to                                                    whose address is                                                   .

Dated:
	(Signature must conform in all respects to name of holder as specified on the face of this Warrant)
	(Street Address)
	(City)	(State)	(Zip Code)

(1)Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise.  In the case of a partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of this Warrant, to the holder surrendering the same.

(2)Use in connection with an exercise involving a delivery of funds to the Company.

(3)Use in connection with an exercise involving the exchange of all or a portion of the principal amount of the Tranche A 2009 Note.

(4)Use in connection with a Cashless Exercise.

FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)

For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto                                                    the right represented by such Warrant to purchase                                                   (1) shares of Original Preferred Stock of Midland States Bancorp, Inc., to which such Warrant relates, and appoints                                                                                              its Attorney to make such transfer on the books of Midland States Bancorp, Inc., maintained for such purpose, with full power of substitution in the premises.

Dated:
	(Signature must conform in all respects to name of holder as specified on the face of this Warrant)
	(Street Address)
	(City)	(State)	(Zip Code)

Signed in the presence of:

(1)Insert here the number of shares called for on the face of the within Warrant (or, in the case of a partial assignment, the portion thereof as to which this Warrant is being assigned), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the within Warrant, may be delivered upon exercise.  In the case of a partial assignment, a new Warrant or Warrants will be issued and delivered, representing the portion of the within Warrant not being assigned, to the holder assigning the same.

EX-10.6

Exhibit 10.6

Series F Preferred Stock

Warrant No.   P-1

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

MIDLAND STATES BANCORP, INC.

Preferred Stock Purchase Warrant
Expiring April 1, 2016

Effingham, Illinois
May 11, 2011

MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), for value received, hereby certifies that RICHARD E. WORKMAN 2001 TRUST (Richard E. Workman 2001 Trust and each Person to whom this Warrant has been assigned or transferred in accordance with the terms hereof is referred to herein as a “holder”) is entitled to purchase from the Company five hundred (500) duly authorized, validly issued, fully paid and nonassessable shares of the Company’s Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock, $2.00 par value per share (the “Original Preferred Stock”), at an initial exercise price per share of $10,000 per share, at any time or from time to time after the date of this Warrant and prior to 5:00 p.m., Chicago time, on April 1, 2016, subject to extension as provided in Section 1G (such time and date, as extended pursuant to Section 1G, if applicable, the “Expiration Date”), all subject to the terms, conditions and adjustments set forth below in this Warrant.

This Warrant (the “Warrant”, such term to include each Warrant issued in substitution herefor) is being issued in exchange for that certain Series D Preferred Stock Purchase Warrant, dated December 31, 2010, which was issued in connection with the issuance by the Company of the Company’s Amended 2010 Term Note due April 1, 2020, in the aggregate principal amount of $5,000,000 (the “Amended 2010 Term Note”) pursuant to that certain Amended and Restated Credit Agreement, dated as of December 31, 2010, between the Company and Richard E. Workman 2001 Trust, as Lender (as amended from time to time, the “Amended and Restated Credit Agreement”).  The Warrant originally issued hereby evidences rights to purchase five hundred (500) shares of Original Preferred Stock, subject to adjustment as provided herein.  The term “Amended 2010 Term Note” as used herein shall include any note delivered in substitution or exchange for the Amended 2010 Term Note pursuant to the Amended and Restated Credit Agreement.  Certain capitalized terms used in this Warrant are defined in Section 15.

Section 1.Exercise of Warrant.

1A.Manner of Exercise.  This Warrant may be exercised by the holder hereof, in whole or in part, during normal business hours on any Business Day on or after the date of this Warrant to

and including the Expiration Date, by surrender of this Warrant, with the form of subscription at the end hereof (or a reasonable facsimile thereof) duly executed by such holder, to the Company at its principal office at 133 West Jefferson Avenue, Effingham, Illinois 62401, Attention: Douglas J. Tucker, Senior Vice President and Corporate Counsel, or such other office or agency of the Company as the Company may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company (or, if such exercise shall be in connection with an underwritten public offering of shares of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) subject to this Warrant, at the location at which the underwriters shall have agreed to accept delivery thereof), accompanied by payment in the amount (the “Exercise Payment Amount”) obtained by multiplying (a) the number of shares of Original Preferred Stock (without giving effect to any adjustment therein) designated in such form of subscription by (b) $10,000.  If this Warrant is exercised before April 1, 2016, the Exercise Payment Amount may be paid solely by the exchange of an amount of the principal of the Amended 2010 Term Note then outstanding equal to the Exercise Payment Amount.  If this Warrant is exercised on or after April 1, 2016, the Exercise Payment Amount may be paid, at the option of the holder, (i) in cash, by certified or official bank check payable to the order of the Company or by wire transfer of funds to the Company, (ii) by the exchange of an amount of the principal of the Amended 2010 Term Note then outstanding equal to the Exercise Payment Amount, or (iii) in accordance with Section 1F.

1B.Adjustment to Number of Shares of Preferred Stock.  The number of duly authorized, validly issued, fully paid and nonassessable shares of Preferred Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Preferred Stock which would otherwise (but for the provisions of Section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to Section 1A, by a fraction of which (x) the numerator is $10,000 and (y) the denominator is the Exercise Price in effect on the date of such exercise.  The “Exercise Price” shall initially be $10,000 per share, shall be adjusted and readjusted from time to time as provided in Section 2 and, as so adjusted and readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 2 (and the term “Exercise Price” at any time, as used herein, shall mean such price as last adjusted or readjusted).

1C.When Exercise Effective.  Each exercise of this Warrant shall be deemed to have been effected and the Exercise Price shall be determined immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1A, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Original Preferred Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 1D shall be deemed to have become the holder or holders of record thereof.  Notwithstanding the foregoing, if an exercise of all or any portion of this Warrant is being made in connection with (i) a proposed public offering of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) subject to this Warrant, (ii) a proposed Transaction, or (iii) a proposed sale of outstanding shares of Preferred Stock (or Other Securities) or Common Stock issuable upon the conversion of Preferred Stock (or Other Securities) subject to this Warrant, then, at the election of the holder of this Warrant, such exercise may be conditioned upon the consummation of such public offering, Transaction or sale, in which case such exercise shall be effective concurrently with the consummation of such public offering, Transaction or sale.

1D.Delivery of Stock Certificates, etc.  Promptly after the exercise of this Warrant, in whole or in part, and in any event within three Business Days thereafter (unless such exercise shall be in connection with a public offering of shares of Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities) or in connection with any Transaction or sale of outstanding shares of Preferred Stock (or Other Securities) or Common Stock issuable upon the conversion of the Preferred Stock (or Other Securities), in which event, at the election of the holder of this Warrant, concurrently with

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the effectiveness of such exercise, as provided in Section 1C, the Company at its expense will cause to be issued in the name of and delivered to the holder hereof or, subject to Section 8, as such holder may direct,

(1)a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Preferred Stock (or Other Securities) to which such holder shall be entitled upon such exercise, and

(2)in case such exercise is in part only, a new Warrant or Warrants of like tenor, specifying the aggregate on the face or faces thereof the number of shares of Preferred Stock equal to the number of such shares specified on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in Section 1A.

1E.Fractional Shares.  No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Preferred Stock or Other Securities issued upon such exercise.  If any fractional interest in a share of Preferred Stock would, except for the provisions of the first sentence of this Section 1E, be deliverable upon the exercise of this Warrant, the Company shall, in lieu of delivering the fractional share therefor, pay to the holder exercising this Warrant an amount in cash equal to the Market Price of such fractional interest.

1F.Cashless Exercise.  The holder of this Warrant may exercise its right to purchase some or all of the shares of Preferred Stock pursuant to this Warrant on a net basis without the exchange of any funds (a “Cashless Exercise”), such that, upon the exercise hereof, the holder hereof receives that number of shares of Preferred Stock subscribed to pursuant to this Warrant less that number of shares of Preferred Stock, valued at Market Price at the time of exercise, equal to the aggregate Exercise Price that would otherwise have been paid by the holder of this Warrant for such shares of Preferred Stock subscribed to.  (For example: a holder exercises the right to purchase 100 shares.  At that time the Market Price is $12,000 and the exercise price is $10,000.  The aggregate Exercise Price for 100 shares would be $1,000,000.  Therefore $1,000,000 ÷ $12,000 = 83.3.  The holder would receive 16.7 shares [100-83.3] under a Cashless Exercise).

1G.Notice of Expiration Date.  The Company shall provide the holder of this Warrant with written notice of its expiration no more than 45 days before April 1, 2016, and this Warrant shall not expire until the later of (i) April 1, 2016 or (ii) the 30th day after the date such notice of expiration is given to the holder by the Company.

Section 2.Protection Against Impairment of Rights; Adjustment of Exercise Price.

2A.Adjustments for Combinations of Stock Dividends or Stock Splits.  In case the outstanding shares of Preferred Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Preferred Stock, the Exercise Price in effect immediately prior to such combination or consolidation shall be proportionately increased.  In case the Company shall, at any time or from time to time after the date hereof, pay a dividend or make a distribution in respect of its Preferred Stock, in each case in shares of its Preferred Stock, or subdivide its outstanding shares of Preferred Stock, by reclassification or otherwise, into a greater number of shares of Preferred Stock, the Exercise Price in effect immediately prior to such dividend, distribution, or subdivision shall be proportionately reduced.  Such adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a combination, consolidation, or subdivision.  Such adjustments shall be made successively whenever any such event shall occur.

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2B.Minimum Adjustment of Exercise Price.  If the amount of any adjustment of the Exercise Price required hereunder would be less than one percent of the Exercise Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one percent of such Exercise Price; provided, that upon the exercise of this Warrant, all adjustments carried forward and not theretofore made up to and including the date of such exercise shall be made to the nearest .00001 of a cent.

2C.Changes in Preferred Stock.  If any capital reorganization or reclassification of the capital stock of the Company, any consolidation or merger of the Company with another Person (regardless of which entity is the surviving entity), the sale of all or substantially all of the assets of the Company to another Person, any liquidation of the Company or any other transaction (each such transaction being herein called a “Transaction”) shall be effected in such a way that holders of Preferred Stock shall be entitled to receive stock, securities or assets (including cash) upon conversion of or in exchange for Preferred Stock, then, as a condition of the consummation of the Transaction, lawful and adequate provisions (in form satisfactory to the Required Holders) shall be made whereby the holder of this Warrant shall thereafter have the right to receive upon the exercise hereof, upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and this Warrant shall thereafter represent the right to receive, such shares of stock, securities or assets (including cash) as may be issued or payable upon conversion of or in exchange for a number of outstanding shares of Preferred Stock equal to the number of shares of Preferred Stock which immediately theretofore were purchasable and receivable upon the exercise of the rights represented hereby had such Transaction not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise hereof.  In the event of a merger or consolidation of the Company with or into another Person as a result of which a number of shares of Preferred stock or other equity interests of the surviving Person greater or less than the number of shares of Preferred Stock of the Company outstanding immediately prior to such merger or consolidation are issuable to holders of Preferred Stock of the Company, then the Exercise Price in effect immediately prior to such merger or consolidation shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Preferred Stock of the Company.  Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property as to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity of the Warrants in accordance with the terms hereof and thereof, together with such other matters as such holders may reasonably request.  If a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding shares of Preferred Stock of the Company, the Company shall not effect any consolidation, merger or sale with the Person having made such offer or with any Affiliate of such Person, unless prior to the consummation of such consolidation, merger or sale, the holder of this Warrant shall have been given a reasonable opportunity to then elect to receive upon the exercise of this Warrant either the stock, securities or assets then issuable with respect to the Preferred

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Stock of the Company or the stock, securities or assets (including cash), or the equivalent, issued to previous holders of the Preferred Stock in accordance with such offer as if the shares of Preferred Stock issued upon the exercise of this Warrant had been issued.

2D.Notice of Adjustment.  Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to the holder of this Warrant an Officer’s Certificate stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Preferred Stock issuable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by the holder of this Warrant stating that such holder contemplates the exercise of such Warrant, the Company will obtain and deliver to the holder of this Warrant the opinion of its regular independent auditors or another firm of independent public accountants of recognized national or regional standing selected by the Company’s Board of Directors, which opinion shall confirm the statements in the most recent Officer’s Certificate delivered under this Section 2D.

2E.Other Notices.  In case at any time:

(1)the Company shall declare or pay to the holders of Preferred Stock any dividend, other than a cash dividend in accordance with Section 2(a) of the Certificate of Designation;

(2)the Company shall offer for subscription pro rata to the holders of Preferred Stock any additional shares of stock of any class or other rights;

(3)any matter shall be submitted to the holders of the Preferred Stock for their vote or written consent;

(4)there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity;

(5)there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company;

(6)the Company, subject to Section 2G(2), shall (i) exercise its right to call and convert all of the then outstanding shares of Preferred Stock into shares of Common Stock pursuant to Section 3(c) of the Certificate of Designation (the “Mandatory Conversion Right”), or (ii) exercise its right to call and redeem all of the then outstanding shares of Preferred Stock pursuant to Section 5 of the Certificate of Designation (the “Mandatory Redemption Right”);

(7)there shall be made any tender offer for any shares of capital stock of the Company; or

(8)there shall be any other Transaction;

then, in any one or more of such cases, the Company shall give to the holder of this Warrant, (i) at least 15 days prior to (A) the date on which the books of the Company shall close or a record shall be taken (each, a “Record Date”) with respect to any event referred to in subsections (1) through (6) above or, if no Record Date is fixed for an event referred to in subsection (6), (B) the date on which it gives notice of exercise of the Mandatory Conversion Right or notice of exercise of the Mandatory Redemption Right,

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and within five days after it has knowledge of any pending tender offer or other Transaction, written notice of the Record Date for such dividend, distribution or  subscription rights, for the exercise of the Mandatory Conversion Right or Mandatory Redemption Right or for determining rights to vote in respect of any matter submitted to the holders of Preferred Stock for their vote or written consent or in respect of such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction or of the date by which shareholders must tender shares in any tender offer and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or tender offer or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place.  Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Preferred Stock shall be entitled thereto, or in the case of the exercise of the Mandatory Conversion Right or Mandatory Redemption Right, the conversion date or redemption date, as applicable, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, tender offer or Transaction, as the case may be.  Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required.

2F.Certain Events.  If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company, the other provisions of this Warrant are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company shall appoint its regular independent auditors or another firm of independent public accountants of recognized national or regional standing which shall give their opinion upon the adjustment, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of the holders of the Warrants.  Upon receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments described therein; provided, that no such adjustment shall have the effect of increasing the Exercise Price as otherwise determined pursuant to this Warrant.  The Company may make such reductions in the Exercise Price as it deems advisable, including any reductions necessary to ensure that any event treated for Federal income tax purposes as a distribution of stock or stock rights not be taxable to recipients.

2G.Prohibition of Certain Actions.

(1)The Company shall not, without the prior written consent of the Required Holders:

(a)amend the Certificate of Designation;

(b)declare or pay any dividend or distribution on the Preferred Stock in excess of the dividends payable thereon under Section 2(a) of the Certificate of Designation; or

(c)take any action that requires, under the Certificate of Designation, the vote or written consent of the holders of at least 75% of the shares of Preferred Stock if, as of the record date for such vote or the date of such written consent, the shares of Preferred Stock issuable upon exercise of the Warrants would constitute, after giving effect to such exercise, more than 25% of the then outstanding Preferred Stock.

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(2)The Company shall not exercise (a) the Mandatory Conversion Right, or (b) the Mandatory Redemption Right prior to the fifth anniversary of the date on which the Company first issues one or more shares of Preferred Stock upon the exercise of the Warrant.

(3)For so long as any Warrant is outstanding, the Company shall not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant.  Without limiting the generality of the foregoing, the Company

(a)shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock upon the exercise of all Warrants from time to time outstanding; and

(b)shall not take any action which results in any adjustment of the Exercise Price if the total number of shares of Preferred Stock or Other Securities issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Preferred Stock or Other Securities then authorized by the Company’s certificate of incorporation and available for the purpose of issue upon such conversion.

Section 3.Stock to be Reserved.  The Company will at all times reserve and keep available out of the authorized Preferred Stock, solely for the purpose of issue upon the exercise of the Warrants as herein provided, such number of shares of Preferred Stock as shall then be issuable upon the exercise of all outstanding Warrants, and the Company will maintain at all times all other rights and privileges sufficient to enable it to fulfill all its obligations hereunder.  The Company covenants that all shares of Preferred Stock which shall be so issuable shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and that the issuance of such shares of Preferred Stock shall be free from preemptive or similar rights on the part of the holders of any shares of capital stock or securities of the Company or any other Person, and free from all taxes, liens and charges with respect to the issue thereof (not including any income taxes payable by the holders of Warrants being exercised in respect of gains thereon), and the Exercise Price will be credited to the capital and surplus of the Company.  The Company will take all such action as may be necessary to assure that such shares of Preferred Stock may be so issued without violation of any applicable law or regulation, or of any applicable requirements of the National Association of Securities Dealers, Inc. and of any domestic securities exchange upon which the Preferred Stock may be listed.

Section 4.Federal Reserve Board and Other Approvals.

(a)Notwithstanding any other provision of this Warrant, the holder shall not have the right to exercise this Warrant, and the Company shall have no obligation to deliver shares of Preferred Stock upon the exercise hereof, if the issuance of such shares to the holder requires the approval of the Board of Governors of the Federal Reserve System (including, without limitation, any approval pursuant to the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control Act of 1978, as amended, of the holder’s ownership of 10% or more of the outstanding shares of any class of voting securities or control of the Company) (“Federal Reserve Board Approval”) and such approval is not obtained on or before the date of exercise of the Warrant.  The Company will, at its expense and as expeditiously as possible, cooperate with the holder to obtain any required Federal Reserve Board Approval.

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(b)At any such time as the Preferred Stock is listed on any national securities exchange, the Company will, at its expense, obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Preferred Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance so long as the Preferred Stock is so listed or quoted; and the Company will also cause to be so listed, will register under the Exchange Act and will maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.

Section 5.Issue Tax.  The issuance of certificates for shares of Preferred Stock upon exercise of this Warrant shall be made without charge to the holders hereof for any issuance tax in respect thereto.

Section 6.Closing of Books.  The Company will at no time close its transfer books against the transfer of any Warrant or of any share of Preferred Stock (or Other Securities) issued or issuable upon the exercise of any Warrant in any manner which interferes with the timely exercise of such Warrant.

Section 7.No Rights or Liabilities as Stockholders.  This Warrant shall not entitle the holder thereof to any of the rights of a stockholder of the Company, except as expressly contemplated herein.  No provision of this Warrant, in the absence of the actual exercise of such Warrant and receipt by the holder thereof of Preferred Stock issuable upon such conversion, shall give rise to any liability on the part of such holder as a stockholder of the Company, whether such liability shall be asserted by the Company or by creditors of the Company.

Section 8.Restrictive Legends.  Except as otherwise permitted by this Section 8, each Warrant originally issued and each Warrant issued upon direct or indirect transfer of, or in substitution for, any Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:

“This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act.”

Except as otherwise permitted by this Section 8, (a) each certificate for Preferred Stock (or Other Securities) issued upon the exercise of any Warrant, and (b) each certificate issued upon the direct or indirect transfer of any such Preferred Stock (or Other Securities) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act.”

The holder of any Restricted Securities shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the applicable legend set forth above in this Section 8 when such securities shall have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering such Restricted Securities, (b) sold to the public pursuant to Rule 144 or any comparable rule under the Securities Act, or (c) when, in the opinion of independent counsel for the holder thereof experienced in Securities Act matters, such restrictions are no longer required in order to insure compliance with the Securities Act.

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Section 9.Transfers.

9A.Transfers Prior to the Initial Exercise Date.  Subject to Section 9C, prior to April 1, 2016, this Warrant may not be transferred in whole, or in part, except to one or more Persons to whom all or a portion of the indebtedness evidenced by the Amended 2010 Term Note has been transferred.  If, prior to April 1, 2016, less than all of the principal amount of the Amended 2010 Term Note is transferred to any Person, then the holder of this Warrant may transfer to such Person only Warrants for that number of shares of Preferred Stock equal to the product of (a) the number of shares of Original Preferred Stock times (b) a fraction, the numerator of which is the principal amount of the Amended 2010 Term Note transferred to such Person, and the denominator of which is $5,000,000.

9B.Transfers On or After April 1, 2016.  Subject to Section 9C, on or after April 1, 2016, this Warrant is detachable from the Amended 2010 Term Note and may be transferred, in whole or in part, to one or more Persons, separate from the Amended 2010 Term Note.

9C.Requirement that Transfers Be Made Only to Accredited Investors.  Notwithstanding the provisions of Section 9A and 9B, this Warrant (i) may be transferred only to one or more “accredited investors” as such term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act (an “Accredited Investor”) and (ii) may not be transferred to any “bank holding company” or “bank” as such terms are defined in the Bank Holding Company Act of 1956, as amended.  At least 10 Business Days prior to transferring this Warrant, in whole or in part, the holder shall provide written notice to the Company of the name of the proposed transferee(s).

Section 10.  Representations and Warranties of the Holder.  The holder of this Warrant, by the acceptance hereof, represents and warrants and agrees as follows:

(1)Such holder is an Accredited Investor, is acquiring this Warrant and, upon exercise hereof, will acquire the shares of Preferred Stock (or Other Securities) and any shares of Common Stock into which such shares of Preferred Stock are convertible (collectively, the “Warrant Securities”), for such holder’s own account and not with a view towards, or for resale in connection with, the public sale or distribution of the Warrant Securities, except pursuant to sales registered or exempted from registration under the Securities Act.  The delivery of this Warrant for exercise shall constitute confirmation at such time by the holder of the representations concerning the Warrant Securities set forth in the preceding sentence, unless contemporaneous with the delivery of this Warrant for exercise, the holder notifies the Company in writing that it is not making such representation (a “Representation Notice”).  If a holder delivers a Representation Notice in connection with an exercise, it shall be a condition to such holder’s exercise of this Warrant and the Company’s obligations under Section 1 in connection with such exercise, that the Company receive such other representations as the Company reasonably considers necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any United States or state securities laws, and the time periods for the Company’s compliance with its obligations under Section 1D shall be tolled until such holder provides the Company with such other representations;

(2)Such holder understands that the Warrant Securities are “restricted securities” under the federal securities laws in as much as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations neither this Warrant nor the Warrant Securities issuable upon its exercise may be resold without registration under the Securities Act or an exemption from such registration;

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(3)Such holder will not offer or sell this Warrant or any of the Warrant Securities in the absence of an effective registration statement for the Warrant or the Warrant Securities, as applicable, under the Securities Act and such state or other laws as may be applicable, or receipt by the Company of a written opinion of counsel, in form and substance reasonably acceptable to the Company, that such registration is not required; provided, however, that no such opinion shall be required in connection with (i) a transaction pursuant to Rule 144 in which the holder provides the Company with certifications reasonably requested by the Company regarding compliance with the terms and provisions of Rule 144 or (ii) a distribution of any Warrant Securities to an Affiliate of the holder, so long as such Affiliate does not pay any consideration in connection with such distribution (other than the issuance of equity securities in such Affiliate) and the holder provides the Company with certifications reasonably requested by the Company in connection therewith.

(4)Such holder acknowledges and understands that the Warrant and each certificate for the Warrant and Warrant Securities will bear the legends set forth in Section 8 under the terms and circumstances set forth therein; and

(5)Such holder acknowledges and understands that the holder shall not have the right to exercise this Warrant, and the Company shall have no obligation to deliver shares of Preferred Stock upon the exercise hereof, if any Federal Reserve Board Approval required in connection with the issuance of such shares of Preferred Stock to the holder is not obtained by the holder on or before the date of exercise of the Warrant.

Section 11.Information Required By Rule 144A.  The Company will, upon the request of the holder of this Warrant or of any shares of Preferred Stock issued upon the exercise of this Warrant, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Warrants or shares of Preferred Stock, except at such times as the Company is subject to and in compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act.  For the purpose of this Section 11, the term “qualified institutional buyer” shall have the meaning specified in Rule 144A under the Securities Act.

Section 12.Ownership, Transfer and Replacement of Warrants.

12A.Ownership of Warrants.  Except as otherwise required by law, the Company may treat the Person in whose name any Warrant is registered on the register kept at the principal office of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company, in its discretion, may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the Company to the contrary.  Subject to Section 8, a Warrant, if properly assigned, may be exercised by a new holder without first having a new Warrant issued.

12B.Transfer and Exchange of Warrants.  Upon the surrender of any Warrant, properly endorsed, for registration of transfer or for exchange at the principal office of the Company, the Company at its expense will (subject to compliance with Section 8, if applicable, and Section 10), execute and deliver to or upon the order of the holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Original Preferred Stock called for on the face or faces of the Warrant or Warrants so surrendered.

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12C.Replacement of Warrants.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant held by a Person other than any institutional investor, upon delivery of its unsecured indemnity or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal office of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

Section 13.Registration Rights.  The holder of this Warrant shall be entitled to certain registration rights under a registration rights agreement to be entered into between the Company or its successor and the Richard E. Workman 2001 Trust (the “Registration Rights Agreement”) in connection with the offer and sale of shares of Common Stock issuable upon the conversion of Preferred Stock (or Other Securities) issued upon exercise of this Warrant, upon the execution and delivery by the holder of the Registration Rights Agreement or a joinder to the Registration Rights Agreement.

Section 14.Information Rights.  Each holder of Warrants shall be entitled to receive audited annual financial statements of the Company, as soon as such statements become available.

Section 15.Definitions.  As used herein, unless the context otherwise requires, the following terms have the following respective meanings:

“Affiliate” shall mean, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  The grantor of a revocable trust shall be deemed to control such revocable trust.

“Amended 2010 Term Notes” shall have the meaning specified in the opening paragraphs of this Warrant.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to close.

“Cashless Exercise” shall have the meaning specified in Section 1F.

“Certificate of Designation” shall mean the Statement of Resolution Establishing Series of Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company, as filed with the Secretary of State of the State of Illinois prior to the date hereof.

“Common Stock” shall mean the common stock of the Company, $0.01 par value per share, or the common equity securities of any successor to the Company, including any surviving Person in a Transaction.

“Company” shall have the meaning specified in the opening paragraphs of this Warrant.

“Current Market Value” shall mean on any date specified herein, with respect to the Common Stock, (a) if the Common Stock is listed or admitted to trading on any securities exchange, the closing price, regular way, on such day on the principal exchange on which such Common Stock is traded, or if no sale takes place on such day, the average of the closing bid and asked prices on such day; (b) if the Common Stock is not then listed or admitted to trading on any securities exchange, the last reported sale price on such day, or if there is no such last reported sale price on such day, the average of

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the closing bid and the asked prices on such day, as reported by a reputable quotation source designated by the Company, (c) if neither clause (a) nor (b) is applicable, the average of the reported high bid and low asked prices on such day, as reported by a reputable quotation service designated by the Company, or (d) if no such reported prices are available, the value of the Common Stock determined in good faith by the Board of Directors of the Company and certified in a board resolution, based, where possible, on the most recently completed arm’s length transaction between the Company and a person other than an Affiliate of the Company in which such determination is necessary.

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

“Exercise Price” shall have the meaning specified in Section 1B.

“Liquidation Preference” shall mean for each share of Preferred Stock, the liquidation preference then in effect for each such share of Preferred Stock, as provided for in the Certificate of Designation.

“Market Price” shall mean on any date specified herein, with respect to Preferred Stock, the amount per share equal to the greater of (a) the sum of the Liquidation Preference of such Preferred Stock plus all authorized, declared and unpaid dividends thereon as of such date and (b) the aggregate Current Market Value of the aggregate number of shares of Common Stock into which such share of Preferred Stock is convertible as of such date.

“Officer’s Certificate” shall mean a certificate signed in the name of the Company by its President, one of its Vice Presidents or its Treasurer.

“Original Preferred Stock” shall have the meaning specified in the opening paragraphs of this Warrant.

“Other Securities” shall mean any stock (other than Preferred Stock) and any other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Preferred Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Preferred Stock or Other Securities pursuant to Section 2C or otherwise.

“Person” shall mean and include an individual, a partnership, an association, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization and a government or any department or agency thereof.

“Preferred Stock” shall mean the Original Preferred Stock, any stock into which such stock shall have been converted or changed or any stock resulting from any reclassification of such stock.

“Required Holders” shall mean the holders of at least a majority of all the Warrants at the time outstanding, determined on the basis of the number of shares of Preferred Stock then purchasable upon the exercise of all Warrants then outstanding.

“Restricted Securities” shall mean (a) any Warrants bearing the applicable legend set forth in Section 8 and (b) any shares of Preferred Stock (or Other Securities) which have been issued upon the exercise of Warrants and which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (c) unless the context otherwise requires, any shares of Preferred Stock (or Other Securities) which are at the time issuable upon the exercise of Warrants and which, when

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so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Transaction” shall have the meaning specified in Section 2C.

“Warrant” shall have the meaning specified in the opening paragraphs of this Warrant.

Section 16.Remedies.  The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

Section 17.Notices.  Any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission or electronic mail, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

(i)if to the Company, to

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois  62401

Attention:  Douglas J. Tucker

Sr. Vice President and Corporate Counsel

Electronic Mail:  dtucker@midlandstatesbank.com

Telecopy:  (217) 342-9462

Confirmation:  (217) 342-7566

With a copy to:

Barack Ferrazzano Kirschbaum & Nagelberg, LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attention:  Dennis R. Wendte

Electronic Mail:Dennis.Wendte@bfkn.com

Telecopy:  (312) 984-3150

Confirmation:  (312) 984-3188

(ii)if to any holder of any Warrant or any holder of any Preferred Stock (or Other Securities), at the registered address of such holder as set forth in the applicable register kept at the principal office of the Company;

provided that the exercise of any Warrant shall be effected in the manner provided in Section 1.

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Section 18.Miscellaneous.

(a)This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

(b)The agreements of the Company contained in this Warrant other than those applicable solely to the Warrants and the holders thereof shall inure to the benefit of and be enforceable by any holder or holders at the time of any Preferred Stock (or Other Securities) issued upon the exercise of Warrants, whether so expressed or not, and shall survive the exercise of this Warrant.

(c)THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS WARRANT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

(d)ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE BROUGHT IN STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS WARRANT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 17, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS WARRANT BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(e)The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.

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IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the day and year first above written.

MIDLAND STATES BANCORP, INC.
By:	/s/ Douglas J. Tucker
	Name: Douglas J. Tucker
	Title: Senior Vice President and Corporate Counsel

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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)

To:  Midland States Bancorp, Inc.:

The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder,            shares(1) of Original Preferred Stock of Midland States Bancorp, Inc., [and herewith makes payment of $                               in cash therefor](2)/[surrenders $                       in principal amount of the Amended 2010 Term Note] (3)/[in a Cashless Exercise pursuant to Section 1F of the within Warrant](4), and requests that the certificates for such shares be issued in the name of, and delivered to                                                    whose address is                                                   .

Dated:
	(Signature must conform in all respects to name of
	holder as specified on the face of this Warrant)
	(Street Address)
	(City)	(State)	(Zip Code)

(1)Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise.  In the case of a partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of this Warrant, to the holder surrendering the same.

(2)Use in connection with an exercise involving a delivery of funds to the Company.

(3)Use in connection with an exercise involving the exchange of all or a portion of the principal amount of the Amended 2010 Term Note.

(4)Use in connection with a Cashless Exercise.

FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)

For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto                                                    the right represented by such Warrant to purchase                                                   (1) shares of Original Preferred Stock of Midland States Bancorp, Inc., to which such Warrant relates, and appoints                                                                                              its Attorney to make such transfer on the books of Midland States Bancorp, Inc., maintained for such purpose, with full power of substitution in the premises.

Dated:
	(Signature must conform in all respects to name of
	holder as specified on the face of this Warrant)
	(Street Address)
	(City)	(State)	(Zip Code)

Signed in the presence of:

(1)Insert here the number of shares called for on the face of the within Warrant (or, in the case of a partial assignment, the portion thereof as to which this Warrant is being assigned), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the within Warrant, may be delivered upon exercise.  In the case of a partial assignment, a new Warrant or Warrants will be issued and delivered, representing the portion of the within Warrant not being assigned, to the holder assigning the same.

EX-10.7

Exhibit 10.7

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of January 18, 2011, is entered into between MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), and the RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (the “Initial Holder”).

1.DEFINITIONS.  As used herein, unless the context otherwise requires, the following terms have the following respective meanings:

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  The grantor of a revocable trust shall be deemed to control such revocable trust.

“Business Day” means any day other than a Saturday, Sunday, legal holiday or other day on which banks in the State of Illinois are closed.

“Common Stock” means the common stock of the Company, $2.00 par value per share, or the common equity securities of any successor company to the Company into which the Common Stock is converted or for which it is exchanged a result of a merger, reincorporation or other transaction in which the Company is not the surviving entity.

“Company” has the meaning set forth in the introductory paragraph of this Agreement and shall include any successor of the Company.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations of the SEC thereunder, as amended and in effect from time to time.

“Holder” means (i) the Initial Holder and (ii) any other Person who subsequently becomes a holder of Registrable Securities and a party to this Agreement in accordance with Section 6.

“Initial Holders” has the meaning set forth in the introductory paragraph of this Agreement.

“Initial Public Offering” means the first firm commitment Underwritten Offering of Common Stock to the public pursuant to an effective registration statement under the Securities Act.

“Person” means a corporation, an association, a partnership, a business, an individual, a limited liability company, a governmental or political subdivision thereof or a governmental agency.

“Registrable Securities” means any shares of Common Stock (a) held by the Initial Holder at any time, including any shares of Common Stock issued or issuable upon the conversion of the Series C Preferred Stock currently held by the Initial Holder; (b) issued or issuable upon the conversion of any shares of Series C Preferred Stock or Series D Preferred Stock acquired or that may be acquired by any Holder upon the exercise of a Warrant, or (c) issued or issuable with respect to any shares of Common Stock referred to in the preceding clauses (a) and (b) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise.  As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities have been sold pursuant to such registration statement, (ii) such securities shall have been sold to the public pursuant to Rule 144, (iii) such securities shall have ceased to be outstanding, or (iv) such securities have been transferred in a transaction in which the transferor’s rights hereunder are not assigned to a transferee or transferees in accordance with Section 6 hereof.  For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire such Registrable Securities (by conversion, exercise or otherwise, including successive exercises and conversions), whether or not such acquisition has actually been effected.

“Registration Expenses” means all expenses incident to the Company’s performance of or compliance with its obligations under Section 2 hereof, including, without limitation, all SEC and any stock exchange registration, listing, filing or Financial Industry Regulatory Authority, Inc. fees; all fees and expenses of complying with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications); all messenger and delivery expenses; the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or “comfort” letters required by or incident to such performance and compliance; any fees and disbursements of underwriters customarily paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained in connection with the requested registration; and the fees and disbursements of one counsel for the Holders, chosen by the Holders of a majority of the Registrable Securities included in any registration under Section 2.1 or 2.2, but excluding underwriting discounts and commissions and fees and disbursements of any additional counsel employed by any such Holder.

“Requisite Holders” means the holder or holders of 51% or more of the Registrable Securities.

“Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

“SEC” means the Securities and Exchange Commission or any other Federal agency that subsequently administers the Securities Act.

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“Series C Preferred Stock” means the Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company.

“Series C Warrant” means the Preferred Stock Purchase Warrant, dated December 31, 2010, pursuant to which the Company has granted the Initial Holder the right to purchase Series C Preferred Stock on the terms and conditions specified therein.

“Series D Preferred Stock” means the Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company.

“Series D Warrant” means the Preferred Stock Purchase Warrant, dated December 31, 2010, pursuant to which the Company has granted the Initial Holder the right to purchase Series D Preferred Stock on the terms and conditions specified therein.

“Securities Act”  means the Securities Act of 1933, and the rules and regulations of the SEC thereunder, as amended and in effect from time to time.

“Underwritten Offering” means an offering and sale of Common Stock pursuant to an effective registration statement under the Securities Act in which the Common Stock is sold to an underwriter for offering and sale to the public.

“Warrants” means the Series C Warrant and the Series D Warrant.

2.REGISTRATION UNDER SECURITIES ACT, ETC.

2.1.Demand Registration Rights.

(a)Request.  Upon the receipt of the written request of the Holder or Holders, requesting that the Company effect the registration under the Securities Act of a number of Registrable Securities that have, in the good faith opinion of the Company, an aggregate fair market value of at least $5 million and specifying the intended method of disposition thereof and whether or not such requested registration is to be an Underwritten Offering, the Company will promptly give written notice of such requested registration to all other Holders and thereupon, subject to Section 2.1(g), the Company will use its best efforts to effect the registration under the Securities Act of:

(i)the Registrable Securities which the Company has been so requested to register by such Holders, and

(ii)all other Registrable Securities which the Company has been requested to register by the Holders thereof by written request given to the Company within 30 days after the giving of such written notice by the Company, all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered.

(b)Registration Statement Form. Registrations under this Section 2.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and as shall be reasonably acceptable to the Holders of a majority of the Registrable

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Securities requested to be so registered and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration.

(c)Expenses. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this Section 2.1 (whether or not such registration shall be effected).

(d)Effective Registration Statement. A registration requested pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after it has become effective, such registration is subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (iii) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied or (iv) unless the holders of the Registrable Securities requested to be included in such registration are able to register and sell at least 90% of the Registrable Securities requested to be included in such registration at a price reasonably satisfactory to the Holders of a majority of the Registrable Securities requested to be included in such registration.

(e)Selection of Underwriters. If a requested registration pursuant to this Section 2.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the Holders of a majority of the Registrable Securities requested to be included in the registration, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed.

(f)Priority in Demand Registrations. No securities, other than Common Stock, shall be included in any offering of securities by the Company effected pursuant to Section 2.1 without the consent of the Holders of a majority of the Registrable Securities requested to be included in such registration.  If Registrable Securities registered pursuant to this Section 2.1 are to be sold in a firm commitment Underwritten Offering and the managing underwriter or underwriters shall advise the Holders in writing that, in their opinion, the total number or dollar amount of Registrable Securities and other Common Stock requested to be included in such offering (including, without limitation, Common Stock proposed to be included by other holders of Common Stock entitled to include Common Stock in such registration pursuant to piggyback registration rights) exceeds the number which can be sold in such offering within a price range acceptable to the Holders of a majority or more of the Registrable Securities requested to be included in such registration, then there shall be included in such firm commitment Underwritten Offering, the number or dollar amount of Registrable Securities that in the opinion of such managing underwriter can be sold without adversely affecting such offering, and such number of Registrable Securities and other Common Stock shall be allocated as follows: (i) first, pro rata among the Holders on the basis of the percentage of Registrable Securities (on an as-converted basis, if applicable) requested to be included in such registration statement by such Holders; (ii) second, pro rata among any holders of piggyback registration rights (other than the Holders) on the basis of the percentage of the number of shares of Common Stock requested to be included in such Registration Statement by such holders; and (iii) third, shares of Common Stock to be sold for the Company’s account for which inclusion in such registration statement was requested by the Company.  For the avoidance of doubt, if the total

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number or dollar amount of Registrable Securities requested to be included in the registration statement pursuant to this Section 2.1 exceeds the maximum number or amount that the managing underwriter or underwriters believe can be sold without adversely affecting the success of such offering, no securities, other than Registrable Securities, shall be included among the securities covered by such registration.

(g)Limitations. Anything in Section 2.1(a) to the contrary notwithstanding, the Company will not be required to effect a registration pursuant to this Section 2.1(a) (i) prior to 180 days following the effective date of the registration statement with respect to the Initial Public Offering, (ii) within 180 days after the effective date of the final prospectus for a previous registration pursuant to Section 2.1(a), or (iii) unless the Registrable Securities to be included in the registration have, in the good faith opinion of the Company, an aggregate fair market value of at least $5 million as of the time that a request for registration, pursuant to Section 2.1(a), is made.  In addition, subject to Section 2.1 (i), the Company will not be required to effect more than one registration under Section 2.1(a).

(h)Company’s Right to Delay Registration.  Notwithstanding any other provision of this Agreement, if the Board of Directors of the Company determines in good faith that the filing or effectiveness of a registration statement in connection with any requested registration under Section 2.1(a) would be reasonably likely to materially and adversely affect any material contemplated acquisition, divestiture, registered primary offering or other action as to which the Company has then taken substantial steps, or would require disclosure of facts or circumstances, which disclosure would be reasonably likely to materially and adversely affect any material contemplated acquisition, divestiture, registered primary offering or other action as to which the Company has then taken substantial steps, then the Company may delay such registration for a period of up to 120 days so long as the Company is still pursuing the action that allowed such delay (it being agreed that the Company may not delay requested registrations pursuant to this Section 2.1(h) more than once during any period of 360 consecutive days).  If the Company postpones the filing or effectiveness of a registration statement pursuant to this Section 2.1(h), it shall promptly notify the Holders of Registrable Securities in writing when the events or circumstances permitting such postponement have ended.

(i)Clean-Up Demand Registration.  If, after a registration in compliance with Section 2.1(a) has become effective, the Holders shall not have sold all of their Registrable Securities due to proration pursuant to Section 2.1(f), then the Requisite Holders shall be entitled to one additional request under Section 2.1(a) in which the Holders then holding Registrable Securities shall not be subject to proration with any other holders of securities of the Company entitled to participate in such registration; provided that such registration request complies with the requirements of Section 2.1(g).

2.2Piggyback Registration.

(a)Right to Include Registrable Securities. If the Company at any time proposes to register any of its securities under the Securities Act (other than by a registration on Form S-4 or Form S-8 or any successor or similar form and other than pursuant to Section 2.1), whether or not for sale for its own account, it will each such time give prompt written notice to all Holders of its intention to do so, specifying the intended method of disposition thereof, and of

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such Holders’ rights under this Section 2.2.  Upon the written request of any such Holder made within 30 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holder or Holders entitled to do so to request that such registration be effected as a registration under Section 2.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities.  No registration effected under this Section 2.2 shall be deemed to have been effected pursuant to Section 2.1 or shall relieve the Company of its obligation to effect any registration upon request under Section 2.1.

(b)Priority in Piggyback Registrations. If (i) a registration pursuant to this Section 2.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, and (ii) the managing underwriter or underwriters of such underwritten offering shall inform the Company and the Holders requesting such registration in writing that, in their opinion, the number or dollar amount of securities requested to be included in such registration exceeds the number or dollar amount which can be sold in (or during the time of) such offering a price reasonably acceptable to the Company (or, if such registration involves an offering of securities pursuant to a demand by such holders under rights of such holders similar to the rights granted to the Holders under Section 2.1 hereof, reasonably acceptable to the holders of such rights, as the case may be), then the Company will include in such registration, to the extent of the number or dollar amount which the Company is so advised can be sold in (or during the time of) such offering, (i) first, all securities proposed by the Company to be sold for its own account (or, if such registration involves an offering of securities proposed to be sold by holders of securities pursuant to as demand by such holders of securities pursuant to a demand by such holders under rights of such holders similar to the rights granted to the Holders under Section 2.1 hereof, all securities proposed to be sold by such holder, as the case may be), (ii) second, such Registrable Securities requested to be included in such registration pro rata on the basis of the percentage of the Registrable Securities of the Company held by each Holder that has requested that Registrable Securities be included in such registration, and (iii) third, all other securities of the Company requested to be included in such registration pro rata on the basis of the numbers of such securities so requested to be included.  In connection with any registration as to which the provisions of this Section 2.2(b) apply with the result that not all of the Registrable Securities requested to be included in such registration are included in such

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registration, then no securities other than securities referred to in clause “first”, above, or Registrable Securities shall be included in such registration.

(c)Expenses. The Company will pay all Registration Expenses in connection with any registration pursuant to this Section 2.2 (whether or not such registration shall be effected).

2.3.Registration Procedures.

(a)If and whenever the Company is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Company will as expeditiously as practicable:

(i)(A) prepare and file with the SEC a registration statement on the appropriate form which includes such Registrable Securities, (B) promptly respond to all comments received with respect to such registration statement and make and file all amendments thereto deemed necessary by the Company’s legal counsel, and (C) thereafter use its reasonable efforts to cause such registration statement to become effective at the earliest practicable date;

(ii)prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement accurate and effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities and other securities covered by such registration statement until the earlier of such time as all of such Registrable Securities have been disposed of by the sellers thereof set forth in such registration statement or for the longer of (A) nine months or (B) if the Company is eligible to conduct a continuous secondary offering pursuant to Rule 415 under the Securities Act, two years;

(iii)furnish to each such seller of Registrable Securities at least two Business Days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and not file any such amendment or supplement to which any such seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder;

(iv)furnish to each seller of such Registrable Securities one copy of such registration statement and of each such amendment thereof and supplement thereto (in each case including all exhibits and documents filed therewith), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents, if any, incorporated by reference in such registration statement or prospectus, and such other documents as such seller may reasonably request;

(v)use its reasonable efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller thereof shall reasonably request and to keep such registration or qualification in effect for so long as such registration statement remains in effect and do any and all other acts and things that may be necessary or advisable to enable such seller to consummate

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the disposition in such jurisdictions of its Registrable Securities covered by such registration statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this subdivision (v), be obligated to be so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(vi)notify each seller of Registrable Securities of any stop order issued or threatened by the SEC and take all reasonable action required to prevent the entry of such stop order or to remove it if entered;

(vii)if such registration statement relates to an underwritten offering, (A) enter into an underwriting agreement with the underwriters for such offering, in form and substance satisfactory to each seller of Registrable Securities and the underwriters and containing such representations and warranties by the Company and such other terms as are generally prevailing in underwriting agreements of the same type, including, without limitation, indemnities to the effect and to the extent provided in Section 2.5, and (B) obtain and furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller, of the legal opinions and accountants’ comfort letters which are to be delivered to the underwriters;

(viii)make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(ix)promptly notify each seller whose Registrable Securities are covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly prepare a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(x)otherwise use its reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its securities holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month of the first fiscal quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

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(xi)cause all such Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed;

(xii)use commercially reasonable efforts to cause its management to participate fully in the sale process relating to such offering, including the preparation of the applicable registration statement and the preparation and presentation of any “road shows,” whether domestic or international; and

(xiii)take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of the Registrable Securities covered by such registration statement.

(b)Required Information.  The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the intended distribution of its securities as the Company may from time to time reasonably request in writing and as shall be required by law or by the SEC in connection with such registration.

(c)Discontinuance of Disposition of Registrable Securities.  Each Holder agrees that upon receipt of any notice from the Company of the happening of any event of the kind described in clause (ix) of Section 2.3(a), such Holder will forthwith discontinue such Holder’s disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by clause (ix) of Section 2.3(a) and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such holder’s possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

2.4Withdrawal.  If any Holder participating in a registration hereunder disapproves of the terms of any offering, such Holder shall have the right, in its sole discretion, to withdraw such Holder’s Registrable Securities from such registration by giving written notice to the Company and the managing underwriter (if any).  If such registration was commenced pursuant to a request under Section 2.1(a) and if the Holders participating in such registration withdraw such number of Registrable Securities from the offering so as to decrease the amount of Registrable Securities included in the registration below the minimum threshold set forth in Section 2.1(g), then the Company shall permit, to the extent reasonably possible, other Holders to increase the amount of Registrable Securities they requested be to included in such registration; provided, however, if the aggregate amount of Registrable Securities to be included in such registration following all such increases is less than $4 million, the Company may withdraw the registration, and such registration shall nevertheless be counted, for purposes of Section 2.1(g), as a registration effected hereunder; provided further, however, that such registration shall not be so counted if the managing underwriter or underwriters advise the participating Holders that there has been a material change in market conditions, or the Company makes a public announcement that there has been a material change in the condition, business or prospects of the Company, which in either such case could reasonably be expected to materially and adversely affect the ability of the underwriters to complete the offering or materially and adversely affect the price at which the Registrable Securities may be sold.

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2.5.Indemnification.

(a)Indemnification by the Company. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, in the case of any registration statement filed pursuant to Section 2.1 or 2.2, indemnify and hold harmless the seller of any Registrable Securities covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or any such director, officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such seller and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such seller.

(b)Indemnification by the Sellers. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2.3, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such Registrable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 2.5(a)) the Company, its directors and officers and each other Person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect, regardless of any investigation

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made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller.

(c)Notices of Claims; Indemnification Procedures.  Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 2.5(a) or 2.5(b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 2.5(a) or 2.5(b), as the case may be, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(d)Other Indemnification.   Indemnification similar to that specified in this Section 2.5 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act.

(e)Indemnification Payments.  The indemnification required by this Section 2.5 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.

(f)Contribution.  If the indemnification provided for in this Section 2.5 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying and indemnified party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’

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relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.  In no event shall the liability of any seller of Registrable Securities hereunder be greater in amount than the net amount received by such seller from the sale of Registrable Securities pursuant to such registration statement.  The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.5(f) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in this Section 2.5(f).  No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

2.6.Adjustments Affecting Registrable Securities.  The Company will not effect or permit to occur any combination or subdivision of shares which would adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in any registration of its securities or the marketability of such Registrable Securities under any such registration.

2.7.Holdback Agreements.

(a)Holders’ Agreement.  If and to the extent requested by the managing underwriter in connection with any underwritten offering of Common Stock in which Holders of Registrable Securities have the right to participate under Section 2.1 or 2.2, each Holder participating in such underwritten offering shall agree in writing that such Holder will not, without the consent of the managing underwriter for such offering (except for shares included in such offering): (x) effect any public sale or distribution of any Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock for a period of 180 days after the effective date of the registration statement relating to the Initial Public Offering or 90 days after the date of the final prospectus included in the registration statement relating to, or the closing of, any other offering or (y) effect any other transfer of any of the foregoing during such 180- or 90-day period, as applicable, unless the transferee agrees in writing to be bound by the terms and conditions of this Section 2.7(a).

(b)Company Agreement.  If and to the extent requested by the managing underwriter in connection with any underwritten offering at the request of the Holders pursuant to Section 2.1, the Company shall agree not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, for its own account, during the seven days prior to and for a period of 90 days following the date of the final prospectus included in the registration statement relating to, or the closing of, any offering (except as part of such underwritten registration or pursuant to a registration on Form S-4 or Form S-8).

2.8.Limitation on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities, enter into any agreement with any holder or prospective holder of any Company security giving such holder or prospective holder any registration rights

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the terms of which are more favorable than the registration rights granted to the Holders hereunder, or which would reduce the amount of Registrable Securities the holders can include in any registration statement filed pursuant to Section 2.1 hereof, unless such rights are subordinate to those of the Holders.

3.RULE 144.  If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and will take such further action as any Holder may reasonably request, all to the extent required from time to time, including the timely preparation and delivery of certificates representing Registrable Securities to be sold, to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 . Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

4.AMENDMENTS AND WAIVERS.  This Agreement may be amended and the Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Holder or Holders of a majority of the Registrable Securities. Each Holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 4, whether or not such Registrable Securities shall have been marked to indicate such consent.

5.NOTICES.  Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) Business Days after deposit in the United States mail, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, other similar facsimile transmission or electronic mail, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

If to the Company, at:

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois 62401

Attention:Jeffrey G. Ludwig

Executive Vice President and Chief Financial Officer

Electronic Mail:  jludwig@midlandstatesbank.com

Telecopy:  (217) 342-9462

Confirmation:  (217) 342-7331

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With a copy to:

Barack Ferrazzano Kirschbaum & Nagelberg, LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

Attention:  Dennis R. Wendte

Electronic Mail:  Dennis.Wendte@bfkn.com

Telecopy:  (312) 984-3150

Confirmation:  (312) 984-3188

If to Holders, at:

Richard E.  Workman 2001 Trust

5180 Vardon Drive

Windemere, Florida 34786

Attention:   Dr.  Richard Workman, Trustee

Electronic Mail: rworkman@heartlanddentalcare.com

Telecopy:  217-540-5629

Confirmation:  217-540-5100

With a copies to:

Travis Franklin

1200 Network Centre Drive

Suite 21

Effington, IL 62401

Electronic Mail:    tfranklin@heartlanddentalcare.com

Telecopy:  217-540-5629

Confirmation:  217-540-5155

Schiff Hardin, LLP

6600 Sears Tower

Chicago, IL 60606

Attention:  Robert R.  Pluth

Electronic Mail:    rpluth@schiffhardin.com

Telecopy:  (312) 258-5600

Confirmation:  (312) 258-5535

or to such other address or number as each party designates to the other in the manner herein prescribed.

6.ASSIGNMENT.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.  The Initial Holder may assign, at any time, any or all of its rights hereunder with respect to any Registrable Securities held by the Initial Holder (but only with all related obligations) to an Affiliate, and any Holder (including the Initial Holder) may assign any or all of its rights hereunder (but only with all related obligations) to any Person or Persons to whom the Holder transfers or assigns (i) the Warrants, in whole or in part, in accordance with the terms and

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conditions thereof, (ii) any shares of Series C Preferred Stock or Series D Preferred Stock issued upon the exercise of the Warrants, or (iii) any shares of Common Stock issued upon the conversion of such Series C Preferred Stock or Series D Preferred Stock, with respect to any Registrable Securities acquired by such Person or Persons as a result of such transfer or assignment; provided that (i) the Company is, within thirty (30) Business Days after such transfer or assignment, furnished with written notice of the name and address of such transferee(s) or assignee(s) and the securities with respect to which such registration rights are being assigned and (ii) each such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement through the execution and delivery of a joinder, substantially in the form of Exhibit A hereto.

7.TERM.  This Agreement shall terminate on the earlier of: (i) April 1, 2016; and (ii) the date on which the no Holder owns any Registrable Securities; provided, that, the indemnification rights and obligations pursuant to Section 2.5, as well as the Company’s obligations to pay Registration Expenses pursuant to this Agreement, shall survive with respect to any registration statement in which any Registrable Securities of the Holders were included; and provided further, that the Company shall be obligated to comply with any request for registration of Registrable Securities received under Section 2.1(a) or 2.2(a) prior to such termination date, whether or not such registration has been completed by the date on which this Agreement terminates.

8.DESCRIPTIVE HEADINGS; ADVICE OF COUNSEL; INTERPRETATION; TIME OF THE ESSENCE.   The descriptive headings of the several sections and paragraphs of this Agreement are inserted for references only and shall not limit or otherwise affect the meaning hereof.  Each party to this Agreement represents to the other parties to this Agreement that such party has been represented by counsel in connection with this Agreement, that such party has discussed this Agreement with its counsel and that any and all issues with respect to this Agreement have been resolved as set forth herein and therein.  No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured, drafted or dictated such provision.  Time is of the essence in the performance of this Agreement.

9.SPECIFIC PERFORMANCE.  The parties hereto recognize and agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach.

10.GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Illinois.

11.CONSENT TO JURISDICTION.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.  THE COMPANY FURTHER

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IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 5, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF REGISTRABLE SECURITIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

12.COUNTERPARTS; ELECTRONIC SIGNATURES.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.  Delivery or an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.  SIGNATURES ON THE FOLLOWING PAGE.]

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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written.

MIDLAND STATES BANCORP, INC.
By:		/s/ Jeff Ludwig
Name:		Jeff Ludwig
Title:		Senior Vice President and Chief Financial Officer
RICHARD E. WORKMAN 2001 TRUST
By:	/s/ Richard E. Workman
Name: Richard E. Workman
Title: Trustee

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Exhibit A

FORM OF JOINDER TO THE

REGISTRATION RIGHTS AGREEMENT

THIS JOINDER (this “Joinder”) is made and entered into as of [                ], by and between Midland States Bancorp, a Delaware corporation (the “Company”), and [                ] (the “Holder”).  This Joinder joins the Holder to the Registration Rights Agreement (the “Agreement”), dated as of December 31, 2010, by and among the Company and the Initial Holder (as defined in the Agreement).  Capitalized terms used in this Joinder but not otherwise defined will have the meanings set forth in the Agreement.

WHEREAS, (i) the Holder has acquired, directly or indirectly, shares of Common Stock through the acquisition of Warrants, shares of Series C Preferred Stock or Series D Preferred Stock issued upon the exercise of the Warrants, or shares of Common Stock issued upon the conversion of such Series C Preferred Stock or Series D Preferred Stock (the “Purchased Shares”), (ii) the Company desires to grant to the Holder certain registration rights in accordance with the terms of the Agreement, and (iii) it is a condition to the transfer or grant of such rights to the Holder that the Holder agrees to be bound by the terms of the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Joinder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:

1.Agreement to be Bound.  The Holder and the Company agree that upon execution of this Joinder, the Holder will become a party to the Agreement and will be fully bound by, and subject to all of the covenants, terms and conditions of the Agreement as though an original party to the Agreement, and the Purchased Shares will be deemed Registrable Securities for all purposes of the Agreement, subject to the terms and conditions contained in the Agreement.

2.Successors and Assigns.  Except as otherwise provided in this Joinder, this Joinder will bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Holder and any subsequent Holders of the Purchased Shares and the respective successors and assigns of each of them, so long as they hold such shares.

3.Counterparts.  This Joinder may be executed in multiple counterparts (including facsimile and electronic counterparts), each of which shall be deemed to be an original and shall be binding upon the party who executed the same, and all of which taken together shall constitute one and the same agreement.

4.Governing Law.  All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Joinder shall be governed by, and construed in accordance with the laws of the State of Illinois, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

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5.Descriptive Headings.  The headings in this Joinder are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Joinder or any provision of this Joinder.

IN WITNESS WHEREOF, the parties to this Joinder have executed this Joinder as of the date first above written.

MIDLAND STATES BANCORP, INC.

By:

Its:

[HOLDER]

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EX-10.8

Exhibit 10.8

AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this “Agreement”), dated as of May 11, 2011, is by and between MIDLAND STATES BANCORP, INC., an Illinois corporation and successor by merger to Midland States Bancorp, Inc., a Delaware corporation (“Borrower”), and RICHARD E. WORKMAN 2001 TRUST, an Illinois trust dated July 4, 2001 (“Lender”).

RECITALS:

A.Borrower and Lender are parties to:

(i)that certain Amended and Restated Credit Agreement, dated as of December 31, 2010 (as amended, modified or supplemented from time to time, the “Credit Agreement”);

(ii)that certain Amended and Restated 2009 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010 (the “2009 Warrant Purchase Agreement”), pursuant to which Borrower issued and granted to Lender that certain Preferred Stock Purchase Warrant, dated December 31, 2010 (the “Series C Warrant”), which grants Lender the right to purchase up to 630 shares of Borrower’s Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series C Preferred Stock”);

(iii)that certain Amended and Restated 2010 Exchange and Warrant Purchase Agreement, dated as of December 31, 2010 (the “2010 Warrant Purchase Agreement”), pursuant to which Borrower issued and granted to Lender that certain Preferred Stock Purchase Warrant, dated December 31, 2010 (the “Series D Warrant”), which grants Lender the right to purchase up to 500 shares of Borrower’s Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series D Preferred Stock”); and

(iv)that certain Registration Rights Agreement, dated as of January 18, 2011 (the “Rights Agreement”), pursuant to which Borrower granted to Lender and its permitted assignees certain registration rights with respect to shares of Borrower’s common stock, par value $0.01 per share (“Common Stock”), including any of such common stock issuable upon conversion of any shares of Series C Preferred Stock or Series D Preferred Stock acquired upon exercise of the Series C Warrant or Series D Warrant, respectively.

B.Borrower desires to amend the Credit Agreement, the 2009 Warrant Purchase Agreement, the 2010 Warrant Purchase Agreement and the Rights Agreement, and Lender is willing to do so on the terms and subject to the conditions set forth herein.

C.Concurrently herewith, in connection with the amendment of the 2009 Warrant Purchase Agreement and the 2010 Warrant Purchase Agreement: (i) Borrower is executing and delivering to Lender that certain Preferred Stock Purchase Warrant, dated May 11, 2011, pursuant to which Lender has the right to purchase up to 630 shares of Borrower’s Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series E Preferred Stock” and such Warrant, the “Series E Warrant”), and Lender is surrendering to Borrower the Series C

Warrant in exchange for the Series E Warrant; and (ii) Borrower is executing and delivering to Lender that certain Preferred Stock Purchase Warrant, dated May 11, 2011, pursuant to which Lender has the right to purchase up to 500 shares of Borrower’s Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock (the “Series F Preferred Stock” and such Warrant, the “Series F Warrant”), and Lender is surrendering to Borrower the Series F Warrant in exchange for the Series D Warrant.

NOW, THEREFORE, in consideration of the premises, the terms and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions.   Capitalized terms defined in the Credit Agreement which are used herein shall have the meanings as are set forth in the Credit Agreement on the date hereof for such terms unless otherwise defined herein, subject to the next sentence of this Section 1.  References to the Credit Agreement and the other Financing Documents shall be deemed to refer to such Financing Documents as amended hereby except in Sections 3, 4, 5, 6 and 7 where such references shall be deemed to refer to such documents before giving effect to the amendments set forth in this Agreement.

2.Confirmation of Liabilities.  Borrower agrees and acknowledges that the obligations and the unpaid balance of the Liabilities remain outstanding as of the date hereof and shall remain outstanding after the Effective Date (as defined below) and after giving effect to the transactions contemplated hereby, and the continuance thereof are hereby acknowledged, confirmed and ratified in all respects.

3.Amendments to Credit Agreement.  Subject to the complete satisfaction of all of the conditions set forth in Section 9 of this Agreement, the Credit Agreement is amended as follows:

3.1The following definitions set forth in Section 1.1 of the Credit Agreement are deleted in their entirety:

“Series C Warrant” means that certain Series C Preferred Stock Warrant dated as of December 31, 2010 between Borrower and Lender.

“Series D Warrant” means that certain Series D Preferred Stock Warrant dated as of December 31, 2010 between Borrower and Lender.

3.2The following definitions are added to Section 1.1 of the Credit Agreement:

“Series E Warrant” means that certain Series E Preferred Stock Purchase Warrant dated as of May 11, 2011 between Borrower and Lender.

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“Series F Warrant” means that certain Series F Preferred Stock Purchase Warrant dated as of May 11, 2011 between Borrower and Lender.

3.3The following definitions in Section 1.1 of the Credit Agreement is amended and restated in its entirety as follows:

“Financing  Documents” shall mean, collectively, this Agreement, the Notes, the Exchange Agreements, the Preferred Subscription Documents, the Registration Rights Agreement, the Warrants, and all other documents, instruments and agreements delivered to Lender in connection therewith (including without limitation the Governing Documents as amended in connection with the issuance of the Warrants).

“Warrants” shall mean, collectively, the Series E Warrant and the Series F Warrant.

3.4Schedule 7.2 to the Credit Agreement is amended and restated as set forth in Schedule 7.2 attached hereto.

4.Amendments to 2009 Warrant Purchase Agreement.  Subject to the complete satisfaction of all of the conditions set forth in Section 9 of this Agreement, the 2009 Warrant Purchase Agreement is amended as follows:

4.1The following definitions are added to Section 1 of the 2009 Warrant Purchase Agreement:

“Series E Preferred Stock” shall mean Borrower’s Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock.

“Series F Preferred Stock” shall mean Borrower’s Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock.

4.2Each occurrence of the term “Series C Preferred Stock” in the 2009 Warrant Purchase Agreement is deleted and replaced with the term “Series E Preferred Stock.”

4.3Each occurrence of the term “Series C Warrant” in the 2009 Warrant Purchase Agreement is deleted and replaced with the term “Series E Warrant.”

4.4Each occurrence of the term “Series D Warrant” in the 2009 Warrant Purchase Agreement is deleted and replaced with the term “Series F Warrant.”

4.5Each reference to “Warrants” in the 2009 Warrant Purchase Agreement shall be deemed to be a reference to, collectively, the Series E Warrant and the Series F Warrant.

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5.Amendments to 2010 Warrant Purchase Agreement.  Subject to the complete satisfaction of all of the conditions set forth in Section 9 of this Agreement, the 2010 Warrant Purchase Agreement is amended as follows:

5.1The following definitions are added to Section 1 of the 2010 Warrant Purchase Agreement:

“Series E Preferred Stock” shall mean Borrower’s Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock.

“Series F Preferred Stock” shall mean Borrower’s Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock.

5.2Each occurrence of the term “Series D Preferred Stock” in the 2010 Warrant Purchase Agreement is deleted and replaced with the term “Series F Preferred Stock.”

5.3Each occurrence of the term “Series C Warrant” in the 2010 Warrant Purchase Agreement is deleted and replaced with the term “Series E Warrant.”

5.4Each occurrence of the term “Series D Warrant” in the 2010 Warrant Purchase Agreement is deleted and replaced with the term “Series F Warrant.”

5.5Each reference to “Warrants” in the 2010 Warrant Purchase Agreement shall be deemed to be a reference to, collectively, the Series E Warrant and the Series F Warrant.

6.Amendments to Rights Agreement.  Subject to the complete satisfaction of all of the conditions set forth in Section 9 of this Agreement, the Rights Agreement is amended as follows:

6.1The following definitions set forth in Section 1.1 of the Rights Agreement are deleted in their entirety:

“Series C Warrant” means the Preferred Stock Purchase Warrant, dated December 31, 2010, pursuant to which the Company has granted the Initial Holder the right to purchase Series C Preferred Stock on the terms and conditions specified therein.

“Series D Preferred Stock” means the Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company.

“Series D Warrant” means the Preferred Stock Purchase Warrant, dated December 31, 2010, pursuant to which the Company has granted the Initial Holder the right to purchase Series D Preferred Stock on the terms and conditions specified therein.

6.2The following definitions are added to Section 1.1 of the Rights Agreement:

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“Series E Preferred Stock” means the Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company.

“Series E Warrant” means the Preferred Stock Purchase Warrant, dated May 11, 2011, pursuant to which the Company has granted the Initial Holder the right to purchase Series E Preferred Stock on the terms and conditions specified therein.

“Series F Preferred Stock” means the Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock of the Company.

“Series F Warrant” means the Preferred Stock Purchase Warrant, dated May 11, 2011, pursuant to which the Company has granted the Initial Holder the right to purchase Series F Preferred Stock on the terms and conditions specified therein.

6.3The following definitions set forth in Section 1.1 of the Rights Agreement are amended and restated in their entirety as follows:

“Registrable Securities” means any shares of Common Stock: (a) held by the Initial Holder at any time, including any shares of Common Stock issued or issuable upon the conversion of the Series C Preferred Stock currently held by the Initial Holder; (b) issued or issuable upon the conversion of any shares of Series E Preferred Stock or Series F Preferred Stock acquired or that may be acquired by any Holder upon the exercise of a Warrant; or (c) issued or issuable with respect to any shares of Common Stock referred to in the preceding clauses (a) and (b) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise.  As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities have been sold pursuant to such registration statement, (ii) such securities shall have been sold to the public pursuant to Rule 144, (iii) such securities shall have ceased to be outstanding, or (iv) such securities have been transferred in a transaction in which the transferor’s rights hereunder are not assigned to a transferee or transferees in accordance with Section 6 hereof.  For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire such Registrable Securities (by conversion, exercise or otherwise, including successive exercises and conversions), whether or not such acquisition has actually been effected.

“Warrants” means, collectively, the Series E Warrant and the Series F Warrant.

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6.4Section 6 of the Rights Agreement is amended and restated in its entirety as follows:

6.ASSIGNMENT.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.  The Initial Holder may assign, at any time, any or all of its rights hereunder with respect to any Registrable Securities held by the Initial Holder (but only with all related obligations) to an Affiliate, and any Holder (including the Initial Holder) may assign any or all of its rights hereunder (but only with all related obligations) to any Person or Persons to whom the Holder transfers or assigns (i) the Warrants, in whole or in part, in accordance with the terms and conditions thereof, (ii) any shares of Series E Preferred Stock or Series F Preferred Stock issued upon the exercise of the Warrants, or (iii) any shares of Common Stock issued upon the conversion of such Series E Preferred Stock or Series F Preferred Stock, with respect to any Registrable Securities acquired by such Person or Persons as a result of such transfer or assignment; provided that (i) the Company is, within thirty (30) Business Days after such transfer or assignment, furnished with written notice of the name and address of such transferee(s) or assignee(s) and the securities with respect to which such registration rights are being assigned and (ii) each such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement through the execution and delivery of a joinder, substantially in the form of Exhibit A hereto.

6.5Exhibit A to the Rights Agreement is amended and restated in its entirety in the form of Exhibit A attached hereto.

7.Amendments to Letter Agreement.  Subject to the complete satisfaction of all of the conditions set forth in Section 9 of this Agreement, that certain letter agreement dated December 31, 2010 between Lender and Borrower is amended by deleting clauses (f) and (g) of the first grammatical sentence thereof and inserting in lieu thereof the following:

(f) that certain Preferred Stock Purchase Warrant issued by the Company in favor of Lender regarding the Series E Preferred Stock (as amended, modified, supplemented or restated from time to time, the “Series E Warrant”), and (g) that certain Preferred Stock Purchase Warrant issued by the Company in favor of Lender regarding the Company’s Series F 9% Non-Cumulative Perpetual Convertible Stock (the “Series F Preferred Stock” and, together with the Series E Preferred Stock, collectively, the “Preferred Stock”) (as amended, modified, supplemented or restated from time to time, the “Series F Warrant” and, together with the Series E Warrant, collectively, the “Warrants”).

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8.Issuance of Warrants.

8.1Issuance of Series E Warrant.  On the Effective Date: (a) Borrower shall issue and grant to Lender a Preferred Stock Purchase Warrant, in the form attached hereto as Exhibit B, pursuant to which Lender shall have the right to purchase up to 630 shares of Series E Preferred Stock, subject to adjustment as provided therein and on the terms and conditions specified therein (the “Series E Warrant”); and (b) Lender shall surrender to Borrower the Series C Warrant in exchange for the Series E Warrant.

8.2Issuance of Series F Warrant.  On the Effective Date: (a) Borrower shall issue and grant to Lender a Preferred Stock Purchase Warrant, in the form attached hereto as Exhibit C, pursuant to which Lender shall have the right to purchase up to 500 shares of Series F Preferred Stock, subject to adjustment as provided therein and on the terms and conditions specified therein (the “Series F Warrant”; the Series E Warrant and the Series F Warrant are referred to herein, collectively, as the “Warrants”); and (b) Lender shall surrender to Borrower the Series D Warrant in exchange for the Series F Warrant.

9.Conditions to Effective Date.  Sections 3, 4, 5, 6, 7 and 8 of this Agreement will become effective only when each of the following conditions has been satisfied as determined by Lender in its reasonable discretion (the date of such satisfaction being hereafter referred to as the “Effective Date”):

9.1Documents.  Lender shall have received each of the following agreements, instruments and other documents, in each case in form and substance acceptable to Lender in its reasonable discretion:

(a)this Agreement duly executed and delivered by Borrower and Lender;

(b)the documents, instruments, agreements, opinions, certificates and other items listed on the Document Checklist attached hereto as Exhibit D; and

(c)such other documents, instruments, agreements, opinions, certificates and other items as Lender may request.

9.2Charter Amendment.  Borrower’s Charter has been amended to adopt the “Statement of Resolutions Establishing Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock” in the form attached hereto as Exhibit E and to adopt the “Statement of Resolutions Establishing Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock” in the form attached hereto as Exhibit F.

9.3Proceedings; Approvals.  All corporate proceedings taken or to be taken in connection with the transactions contemplated hereby and all agreements, instruments, certificates and other documents relating thereto shall be in form and substance satisfactory to Lender as determined in its reasonable discretion.  All regulatory and other legal approvals required in connection with the transactions contemplated by this Agreement, if any, shall have been duly obtained and be in full force and effect.

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9.4Representations and Warranties; No Default.  As of the Effective Date, both immediately before and after giving effect to consummation of the transactions contemplated hereby: (a) the representations and warranties contained in this Agreement and in the Financing Agreements shall be true and correct; and (b) no Default or Event of Default shall exist.

9.5Legal.  All regulatory and other legal matters relating to the transactions contemplated hereby shall be satisfactory to Lender (and its legal counsel).

9.6Fees.  All fees and expenses required to be paid to Lender and Lender’s counsel on or prior to the Effective Date shall have been paid in full.

10.Acknowledgment of Rights.  Borrower hereby acknowledges that, as of the Effective Date: (a) it has no defenses, claims or set-offs to the enforcement by Lender of the Liabilities, and (b) Lender has fully performed all undertakings and obligations owed to Borrower under the Financing Documents.

11.Release.  Borrower, for itself and its shareholders, directors, officers, successors, assigns, heirs and representatives, does hereby fully, finally and unconditionally release and forever discharge Lender and each of its shareholders, affiliates, agents, attorneys, employees, directors, and officers and the successors, assigns, heirs and representatives of each of the foregoing, from any and all debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case whether known or unknown, contingent or fixed, direct or indirect and of whatever nature or description and whether in law or in equity under contract, tort, statute or otherwise, which Borrower has heretofore had or now or hereafter can, shall or may have by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the Effective Date arising out of, connected with or related in any way to this Agreement, the Credit Agreement, the other Financing Documents, any proposal letter, commitment letter or term sheet, or any act, event or transaction related or attendant thereto, the agreements of Lender contained therein, the possession, use, operation or control of any of the assets of Borrower, the making of any loan or any other advances, the management of any loan or other advances or any collateral or any other matter whatsoever.

12.Representations, Warranties and Agreements.  Borrower represents, warrants and agrees that:

12.1Existence and Power.  Borrower: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois; and (b) has the corporate power and authority and all governmental licenses, authorizations, consents and approvals to own its assets and carry on its business and to execute, deliver, and perform its obligations under this Agreement, the Credit Agreement, the Warrants and the other Financing Documents to which it is a party.

12.2Authorization; No Contravention.  The execution, delivery and performance by Borrower of this Agreement, the Credit Agreement, the Warrants and the other Financing Documents to which it is a party have been duly authorized by all necessary action,

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and do not: (i) contravene the terms of any of Borrower’s Governing Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Financing Document or other Contractual Obligation to which Borrower is a party or any order, injunction, writ or decree of any Governmental Authority to which Borrower or its Property is subject; or (iii) violate any Requirement of Law binding on Borrower.

12.3Warrants, Etc. The Statement of Resolution Establishing Series of Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock of Borrower and the Statement of Resolution Establishing Series of Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock of Borrower have been filed with the Secretary of State of Illinois and are effective.  The Series E Warrant is exercisable, upon the basis and upon the terms and conditions specified therein, for the same number of shares of Borrower Series E Preferred Stock as the number of shares of Series C Preferred Stock issuable upon the exercise of the Series C Warrant immediately prior to the effectiveness of this Agreement and the transactions contemplated hereby; and the Series F Warrant is exercisable, upon the basis and upon the terms and conditions specified therein, for the same number of shares of Borrower Series F Preferred Stock as the number of shares of Series D Preferred Stock issuable upon the exercise of the Series D Warrant immediately prior to the Reincorporation immediately prior to the effectiveness of this Agreement and the transactions contemplated hereby.  The authorized, issued and outstanding Equity Interests of Borrower as of the Effective Date are as set forth on attached Schedule 7.2.  The issuance of (i) the shares of Borrower Series E Preferred Stock and Borrower Series F Preferred Stock issuable upon exercise of the Warrants and (ii) the shares of common stock of Borrower into which such shares of Borrower Series E Preferred Stock and the Borrower Series F Preferred Stock are convertible, in accordance with the Series E Statement of Resolution and the Series F Statement of Resolution, respectively, has been duly authorized by all necessary corporate action on the part of Borrower.  The Borrower has duly reserved for issuance, out of its authorized and unissued shares of capital stock, (i) such number of shares of Borrower Series E Preferred Stock and Borrower Series F Preferred Stock as are issuable upon the exercise of the Series E Warrant and Series F Warrant, respectively, and (ii) such number of shares of common stock of Borrower into which such shares of Borrower Series E Preferred Stock and Borrower Series F Preferred Stock are convertible, in accordance with the Series E Statement of Resolution and the Series F Statement of Resolution, respectively, as of the date hereof.  All of the shares of Borrower Series E Preferred Stock and Borrower Series F Preferred Stock issuable upon the exercise of the Warrants will be, upon such exercise, and all of the shares of common stock of Borrower issuable upon the conversion of such shares of Borrower Series E Preferred Stock and Borrower Series F Preferred Stock will be, upon such conversion, validly issued, fully paid, and non-assessable and free of statutory and contractual preemptive rights.  The issuance by Borrower of the Borrower Series E Preferred Stock and Borrower Series F Preferred Stock to Lender upon the exercise of the Warrants and the issuance of the common stock of Borrower to Lender upon the conversion of such Borrower Series E Preferred Stock and Borrower Series F Preferred Stock do not require registration under the Securities Act of 1933, as amended, or registration or qualification under the securities laws of the State of Illinois.

12.4Governmental Authorization.  No approval, consent, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, Borrower

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of this Agreement, the Credit Agreement, the Warrants and the other Financing Documents to which it is a party, except those obtained or made on or prior to the date of this Agreement.

12.5Binding Effect.  This Agreement, the Credit Agreement, the Warrants and the other Financing Documents to which Borrower is a party constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

12.6Conditions.  Each of the conditions to the occurrence of the Effective Date set forth in Section 9 of this Agreement has occurred and each of the representations and warranties set forth in this Agreement are true and correct in all material respects.

12.7Survival.  All indemnification obligations of Borrower contained in the Credit Agreement and the other Financing Documents shall survive and continue in favor of Lender and each other indemnified Person thereunder.  In addition, the representations, warranties and agreements made in this Agreement, or in any document delivered pursuant hereto, shall survive the execution and delivery of this Agreement and the consummation of the transactions described herein or contemplated hereby or by the Financing Documents.

13.Effect.

13.1Upon the Effective Date, each reference in any of the Agreements and all documents, instruments and agreements executed and/or delivered in connection with any of the Agreements to any agreement amended or amended and restated in connection with the conditions to the Effective Date shall mean and be a reference to the agreement, instrument or document as so amended or so amended and restated.

13.2Except for the Series C Warrant (which is being exchanged for the Series E Warrant pursuant to Section 8.1 hereof) and the Series D Warrant (which is being exchanged for the Series F Warrant pursuant to Section 8.2 hereof), the Credit Agreement, the other Financing Documents and all documents, instruments and agreements executed and/or delivered in connection with any of the Financing Documents shall remain in full force and effect, and are hereby ratified and confirmed in all respects.

13.3The execution, delivery and effectiveness of this Agreement shall not: (a) operate as a waiver of any Default or Event of Default; (b) operate as a waiver of any right, power or remedy of Lender; or (c) constitute a waiver of any other provision of the Credit Agreement or any other Financing Document.

13.4Each of this Agreement and the Warrants shall be deemed to be Financing Documents under the Credit Agreement.

14.General.

14.1Further Assurances.  Promptly upon request by Lender, Borrower shall, and Borrower shall cause each of its Subsidiaries to, take such additional actions as Lender may

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reasonably require from time to time in order to: (a) carry out more effectively the purposes of this Agreement; and (b) better assure, convey, grant, assign, transfer, preserve, protect and confirm to Lender the rights granted or now or hereafter intended to be granted to Lender under this Agreement or under any other document executed in connection therewith.

14.2Costs and Attorneys’ Fees.  Borrower shall reimburse Lender on demand for all expenses and fees paid or incurred in connection with the analysis, documentation, negotiation and closing of this Agreement, including the reasonable fees and expenses of Lender’s attorneys and paralegals and consultants (whether such attorneys and paralegals are employees of Lender or are separately engaged by Lender), whether such expenses and fees are incurred prior to or after the date hereof.

14.3Parties.  Whenever in this Agreement there is reference made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and assigns of Borrower and the successors and assigns of Lender, and the provisions of this Agreement shall be binding upon and shall inure to the benefit of said successors and assigns.

14.4Choice of Law.  This Agreement shall be deemed to be executed and has been delivered and accepted in Chicago, Illinois by signing and delivering it there.  This Agreement shall be governed and controlled by, and construed in accordance with  the laws of the State of Illinois as to interpretation, enforcement, validity, construction, effect, choice of law, and in all other respects.  Any dispute between the parties hereto arising out of, connected with, related to, or incidental to the relationship established between them in connection with this Agreement, and whether arising in contract, tort, equity, or otherwise, shall be resolved in accordance with the internal laws and not the conflicts of law provisions of the State of Illinois.

14.5Waiver of Jury Trial.  Borrower and Lender waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise, between Lender and Borrower arising out of, connected with, related to or incidental to the relationship established between them in connection with this Agreement or any other instrument, document or agreement executed or delivered in connection therewith or the transactions related thereto.  Borrower and Lender hereby agree and consent that any such claim, demand, action or cause of action shall be decided by court trial without a jury and that any party may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.

14.6Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the  remainder of such provision or the remaining provisions of this Agreement.

14.7Section Titles.  Article, section and subsection titles contained in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties.

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14.8Counterparts.  This Agreement may be executed and accepted in any number of counterparts, each of which shall be an original with the same effect as if the signatures were on the same instrument.  The delivery of a copy of an executed counterpart of the signature page to this Agreement by telecopier or other electronic means (including by email) shall be effective as delivery of a manually executed counterpart of this Agreement.

[Signature Page Follows]

[Remainder of Page Left Blank Intentionally]

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IN WITNESS WHEREOF, this Amendment Agreement has been duly executed as of the day and year first above written.

MIDLAND STATES BANCORP, INC.
By:	/s/ Douglas J. Tucker
Name:	Douglas J. Tucker
Title:	Senior Vice President and Corporate Counsel
RICHARD E. WORKMAN 2001 TRUST
By:	/s/ Richard E. Workman
Name:	Richard E. Workman
Title:	Trustee

(Signature Page to Amendment Agreement)

EXHIBIT A

Revised Exhibit A to Registration Rights Agreement

*     *     *

FORM OF JOINDER TO THE

REGISTRATION RIGHTS AGREEMENT

THIS JOINDER (this “Joinder”) is made and entered into as of [                ], by and between Midland States Bancorp, an Illinois corporation (the “Company”), and [                ] (the “Holder”).  This Joinder joins the Holder to the Registration Rights Agreement, dated as of December 31, 2010 (as heretofore amended, modified or supplemented from time to time, the “Agreement”), by and among the Company and the Initial Holder (as defined in the Agreement).  Capitalized terms used in this Joinder but not otherwise defined will have the meanings set forth in the Agreement.

WHEREAS, (i) the Holder has acquired, directly or indirectly, shares of Common Stock through the acquisition of Warrants, shares of Series E Preferred Stock or Series F Preferred Stock issued upon the exercise of the Warrants, or shares of Common Stock issued upon the conversion of such Series E Preferred Stock or Series F Preferred Stock (the “Purchased Shares”), (ii) the Company desires to grant to the Holder certain registration rights in accordance with the terms of the Agreement, and (iii) it is a condition to the transfer or grant of such rights to the Holder that the Holder agrees to be bound by the terms of the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Joinder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:

1.Agreement to be Bound.  The Holder and the Company agree that upon execution of this Joinder, the Holder will become a party to the Agreement and will be fully bound by, and subject to all of the covenants, terms and conditions of the Agreement as though an original party to the Agreement, and the Purchased Shares will be deemed Registrable Securities for all purposes of the Agreement, subject to the terms and conditions contained in the Agreement.

2.Successors and Assigns.  Except as otherwise provided in this Joinder, this Joinder will bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Holder and any subsequent Holders of the Purchased Shares and the respective successors and assigns of each of them, so long as they hold such shares.

3.Counterparts.  This Joinder may be executed in multiple counterparts (including facsimile and electronic counterparts), each of which shall be deemed to be an original and shall be binding upon the party who executed the same, and all of which taken together shall constitute one and the same agreement.

4.Governing Law.  All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Joinder shall be governed by, and construed in accordance with the laws of the State of Illinois, without giving effect to any choice

of law or conflict of law rules or provisions (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

5.Descriptive Headings.  The headings in this Joinder are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Joinder or any provision of this Joinder.

IN WITNESS WHEREOF, the parties to this Joinder have executed this Joinder as of the date first above written.

MIDLAND STATES BANCORP, INC.

By:

Its:

[HOLDER]

EXHIBIT B

Form of Series E Warrant

[See Exhibit 10.5 to this Form S-1]

EXHIBIT C

Form of Series F Warrant

[See Exhibit 10.6 to this Form S-1]

EXHIBIT D

EXCHANGE OF SERIES E AND F WARRANTS

for

SERIES C AND D WARRANTS

and

AMENDMENT NO. 1 TO

AMENDED AND RESTATED CREDIT AGREEMENT

between

MIDLAND STATES BANCORP, INC. (“Issuer”)

and

RICHARD E. WORKMAN 2001 TRUST (“Purchaser”)

May 11, 2011

Document Checklist:

1.Amendment Agreement between Issuer and Purchaser amending the following documents:

(a)the Credit Agreement;

(b)the Amended and Restated 2009 Exchange and Warrant Purchase Agreement between Issuer and Purchaser;

(c)the Amended and Restated 2010 Exchange and Warrant Purchase Agreement between Issuer and Purchaser; and

(d)the Registration Rights Agreement between Issuer and Purchaser.

2.Preferred Stock Purchase Warrant issued by Issuer in favor of Purchaser regarding Issuer’s Series E Preferred Stock

3.Preferred Stock Purchase Warrant issued by Issuer in favor of Purchaser regarding Issuer’s Series F Preferred Stock

4.Certificate of Secretary of Issuer including certificate as to incumbency of the following:

(a)	Exhibit A	Articles of Incorporation of Issuer and all amendments thereto certified by the Secretary of State of the State of Illinois
(b)	Exhibit B	By-laws of Issuer
(c)	Exhibit C	Resolutions of Board of Directors of Issuer approving exchange, including:

(i)Statement of Resolutions Establishing Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock

(ii)Statement of Resolutions Establishing Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock

5.Opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP

6.Certificate of Good Standing of Issuer from the Secretary of State of Illinois

7.Consent of Lender, pursuant to Section 6.10 of the Credit Agreement, to amend, modify, cancel or supplement Related Documents as contemplated by this Agreement

8.On or before May 20, 2011, a Statement of Correction relating to the Statement of Resolutions Establishing Series E 9% Non-Cumulative Perpetual Preferred Stock, as filed with the Secretary of State of Illinois

9.On or before May 20, 2011, a Statement of Correction relating to the Statement of Resolutions Establishing Series F 9% Non-Cumulative Perpetual Preferred Stock, as filed with the Secretary of State of Illinois

EXHIBIT E

Form of Statement of Resolutions Establishing Series E 9% Non-Cumulative Perpetual
Convertible Preferred Stock

[See Exhibit 3.1 to this Form S-1]

EXHIBIT F

Form of Statement of Resolutions Establishing Series F 9% Non-Cumulative Perpetual
Convertible Preferred Stock

[See Exhibit 3.1 to this Form S-1]

SCHEDULE 7.2

Authorized Equity Interests of Borrower

(a)Common Stock:  The Borrower has authorized 40,000,000 shares of common stock, 4,249,777 shares of which have been issued and remain outstanding as of May 11, 2011.

(b)Series C 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series C Preferred Stock”).  The Borrower has currently authorized 3,130 shares of Series C Preferred Stock, 2,360 shares of which are outstanding.

(c)Series D 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series D Preferred Stock”).  The Borrower has currently authorized 4,400 shares of Series D Preferred Stock, 2,377 shares of which are outstanding.

(d)Series E 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series E Preferred Stock”).  The Borrower has currently authorized 630 shares of Series E Preferred Stock, and none of such shares are outstanding.

(e)Series F 9% Non-Cumulative Perpetual Convertible Preferred Stock (“Series F Preferred Stock”).  The Borrower has currently authorized 500 shares of Series F Preferred Stock, and none of such shares are outstanding.

(f)Stock Options.

Exerciserable	Non-Exercisable	TotalOutstanding
183,610	390,260	573,870

(g)Restricted Stock.  Included in the 4,249,777 shares of common stock listed in item (a) above are 31,360 shares which are restricted as to transferability.

(h)Authorized Equity Interests of Subsidiaries.  Midland States Bank (the “Bank”) is the sole subsidiary of the Borrower.  All authorized and outstanding equity interests of the Bank are currently held by the Borrower.

EX-10.9

Exhibit 10.9

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Leon J. Holschbach (“Executive”).

RECITALS

A.The Bank is a wholly-owned subsidiary of the Company.

B.Executive is currently employed as President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank pursuant to the terms and conditions of that certain employment agreement by and between the parties dated January 1, 2010 (the “Prior Agreement”).

C.Executive currently serves as a member of the Company’s Board of Directors (the “Board”) and the Bank’s Board of Directors (the “Bank Board”).

D.The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

E.In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Company and the Bank.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements respecting Executive’s employment by, or service to, the Employer as may from time to time have been made by and between the parties, whether or not in writing, including but not limited to the Prior Agreement; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending three (3) years

thereafter, unless sooner terminated as provided herein.  As of the second anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Company or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the President and Chief Executive Officer of the Company and the President and Chief Executive Officer of the Bank, at the direction of the Board and the Bank Board, as the case may be.  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the Board and the Bank Board, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the Board and the Bank Board, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  During the Employment Period, Executive shall be nominated to serve as a member of the Board and the Bank Board, subject to election by those shareholders of the Company and the Bank authorized to vote with respect to the election of directors.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the Board or the Bank Board, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the Board and the Bank Board.

4.Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)Executive shall be compensated at an annual rate of $452,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the Compensation Committee of the Board (the “Compensation Committee”), and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the

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Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Company’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than fifty percent (50%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the Compensation Committee.

(c)The Employer shall secure, at its sole expense, for the benefit of Executive and his beneficiaries, life insurance covering the life of Executive with an aggregate death benefit equal to $1,000,000.00.  Such life insurance may be provided pursuant to a group term life insurance plan maintained by the Employer for the benefit of its employees generally, pursuant to an individual life insurance policy covering the life of Executive, or a combination thereof.  Executive shall have sole discretion to designate the beneficiaries of such life insurance.  Any such policies provided pursuant to this subsection shall provide for the portability of such policies in the event of Executive’s termination of employment.

(d)Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.

(e)Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(f)Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)“Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of

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the management and policies of such corporation, partnership, joint venture or other business entity.

(b)“Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three most recently completed fiscal years of the Company.

(c)“Change of Control” shall mean the first to occur of the following:

(i)Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or the Bank or an agreement for the sale or disposition by the Company of all or substantially all the Company’s or the Bank’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

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(d)“Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)“Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(f)“Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) — (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)“Minimum Payments” shall mean, as applicable, the following amounts:

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(i)Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

(v)benefits, incentives and awards described in Section 6(f).

(h)“Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)“Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)“Severance Amount” shall mean:

(i)for any Termination occurring during the Employment Period and not during a Covered Period, an amount equal to one hundred and fifty percent (150%) of Executive’s Base Compensation; or

(ii)for any Termination occurring during a Covered Period, an amount equal to two hundred percent (200%) of Executive’s Base Compensation.

(k)“Termination” shall mean termination of Executive’s employment either:

(i)by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)by Executive for Good Reason.

(l)“Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)“Termination for Cause” shall mean only a termination by the Employer as a result of:

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(i)Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the Board, to perform his obligations hereunder;

(ii)Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the Board and Bank Board; or

(iii)Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

Any determination of a Termination for Cause under this Agreement shall be made by resolution adopted by a two-thirds (2/3) vote of the Board at a meeting called and held for that purpose.  Executive shall be provided with reasonable notice of such meeting and shall be given the opportunity to be heard, with the presence of counsel, prior to the vote being taken by the Board.

(n)“Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

6.Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

(a)Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided

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under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iv)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(d)Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees

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immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than eighteen (18) months following termination.  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.  In the event that as of the date of a Change in Control, Executive is covered by life insurance pursuant to Section 4(d), the Employer (or its successor) shall continue such coverage in effect for eighteen (18) months, at which time Executive shall be permitted to take over such payments pursuant to a “roll out” of such policies to Executive.

(f)Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

7.Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

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8.Restrictive Covenants.

(a)Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his  employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of his  duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

(b)Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses a twenty-five (25) mile radius from each banking or other office location of the Employer and its Affiliates (collectively, the “Restricted Area”).  Therefore, as an essential ingredient of and in

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consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of eighteen (18) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.

(ii)Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(v)Notwithstanding the foregoing to the contrary, if Executive’s termination of employment occurs during a Covered Period, the Restricted Period shall be reduced to a period of twelve (12)months following any such termination of employment.

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(d)Work for Hire Provisions.

(i)Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

(ii)Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

(e)Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such

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provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company (with a copy to the Bank):

Midland States Bancorp, Inc.
Attention: Chairman of the Board of Directors
133 W. Jefferson Street
Effingham, Illinois 62401

If to the Bank (with a copy to the Company):

Midland States Bank
Attention: Chairman of the Board of Directors
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.Entire Agreement; Survival.

(a)This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral,

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specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)The provisions of Section 8 shall survive the termination of this Agreement.

13.Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

14.No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.Internal Revenue Code Section 409A.

(a)It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest

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under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

(c)The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANCORP, INC.		LEON J. HOLSCHBACH
By:	/s/ John M. Schultz	/s/ Leon J. Holschbach
Name:	John M. Schultz
Its:	Chairman
MIDLAND STATES BANK
By:	/s/ John M. Schultz
Name:	John M. Schultz
Its:	Chairman

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this        day of                     , 200  , by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Leon J. Holschbach (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                               .  Executive further agrees that without prior written consent of the Employer he will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.Severance Payment.

(a)A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

3.General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act

A-1

of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.No Disparaging, Untrue Or Misleading Statements.  Executive represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so

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that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

7.Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

10.Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)this Release is written in a manner understood by Executive;

(b)this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

(c)Executive has not waived any rights arising after the date of this Release;

(d)Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)Executive has been advised to consult with an attorney prior to executing this Release.

12.Consideration and Revocation.  Executive is receiving this Release on                     , 200  , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

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13.Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably available, upon reasonable notice from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

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If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

MIDLAND STATES BANCORP, INC.	LEON J. HOLSCHBACH
By:
Name:	[Signature]
Its:
MIDLAND STATES BANK
By:
Name:
Its:

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EX-10.10

Exhibit 10.10

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Jeffrey Ludwig (“Executive”).

RECITALS

A.The Bank is a wholly-owned subsidiary of the Company.

B.Executive is currently employed as Executive Vice President of Finance and Chief Financial Officer of the Company and Executive Vice President of Finance and Chief Financial Officer of the Bank pursuant to the terms and conditions of that certain employment agreement by and between the parties dated January 1, 2010 (the “Prior Agreement”).

C.The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

D.In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Company and the Bank.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements respecting Executive’s employment by, or service to, the Employer as may from time to time have been made by and between the parties, whether or not in writing, including but not limited to the Prior Agreement; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending three (3) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Company or

the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the Executive Vice President of Finance and Chief Financial Officer of the Company and the Executive Vice President of Finance and Chief Financial Officer of the Bank, at the direction of the Chief Executive Officer of the Company and the Chief Executive Officer of the Bank (collectively, the “CEO”), as the case may be.  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

4.Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)Executive shall be compensated at an annual rate of $290,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”), and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Company’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than forty percent (40%) of the Annual Base Salary, which Incentive

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Bonus shall be determined by specific performance criteria established from time to time by the Compensation Committee.

(c)Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.

(d)Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(e)Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)“Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

(b)“Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

(c)“Change of Control” shall mean the first to occur of the following:

(i)Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the

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Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or the Bank or an agreement for the sale or disposition by the Company of all or substantially all the Company’s or the Bank’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

(d)“Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)“Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

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(f)“Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) – (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)“Minimum Payments” shall mean, as applicable, the following amounts:

(i)Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

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(v)benefits, incentives and awards described in Section 6(f).

(h)“Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)“Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)“Severance Amount” shall mean:

(i)for any Termination occurring during the Employment Period and not during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation; or

(ii)for any Termination occurring during a Covered Period, an amount equal to one hundred-fifty percent (150%) of Executive’s Base Compensation.

(k)“Termination” shall mean termination of Executive’s employment either:

(i)by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)by Executive for Good Reason.

(l)“Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)“Termination for Cause” shall mean only a termination by the Employer as a result of:

(i)Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform his obligations hereunder;

(ii)Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

(iii)Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

Any determination of a Termination for Cause under this Agreement shall be made by resolution adopted by a two-thirds (2/3) vote of the Board at a meeting called and held for that purpose. 

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Executive shall be provided with reasonable notice of such meeting and shall be given the opportunity to be heard, with the presence of counsel, prior to the vote being taken by the Board.

(n)“Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

6.Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

(a)Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12

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substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iv)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(d)Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months (eighteen (18) months if such termination occurs during a Covered Period) following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan

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of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

(f)Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

7.Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

8.Restrictive Covenants.

(a)Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate

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in connection with performance by Executive of his duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

(b)Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses a twenty-five (25) mile radius from each banking or other office location of the Employer and its Affiliates (collectively, the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of twelve (12) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any

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regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.

(ii)Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(d)Work for Hire Provisions.

(i)Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

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(ii)Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

(e)Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company (with a copy to the Bank):

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Midland States Bancorp, Inc.
Attention: Chief Executive Officer and General Counsel
133 W. Jefferson Street
Effingham, Illinois 62401

If to the Bank (with a copy to the Company):

Midland States Bank
Attention: Chief Executive Officer and General Counsel
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.Entire Agreement; Survival.

(a)This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)The provisions of Section 8 shall survive the termination of this Agreement.

13.Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

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14.No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.Internal Revenue Code Section 409A.

(a)It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all

14

other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

(c)The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANCORP, INC.		JEFFREY LUDWIG
By:	/s/ Leon J. Holschbach	/s/ Jeffrey Ludwig
Name:	Leon J. Holschbach
Its:	President & CEO
MIDLAND STATES BANK
By:	/s/ Leon J. Holschbach
Name:	Leon J. Holschbach
Its:	President & CEO

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this        day of                     , 20    , by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Jeffrey Ludwig (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                               .  Executive further agrees that without prior written consent of the Employer he will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.Severance Payment.

(a)A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

3.General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act

A-1

of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.No Disparaging, Untrue Or Misleading Statements.  Executive represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so

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that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

7.Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

10.Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)this Release is written in a manner understood by Executive;

(b)this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

(c)Executive has not waived any rights arising after the date of this Release;

(d)Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)Executive has been advised to consult with an attorney prior to executing this Release.

12.Consideration and Revocation.  Executive is receiving this Release on                     , 20    , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

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13.Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably available, upon reasonable notice from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

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If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

MIDLAND STATES BANCORP, INC.	JEFFREY LUDWIG
By:
Name:	[Signature]
Its:
MIDLAND STATES BANK
By:
Name:
Its:

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EX-10.11

Exhibit 10.11

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Douglas J. Tucker (“Executive”).

RECITALS

A.The Bank is a wholly-owned subsidiary of the Company.

B.Executive is currently employed as Senior Vice President Corporate Counsel of the Company and Senior Vice President Corporate Counsel of the Bank.

C.The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

D.In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Company and the Bank.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements or understandings respecting Executive’s employment by, or service to, the Employer as may from time to time have been made by and between the parties, whether or not in writing; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending two (2) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Company or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs

during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the Senior Vice President Corporate Counsel of the Company and Senior Vice President Corporate Counsel of the Bank, at the direction of the Chief Executive Officer of the Company the Chief Executive Officer of the Bank (collectively, the “CEO”), as the case may be.  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

4.Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)Executive shall be compensated at an annual rate of $200,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the CEO, and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Company’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than thirty-five percent (35%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the Compensation Committee or the CEO.

(c)Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred

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bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  In the event that Executive is granted stock option awards or similar equity-type awards during the Employment Period, such awards shall provide for an expiration period of not less than five (5) years following termination (other than for Cause) to exercise such awards, but in no event beyond the original term of such awards.

(d)Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(e)Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)“Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

(b)“Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

(c)“Change of Control” shall mean the first to occur of the following:

(i)Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the

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Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or the Bank or an agreement for the sale or disposition by the Company of all or substantially all the Company’s or the Bank’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

(d)“Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)“Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

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(f)“Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) – (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)“Minimum Payments” shall mean, as applicable, the following amounts:

(i)Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

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(v)benefits, incentives and awards described in Section 6(f).

(h)“Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)“Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)“Severance Amount” shall mean:

(i)for any Termination occurring during the Employment Period and not during a Covered Period, an amount equal to fifty percent (50%) of Executive’s Base Compensation; or

(ii)for any Termination occurring during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation.

(k)“Termination” shall mean termination of Executive’s employment either:

(i)by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)by Executive for Good Reason.

(l)“Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)“Termination for Cause” shall mean only a termination by the Employer as a result of:

(i)Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform his obligations hereunder;

(ii)Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

(iii)Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

(n) “Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

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6.Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

(a)Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that

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exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(d)Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

(f)Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions

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of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

7.Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

8.Restrictive Covenants.

(a)Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of his duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this

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regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

(b)Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses the County of Effingham, Illinois (the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of twelve (12) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement: provided further, that nothing contained herein is intended to restrict Executive’s ability to engage in the private practice of law within the Restricted Area.

(ii)Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere

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with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(d)Work for Hire Provisions.

(i)Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

(ii)Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

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(e)           Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)            In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.             No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.          Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company (with a copy to the Bank):

Midland States Bancorp, Inc.
Attention: Chief Executive Officer
133 W. Jefferson Street
Effingham, Illinois 62401

If to the Bank (with a copy to the Company):

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Midland States Bank
Attention: Chief Executive Officer
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.          Entire Agreement; Survival.

(a)           This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)           The provisions of Section 8 shall survive the termination of this Agreement.

13.          Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

14.          No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

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15.          Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.          Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.          Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.          Internal Revenue Code Section 409A.

(a)           It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)           Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

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(c)           The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANCORP, INC.		DOUGLAS J. TUCKER
By:	/s/ Leon J. Holschbach	/s/ Douglas J. Tucker
Name:	Leon J. Holschbach
Its:	President & CEO
MIDLAND STATES BANK
By:	/s/ Leon J. Holschbach
Name:	Leon J. Holschbach
Its:	President & CEO

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this         day of                      , 20   , by and between Midland States Bancorp, Inc., (the “Company”), Midland States Bank, an Illinois banking corporation (the “Bank”) (the Bank and the Company hereinafter collectively referred to as the “Employer”), and Douglas J. Tucker (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.             Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                                 .  Executive further agrees that without prior written consent of the Employer he will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.             Severance Payment.

(a)           A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)           The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

3.             General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act

A-1

of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.             Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.             No Disparaging, Untrue Or Misleading Statements.  Executive  represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.             Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so

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that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

7.             Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.             Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.             Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

10.          Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.          Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)           this Release is written in a manner understood by Executive;

(b)           this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

(c)           Executive has not waived any rights arising after the date of this Release;

(d)           Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)           Executive has been advised to consult with an attorney prior to executing this Release.

12.          Consideration and Revocation.  Executive is receiving this Release on                     , 20       , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

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13.          Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably available, upon reasonable notice from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.          Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.          Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.          Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.          Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

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If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

MIDLAND STATES BANCORP, INC.	DOUGLAS J. TUCKER
By:
Name:	[Signature]
Its:
MIDLAND STATES BANK
By:
Name:
Its:

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EX-10.12

Exhibit 10.12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Jeffrey Mefford (“Executive”).

RECITALS

A.            The Employer is a wholly-owned subsidiary of Midland States Bancorp, Inc., (the “Company”).

B.            Executive is currently employed as Senior Vice President Community Banking of the Employer pursuant to the terms and conditions of that certain employment agreement by and between the parties dated January 1, 2010 (the “Prior Agreement”).

C.            The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

D.            In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Employer.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.             Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements respecting Executive’s employment by, or service to, the Employer or the Company as may from time to time have been made by and between the parties, whether or not in writing, including but not limited to the Prior Agreement; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.             Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending two (2) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Employer or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional

year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.             Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the Senior Vice President Community Banking of the Employer, at the direction of the Chief Executive Officer of the Employer (the “CEO”).  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

4.             Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)           Executive shall be compensated at an annual rate of $205,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the CEO, and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)           Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Employer’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than forty percent (40%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the CEO.

(c)           Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred

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bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.

(d)           Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(e)           Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.             Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)           “Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

(b)           “Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

(c)           “Change of Control” shall mean the first to occur of the following:

(i)           Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)          During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new

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Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)         Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

(d)           “Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)           “Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(f)            “Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)           an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately

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following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)          a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)         relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)        failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)         a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) — (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)           “Minimum Payments” shall mean, as applicable, the following amounts:

(i)           Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)          Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)         Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)        Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

(v)         benefits, incentives and awards described in Section 6(f).

(h)           “Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the

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Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)            “Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)            “Severance Amount” shall mean:

(i)           for any Termination occurring during the Employment Period and not during a Covered Period, the benefit available under the Midland States Severance Plan; or

(ii)          for any Termination occurring during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation.

(k)           “Termination” shall mean termination of Executive’s employment either:

(i)           by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)          by Executive for Good Reason.

(l)            “Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)          “Termination for Cause” shall mean only a termination by the Employer as a result of:

(i)           Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform his obligations hereunder;

(ii)          Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

(iii)         Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

(n)           “Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

6.             Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

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(a)           Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)           Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)           Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)          If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)           Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)           Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)          To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)         Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

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(d)           Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)           Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)          Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)         Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)           Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

(f)            Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

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7.             Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

8.             Restrictive Covenants.

(a)           Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his  employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of his  duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected

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sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

(b)           Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)           Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses a twenty-five (25) mile radius from each banking or other office location of the Employer and its Affiliates (collectively, the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of twelve (12) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)           Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.

(ii)          Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the

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Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)         Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)        Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(d)           Work for Hire Provisions.

(i)           Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

(ii)          Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

(e)           Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants

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contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)            In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.             No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.          Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employer (with a copy to the Company):

Midland States Bank
Attention: Chief Executive Officer and General Counsel
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to

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agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.          Entire Agreement; Survival.

(a)           This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)           The provisions of Section 8 shall survive the termination of this Agreement.

13.          Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

14.          No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.          Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.          Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of

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experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.          Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.          Internal Revenue Code Section 409A.

(a)           It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)           Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

(c)           The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANK		JEFFREY MEFFORD
By:	/s/ Leon J. Holschbach	/s/ Jeffrey Mefford
Name:	Leon J. Holschbach
Its:	President & CEO

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this          day of                   , 20     , by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Jeffrey Mefford (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.             Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                             .  Executive further agrees that without prior written consent of the Employer he will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.             Severance Payment.

(a)           A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)           The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

3.             General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement

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Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.             Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.             No Disparaging, Untrue Or Misleading Statements.  Executive  represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.             Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

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7.             Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.             Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.             Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

10.          Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.          Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)           this Release is written in a manner understood by Executive;

(b)           this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

(c)           Executive has not waived any rights arising after the date of this Release;

(d)           Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)           Executive has been advised to consult with an attorney prior to executing this Release.

12.          Consideration and Revocation.  Executive is receiving this Release on                        , 20      , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

13.          Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably available, upon reasonable notice

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from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.          Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.          Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.          Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.          Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.          Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

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MIDLAND STATES BANK	JEFFREY MEFFORD
By:
Name:	[Signature]
Its:

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EX-10.13

Exhibit 10.13

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Jeff Brunoehler (“Executive”).

RECITALS

A.            The Employer is a wholly-owned subsidiary of Midland States Bancorp, Inc., (the “Company”).

B.            Executive is currently employed as Senior Vice President Chief Credit Officer of the Employer pursuant to the terms and conditions of that certain employment agreement by and between the parties dated July 15, 2010 (the “Prior Agreement”).

C.            The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

D.            In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Employer.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.             Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements respecting Executive’s employment by, or service to, the Employer or the Company as may from time to time have been made by and between the parties, whether or not in writing, including but not limited to the Prior Agreement; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.             Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending two (2) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Employer or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional

year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.             Duties.  Executive agrees that during the Employment Period, Executive will devote his full business time, energies and talents to serving as the Senior Vice President Chief Credit Officer of the Employer, at the direction of the Chief Executive Officer of the Employer (the “CEO”).  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the Board and the Bank Board, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

4.             Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)           Executive shall be compensated at an annual rate of $185,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the CEO, and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)           Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Employer’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than thirty-five percent (35%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the CEO.

(c)           Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred

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bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.

(d)           Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(e)           Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.             Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)           “Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

(b)           “Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

(c)           “Change of Control” shall mean the first to occur of the following:

(i)           Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)          During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new

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Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)         Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

(d)           “Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)           “Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(f)            “Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)           an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately

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following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)          a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)         relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)        failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)         a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) — (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)           “Minimum Payments” shall mean, as applicable, the following amounts:

(i)           Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)          Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)         Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)        Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

(v)         benefits, incentives and awards described in Section 6(f).

(h)           “Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the

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Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)            “Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)            “Severance Amount” shall mean:

(i)           for any Termination occurring during the Employment Period and not during a Covered Period, the benefit available under the Midland States Severance Plan; or

(ii)          for any Termination occurring during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation.

(k)           “Termination” shall mean termination of Executive’s employment either:

(i)           by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)          by Executive for Good Reason.

(l)            “Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)          “Termination for Cause” shall mean only a termination by the Employer as a result of:

(i)           Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform his obligations hereunder;

(ii)          Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

(iii)         Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

(n)           “Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

6.             Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

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(a)           Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)           Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)           Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)          If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)           Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)           Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)          To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)         Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

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(d)           Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)           Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)          Executive (and his dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)         Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)           Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

(f)            Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

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7.             Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless he first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

8.             Restrictive Covenants.

(a)           Confidential Information.  Executive acknowledges that, during the course of his employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after his  employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of his  duties hereunder.  Executive agrees that, if he receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or his activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide him in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected

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sources and fitting them together to claim that he did not violate any agreements set forth in this Agreement.

(b)           Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of his duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)           Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses a twenty-five (25) mile radius from each banking or other office location of the Employer and its Affiliates (collectively, the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and his employment by the Employer, Executive agrees that, during his employment with the Employer and for a period of twelve (12) months immediately following the termination of his employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, he will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)           Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend his name or any similar name to, lend his credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.

(ii)          Executive will not, directly or indirectly, either for himself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the

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Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)Executive will not, directly or indirectly, either for himself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(d)Work for Hire Provisions.

(i)Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that he may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of his employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

(ii)Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of his employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to his exposure to any Confidential Information.

(e)Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants

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contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employer (with a copy to the Company):

Midland States Bank
Attention: Chief Executive Office and General Counsel
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to

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agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.Entire Agreement; Survival.

(a)This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)The provisions of Section 8 shall survive the termination of this Agreement.

13.Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

14.No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect his and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of

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experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.Internal Revenue Code Section 409A.

(a)It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

(c)The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), he shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANK		JEFF BRUNOEHLER
By:	/s/ Leon J. Holschbach	/s/ Jeff Brunoehler
Name:	Leon J. Holschbach
Its:	President & CEO

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this        day of                     , 20    , by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Jeff Brunoehler (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                               .  Executive further agrees that without prior written consent of the Employer he will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.Severance Payment.

(a)A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of his employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that he has agreed in the Employment Agreement, and again herein, that he is only entitled to such payments if he executes this Release.

3.General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement

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Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving his employment with the Employer, the termination of his employment with the Employer, or involving any continuing effects of his employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that his Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.No Disparaging, Untrue Or Misleading Statements.  Executive  represents that he has not made, and agrees that he will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

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7.Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.Non-Disclosure.  Executive agrees that he will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than his attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.Restrictive Covenants.  Executive agrees that he will abide by the terms set forth in Section 8 of the Employment Agreement.

10.Return of Employer Materials. Executive represents that he has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within his possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)this Release is written in a manner understood by Executive;

(b)this Release refers to and waives any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended;

(c)Executive has not waived any rights arising after the date of this Release;

(d)Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)Executive has been advised to consult with an attorney prior to executing this Release.

12.Consideration and Revocation.  Executive is receiving this Release on                     , 20    , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

13.Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make himself reasonably available, upon reasonable notice

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from the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by him as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to him is solely to reimburse his expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

If Executive signs this Release less than 21 days after he receives it from the Employer, he confirms that he does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

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MIDLAND STATES BANK	JEFF BRUNOEHLER
By:
Name:	[Signature]
Its:

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EX-10.14

Exhibit 10.14

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 1, 2010 (the “Effective Date”) by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Sharon Schaubert (“Executive”).

RECITALS

A.The Employer is a wholly-owned subsidiary of Midland States Bancorp, Inc., (the “Company”).

B.Executive is currently employed as Senior Vice President Corporate Services of the Employer pursuant to the terms and conditions of that certain employment agreement by and between the parties dated January 1, 2010 (the “Prior Agreement”).

C.The Company is considering various strategic initiatives, one of which may be an initial public offering (an “IPO”) of its common stock pursuant to which the Company would become a publicly-traded corporation.

D.In anticipation of the possibility of an IPO, or other strategic initiatives, the parties desire to reconsider, amend and restate the terms and conditions of employment applicable to Executive’s employment with the Employer.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows:

AGREEMENTS

1.Prior Agreement.  As of the Effective Date, this Agreement shall supersede and replace any and all prior agreements respecting Executive’s employment by, or service to, the Employer or the Company as may from time to time have been made by and between the parties, whether or not in writing, including but not limited to the Prior Agreement; provided, however, that any vested benefits due to Executive pursuant to any pension plan, welfare benefit plan or any other employee benefit plan shall continue to be available to Executive subject to the terms and conditions of the applicable plan as may be in effect from time to time.

2.Employment Period.  Subject to the terms and conditions of this Agreement, the Employer hereby agrees to continue to employ Executive during the Employment Period and Executive hereby agrees to continue to remain in the employ of the Employer and to provide services during the Employment Period in accordance with this Agreement.  The “Employment Period” shall be the period commencing on the Effective Date and ending two (2) years thereafter, unless sooner terminated as provided herein.  As of the first anniversary of the Effective Date, and each anniversary thereafter (each an “Extension Date”), the Employment Period shall automatically be extended for one (1) additional year, unless either the Employer or the Executive notifies the other party, by written notice delivered no later than 90 days prior to such Extension Date, that the “Employment Period” shall not be extended for an additional

year.  Notwithstanding anything contained herein to the contrary, if a Change of Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2) year period following the Change of Control and shall then terminate.

3.Duties.  Executive agrees that during the Employment Period, Executive will devote her full business time, energies and talents to serving as the Senior Vice President Corporate Services of the Employer, at the direction of the Chief Executive Officer of the Employer (the “CEO”).  Executive shall have such duties and responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder.  Executive will perform the duties required by this Agreement at the Company’s principal place of business unless the nature of such duties requires otherwise.  Notwithstanding the foregoing, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Employer and its Affiliates; provided, however, that Executive shall not serve on the board of directors of any business (other than the Employer or its Affiliates) or hold any other position with any business without receiving the prior written consent of the CEO.

4.Compensation and Benefits.  Subject to the terms and conditions of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows for periods following the Effective Date:

(a)Executive shall be compensated at an annual rate of $160,000 (the “Annual Base Salary”), which shall be payable in accordance with the Employer’s normal payroll practices as are in effect from time to time.  Beginning on January 1, 2012 and on each anniversary of such date, Executive’s rate of Annual Base Salary shall be reviewed by the CEO, and following such review, the Annual Base Salary may be adjusted upward but in no event will it be decreased.

(b)Executive shall be entitled to receive performance based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Employment Period.  Any such Incentive Bonus shall be paid to Executive within thirty (30) days of the completion of the annual audit by the Employer’s auditor, but in no event later than two and one-half months after the close of each such fiscal year.  Executive’s target Incentive Bonus shall be not less than thirty-five percent (35%) of the Annual Base Salary, which Incentive Bonus shall be determined by specific performance criteria established from time to time by the CEO.

(c)Executive shall be eligible to participate, subject to the terms and conditions thereof, in all other incentive plans and programs, including such cash and deferred

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bonus programs and equity incentive plans as may be in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.  Executive and Executive’s dependents, as the case may be, shall be eligible to participate in all pension and similar benefit plans (qualified, non-qualified and supplemental), profit sharing, 401(k), as well as all medical and dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans and programs of the Employer, subject to the terms and conditions thereof, as in effect from time to time with respect to senior executives employed by the Employer on as favorable a basis as provided to other similarly situated senior executives.

(d)Executive shall be entitled to accrue vacation at a rate of no less than four (4) weeks paid vacation for each calendar year, subject to the Employer’s vacation programs and policies as may be in effect during the Employment Period.

(e)Executive shall be reimbursed by the Employer, on terms and conditions that are substantially similar to those that apply to other similarly situated executives of the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging and similar items which are consistent with the Employer’s expense reimbursement policy and actually incurred by Executive in the promotion of the Employer’s business.

5.Definitions.  As used throughout this Agreement, all of the terms defined in this Section 5 shall have the meanings given below.

(a)“Affiliate” shall mean each company, corporation, partnership, bank, savings bank, savings and loan association, credit union or other financial institution, directly or indirectly, which is controlled by, controls, or is under common control with, the Company, where “control” means (x) the ownership of 51% or more of the voting securities or other voting interest or other equity interest of any corporation, partnership, joint venture or other business entity, or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

(b)“Base Compensation” shall mean the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change of Control; and (ii) the average of the Incentive Bonus paid (or payable) for the three (3) most recently completed fiscal years of the Company.

(c)“Change of Control” shall mean the first to occur of the following:

(i)Any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(ii)During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new

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Director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii)Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive if the Executive is part of a purchasing group which consummates the Change-in-Control transaction.  The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors).

In the event that any benefit under this Agreement constitutes deferred compensation, and the settlement of, or distribution of such benefits is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

(d)“Covered Period” shall mean the period beginning six (6) months prior to a Change of Control and ending twenty-four (24) months after the Change of Control.

(e)“Disability” shall mean that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(f)“Good Reason” shall mean Executive’s voluntary Termination of employment for one or more of the following reasons:

(i)an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 3 immediately

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following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(ii)a reduction in Executive’s Annual Base Salary, Incentive Bonus opportunity, or material reduction in Executive’s aggregate compensation and benefits from that in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period;

(iii)relocation of Executive’s primary place of employment of more than ninety (90) miles from Executive’s primary place of employment immediately following the Effective Date, or if applicable, prior to the Covered Period, or a requirement that Executive engage in travel that is materially greater than was required prior to the Covered Period;

(iv)failure by an acquirer to assume this Agreement at the time of a Change of Control; or

(v)a material breach by the Employer, or its successor, of this Agreement.

Notwithstanding the foregoing, prior to Executive’s Termination for Good Reason, Executive must give the Employer written notice of the existence of any condition set forth in clause (i) – (v) above within ninety (90) days of such initial existence and the Employer shall have thirty (30) days from the date of receipt of such notice in which to cure the condition giving rise to Good Reason, if curable.  If, during such thirty (30) day period, the Employer cures the condition giving rise to Good Reason, no payments or benefits shall be due under Section 6 of this Agreement with respect to such occurrence.  If, during such thirty (30) day period, the Employer fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to payments or benefits under Section 6 of this Agreement upon such Termination; provided such Termination occurs within 24 months of such initial existence of the applicable condition.

(g)“Minimum Payments” shall mean, as applicable, the following amounts:

(i)Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date;

(ii)Executive’s earned but unpaid Incentive Bonus for the previously completed fiscal year;

(iii)Executive’s accrued but unpaid vacation pay for the period ending on the Termination Date;

(iv)Executive’s unreimbursed business expenses and all other items earned and owed to Executive through the Termination Date; and

(v)benefits, incentives and awards described in Section 6(f).

(h)“Pro Rata Bonus” means a payment equal to the Incentive Bonus that Executive would have earned for the year of termination, based upon actual results of the

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Employer and pro rated on a per diem basis (by dividing the number of days employed during the applicable performance period by the total number of days in the applicable performance period).

(i)“Release” shall mean a general release and waiver substantially in the form attached hereto as Exhibit A.

(j)“Severance Amount” shall mean:

(i)for any Termination occurring during the Employment Period and not during a Covered Period, the benefit available under the Midland States Severance Plan; or

(ii)for any Termination occurring during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation.

(k)“Termination” shall mean termination of Executive’s employment either:

(i)by the Employer or its successor, as the case may be, other than a Termination for Cause or any termination as a result of death or Disability; or

(ii)by Executive for Good Reason.

(l)“Termination Date” shall mean the date of employment termination, for any reason or no reason, indicated in the written notice provided by the Employer or Executive to the other.

(m)“Termination for Cause” shall mean only a termination by the Employer as a result of:

(i)Executive’s willful and continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the CEO, to perform her obligations hereunder;

(ii)Executive’s willful act or acts of gross misconduct that are, alone or in the aggregate, materially and demonstrably injurious, monetarily or otherwise, to the Employer or an Affiliate, as determined in the sole discretion of the CEO; or

(iii)Executive’s breach of fiduciary responsibility or any obligation of Executive pursuant to Section 8.

(n) “Voting Securities” shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

6.Rights and Payments Upon Termination.  Either party may terminate Executive’s employment under this Agreement pursuant to the terms and conditions of this Section 6.  Subject to Section 7 below, Executive’s right to benefits and payments, if any, for periods after the Termination Date shall be determined in accordance with this Section 6:

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(a)Minimum Payments.  If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the Minimum Payments, in addition to any payments or benefits to which Executive may be entitled under the following provisions of this Section 6 (other than this Section 6(a)) or the express terms of any employee benefit plan or as required by law.  Any payments to be made to Executive pursuant to this Section 6(a) shall be made within thirty (30) days after the Termination Date; provided that any benefits, incentives or awards payable as described in Section 6(f) shall be made in accordance with the provisions of the applicable plan, program or arrangement.  Except as may be otherwise expressly provided to the contrary in this Agreement or as otherwise provided by law, nothing in this Agreement shall be construed as requiring Executive to be treated as employed by the Employer following the Termination Date for purposes of any employee benefit plan or arrangement in which Executive may participate at such time.

(b)Termination for Cause, Death, Disability, Voluntary Resignation and Non-Renewal.

(i)Upon a determination of a Termination for Cause by the Employer, Executive’s death or Disability, or Executive’s voluntary resignation other than for Good Reason, Executive’s employment shall immediately terminate.

(ii)If the Termination Date occurs during the Employment Period and is a result of a Termination for Cause, death, Disability, voluntary resignation other than for Good Reason or if this Agreement expires due to notice of non-renewal by either party as provided under Section 2 or at the end of a Covered Period, then, other than the Minimum Payments, Executive shall have no right to payments or benefits under this Agreement (and the Employer shall have no obligation to make any such payments or provide any such benefits) for periods after the Termination Date.

(c)Termination Other than for Cause or Termination for Good Reason.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination other than during a Covered Period, then, in addition to the Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Commencing on the Termination Date, Executive shall receive the applicable Severance Amount (less any amount described in subparagraph (ii) below) paid in 12 substantially equal monthly installments, with each successive payment being due on the monthly anniversary of the Termination Date.

(ii)To the extent any portion of the applicable Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the applicable Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable within five (5) days after Executive’s Termination Date.

(iii)Executive (and dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

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(d)Termination Upon a Change of Control.  If Executive’s employment by the Employer, or any Affiliate or successor of the Employer, shall be subject to a Termination within a Covered Period, then, in addition to Minimum Payments, the Employer shall provide Executive the following benefits:

(i)Within five (5) days after Executive’s Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount.

(ii)Executive (and her dependents, as may be applicable) shall be entitled to the medical benefits provided in Section 6(e) below.

(iii)Executive shall be entitled to receive a Pro Rata Bonus, when Incentive Bonuses are paid to other senior management of Employer, consistent with Section 4(b) of this Agreement.

(e)Medical, Dental and Life Insurance Benefits.  If Executive’s employment by the Employer or any Affiliate or successor of the Employer shall be subject to a Termination as provided in subsections (c) or (d) above within the Employment Period, then to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical and dental plans of the Employer (or any Affiliate) for active employees immediately prior to the termination, then, for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Employer will provide Executive and those dependents with equivalent coverage, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer or an Affiliate during such period, but in no event more than twelve (12) months following termination,  The coverage may be procured directly by the Employer (or any Affiliate, if appropriate) apart from, and outside of the terms of the plans themselves; provided that Executive and Executive’s dependents comply with all of the conditions of the medical or dental plans, with the cost to the Employer not to exceed the cost for continued COBRA coverage.  In the event Executive or any of Executive’s dependents become eligible for coverage under the terms of any other medical and/or dental plan of a subsequent employer which plan benefits are comparable to Employer (or any Affiliate) plan benefits, coverage under Employer (or any Affiliate) plans will cease for the eligible Executive and/or dependent.  Executive and Executive’s dependents must notify the Employer (or any Affiliate) of any subsequent employment and provide information regarding medical and/or dental coverage available.  In the event the Employer (or any Affiliate) discovers that Executive and/or dependent has become employed and not provided the above notification, all payments and benefits under this subsection (e) will cease.

(f)Other Benefits.  Executive’s rights following a Termination with respect to any benefits, incentives or awards provided to Executive pursuant to the terms and conditions of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms and conditions of such plan, program or arrangement and this Agreement shall have no effect upon such terms and conditions except as specifically provided herein.

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7.Release.  Notwithstanding anything contained in this Agreement to the contrary, no payments or benefits (including without limitation, vesting of any and all stock options, shares of restricted stock, restricted stock units and other unvested incentive awards) payable to Executive under Section 6(c), 6(d) or 6(e) (except for payments and benefits described in Section 6(a)) shall be paid or provided to Executive unless she first executes (without subsequent revocation) and delivers to the Employer a Release.  To the extent any of the payments and/or benefits due under Section 6(c), 6(d) or 6(e) are determined to be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Release must be executed and become irrevocable on or before the 60th day following the Termination Date.  Provided that an executed, irrevocable Release has been delivered on or before the 60th day following the Termination Date, any payments and benefits that are determined to be subject to Section 409A of the Code shall become payable, or shall otherwise commence, as of the 60th day following the Termination Date.  If an executed, irrevocable Release is not delivered on or before the 60th day following the Termination Date, Executive shall forever forfeit any and all rights to any payment or benefit (to the extent such payment or benefit is determined to be subject to Section 409A of the Code) under Section 6(c), 6(d) or 6(e) or any payment or benefit in lieu thereof.

8.Restrictive Covenants.

(a)Confidential Information.  Executive acknowledges that, during the course of her employment with the Employer, Executive may produce and have access to confidential and/or proprietary non-public information concerning the Employer and its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  Executive agrees not to directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during or after her  employment with the Employer, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with performance by Executive of her  duties hereunder.  Executive agrees that, if she receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or her activities in connection with the business of the Employer or any of its Affiliates, Executive will immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  Executive agrees to abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, Executive shall not directly or indirectly render services to any person or entity where Executive’s service would involve the use or disclosure of Confidential Information.  Executive agrees not to use any Confidential Information to guide her in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected

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sources and fitting them together to claim that she did not violate any agreements set forth in this Agreement.

(b)Documents and Property.  All records, files, documents and other materials or copies thereof relating to the business of the Employer and its Affiliates, which Executive shall prepare, receive, or use, shall be and remain the sole property of the Employer and, other than in connection with performance by Executive of her duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon Executive’s termination of employment together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(c)Non-Competition and Non-Solicitation.  The Employer and Executive have agreed that the primary service area of the Employer’s lending and deposit taking functions in which Executive will actively participate extends separately to an area that encompasses a twenty-five (25) mile radius from each banking or other office location of the Employer and its Affiliates (collectively, the “Restricted Area”).  Therefore, as an essential ingredient of and in consideration of this Agreement and her employment by the Employer, Executive agrees that, during her employment with the Employer and for a period of twelve (12) months immediately following the termination of her employment (the “Restricted Period”), for whatever reason, where such termination occurs during the Employment Period or thereafter, she will not, except with the express prior written consent of the Employer, directly or indirectly, do any of the following (all of which are collectively referred to in this agreement as the “Restrictive Covenant”):

(i)Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer or consultant to, lend her name or any similar name to, lend her credit to, or render services or advice to, any person, firm, partnership, corporation or trust which owns, operates or is in the process of forming, a bank, savings and loan association, credit union or similar financial institution (a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided however, that the ownership by Executive of shares of the capital stock of any Financial Institution which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.

(ii)Executive will not, directly or indirectly, either for herself, or any Financial Institution: (1) induce or attempt to induce any employee of the Employer or any of its Affiliates to leave the employ of the Employer or any of its Affiliates; (2) in any way interfere with the relationship between the Employer or any of its Affiliates and any employee of the Employer or any of its Affiliates; or (3) induce or attempt to induce any customer, supplier, licensee, or business relation of the Employer or any of its Affiliates to cease doing business with the Employer or any of its Affiliates or in any way interfere with the relationship between the

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Employer or any of its Affiliates and their respective customers, suppliers, licensees or business relations.

(iii)Executive will not, directly or indirectly, either for herself, or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Employer or any of its Affiliates, where Executive, or any person reporting to Executive, had personal contact with such person or entity, with respect to products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(iv)Executive will not, directly or indirectly, serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restricted Area, with respect to the products, activities or services which compete in whole or in part with the products, activities or services of the Employer or any of its Affiliates.

(d)Work for Hire Provisions.

(i)Exclusive Rights of the Employer in Work Product.  The parties acknowledge and agree that all work performed by Executive for the Employer or any of its Affiliates shall be deemed “work for hire.”  The Employer shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions (as defined below), and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same.  Any and all enhancements of the technology of the Employer or any of its Affiliates that are developed by Executive shall be the exclusive property of the Employer.  Executive hereby assigns to the Employer any right, title and interest in and to all Inventions that she may have, by law or equity, without additional consideration of any kind whatsoever from the Employer or any of its Affiliates.  Executive agrees to execute and deliver any instruments or documents and to do all other things (including the giving of testimony) requested by the Employer (both during and after the termination of her employment with the Employer) in order to vest more fully in the Employer or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefore in the United States and/or foreign countries).

(ii)Definitions and Exclusions.  For purposes of this Agreement, “Inventions” means all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of her employment with the Employer or any of its Affiliates and/or comprised, in whole or part, of Confidential Information.  Notwithstanding the foregoing, Inventions shall not include:  (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to her exposure to any Confidential Information.

(e)Remedies for Breach of Restrictive Covenants.  Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges and expressly agrees that the covenants

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contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with her, as the case may be.

(f)In the event of the existence of any other agreement between the parties which (i) is in effect during the Restricted Period, and (ii) which contains restrictive covenants that conflict with any of the provisions of this Section 8, then the more restrictive of such provisions from the agreements shall control for the period during which the agreements would otherwise be in effect.

9.No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

10.Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Employer (with a copy to the Company):

Midland States Bank
Attention: Chief Executive Officer and General Counsel
133 W. Jefferson Street
Effingham, Illinois 62401

If to Executive, to such home address or other address as Executive has most recently provided to the Employer.

or to such other address as either party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt.

11.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Illinois applicable to

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agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Effingham, Illinois.

12.Entire Agreement; Survival.

(a)This Agreement constitutes the entire agreement between Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Agreement.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and Executive hereby agrees that such scope may be judicially modified accordingly.

(b)The provisions of Section 8 shall survive the termination of this Agreement.

13.Withholding of Taxes.  The Employer may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

14.No Assignment.  Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

15.Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not effect the sale or other disposition of all or substantially all of its assets (where such transaction would constitute a Change in Control) unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for the payment in full of all amounts which are or may reasonably be expected to become payable to Executive under this Agreement.

16.Legal Fees.  In the event that either party commences arbitration or litigation to enforce or protect her and/or its rights under this Agreement, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of

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experts, evidence and counsel) relating to such action, in addition to all other entitled relief, including but not limited to damages and injunctive relief.

17.Amendment.  This Agreement may not be amended or modified except by written agreement signed by Executive and the Employer.

18.Internal Revenue Code Section 409A.

(a)It is intended that this Agreement comply with the provisions of Section 409A of the Code so as not to subject Executive to the payment of additional taxes and interest under Section 409A of the Code.  In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions, and to the extent that any regulations or other guidance issued under Section 409A of the Code would result in Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of the Agreement while avoiding the application of such taxes or interest under Section 409A of the Code.

(b)Notwithstanding any provision in this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Termination Date, then, to the extent required pursuant to Section 409A(a)(2)(B)(i) of the Code, payments due under this Agreement which are deemed to be deferred compensation shall be subject to a six (6) month delay following the Termination Date.  For purposes of Section 409A of the Code, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments and, accordingly, the aforementioned deferral shall only apply to separate payments which would occur during the six (6) month deferral period and all other payments shall be unaffected.  All delayed payments shall be accumulated and paid in a lump-sum catch-up payment as of the first day of the seventh-month following the Termination Date (or, if earlier, the date of death of Executive) with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period.  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein.

(c)The term “Specified Employee” shall mean any person who is a “key employee” (as defined in Code Section 416(i) of the Code without regard to paragraph (5) thereof), as determined by the Employer based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee under Section 416(i) of the Code (without regard to paragraph (5) thereof), she shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of such identification period.  For purposes of determining whether Executive is a key employee under Section 416(i) of the Code, “compensation” shall mean Executive’s W-2 compensation as reported by the Employer for a particular calendar year.

(remainder of page intentionally left blank)

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MIDLAND STATES BANK		SHARON SCHAUBERT
By:	/s/ Leon J. Holschbach	/s/ Sharon Schaubert
Name:	Leon J. Holschbach
Its:	President & CEO

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EXHIBIT A

GENERAL RELEASE AND WAIVER

THIS GENERAL RELEASE AND WAIVER (the “Release”) is made and entered into as of this        day of                     , 20    , by and between Midland States Bank, an Illinois banking corporation (the “Employer”), and Sharon Schaubert (“Executive”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Termination of Employment.  Executive and the Employer agree that Executive’s employment with the Employer terminated effective                               .  Executive further agrees that without prior written consent of the Employer she will not hereafter seek reinstatement, recall or reemployment with the Employer.

2.Severance Payment.

(a)A description of the payments to which Executive may be entitled upon termination of employment are contained in Section 6 of that certain Employment Agreement entered into by and between the Employer and Executive dated December 1, 2010, which is incorporated by reference herein (the “Employment Agreement”).

(b)The payments described in this Section 2 are over and above that to which Executive would be otherwise entitled to upon the termination of her employment with the Employer, absent executing this Release, notwithstanding the terms of the Employment Agreement.  Executive affirms that she has agreed in the Employment Agreement, and again herein, that she is only entitled to such payments if she executes this Release.

3.General Release.  In consideration of the payments and benefits to be made by the Employer to Executive in Section 2 above, Executive, with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with her counsel, releases and discharges the Employer, its shareholders, officers, directors, supervisors, managers, employees, agents, representatives, attorneys, parent companies, divisions, subsidiaries and affiliates, and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “Released Parties”) from any and all claims, actions, causes of action, grievances, suits, charges, or complaints of any kind or nature whatsoever, that she ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy, arising prior to the execution of this Release.  Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes any and all subject matters and claims arising from any alleged violation by the Released Parties under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement

A-1

Income Security Act of 1974, as amended; the Illinois Human Rights Act, and other similar state or local laws; the Americans with Disabilities Act; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order 11141; and any other statutory claim, employment or other contract or implied contract claim, claim for equity in the Employer, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, or invasion of privacy arising out of or involving her employment with the Employer, the termination of her employment with the Employer, or involving any continuing effects of her employment with the Employer or termination of employment with the Employer; provided, however, that nothing herein waives or releases Executive’s rights to any payments or benefits the Employer is required to pay or provide pursuant to the terms of the Employment Agreement or this Release or to indemnification which Executive may have under the Employer’s governing documents, by any agreement, under any applicable law or otherwise.  Executive further acknowledges that she is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action which are unknown to the releasing or discharging part at the time of execution of the release and discharge.  Executive hereby expressly waives, surrenders and agrees to forego any protection to which she would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the State of Illinois.

4.Covenant Not to Sue.  Executive agrees not to bring, file, charge, claim, sue or cause, assist, or permit to be brought, filed, charged or claimed any action, cause of action, or proceeding regarding or in any way related to any of the claims described in Section 3 hereof, and further agrees that her Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding.  If any government agency or court assumes jurisdiction of any charge, complaint, or cause of action covered by this Release, Executive will not seek and will not accept any personal equitable or monetary relief in connection with such investigation, civil action, suit or legal proceeding.

5.No Disparaging, Untrue Or Misleading Statements.  Executive  represents that she has not made, and agrees that she will not make, to any third party any disparaging, untrue, or misleading written or oral statements about or relating to, respectively, the Employer, its products or services (or about or relating to any officer, director, agent, employee, or other person acting on the Employer’s behalf), or Executive.

6.Severability.  If any provision of this Release shall be found by a court to be invalid or unenforceable, in whole or in part, then such provision shall be construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

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7.Waiver.  A waiver by the Employer of a breach of any provision of this Release by Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by Executive.  No waiver shall be valid unless in writing and signed by an authorized officer of the Employer.

8.Non-Disclosure.  Executive agrees that she will keep the terms and amounts set forth in this Release completely confidential and will not disclose any information concerning this Release’s terms and amounts to any person other than her attorney, accountant, tax advisor, or immediate family, until such time as the information in this Release is disclosed by the Employer as may be required by law.

9.Restrictive Covenants.  Executive agrees that she will abide by the terms set forth in Section 8 of the Employment Agreement.

10.Return of Employer Materials. Executive represents that she has returned all Employer property and all originals and all copies, including electronic and hard copy, of all documents, within her possession at the time of the execution of this Release, including but not limited to the laptop computer, printer, Blackberry device, telephone, and credit card, as may be applicable.

11.Representation.  Executive hereby agrees that this Release is given knowingly and voluntarily and acknowledges that:

(a)this Release is written in a manner understood by Executive;

(b)this Release refers to and waives any and all rights or claims that she may have arising under the Age Discrimination in Employment Act, as amended;

(c)Executive has not waived any rights arising after the date of this Release;

(d)Executive has received valuable consideration in exchange for the Release in addition to amounts Executive is already entitled to receive; and

(e)Executive has been advised to consult with an attorney prior to executing this Release.

12.Consideration and Revocation.  Executive is receiving this Release on                     , 20    , and Executive shall be given twenty-one (21) days from receipt of this Release to consider whether to sign the Release.  Executive agrees that changes or modifications to this Release do not restart or otherwise extend the above twenty-one (21) day period, unless specifically agreed to in writing by the Employer.  Moreover, Executive shall have seven (7) days following execution to revoke this Release in writing to the Secretary of the Employer and the Release shall not take effect until those seven (7) days have ended.

13.Future Cooperation.  In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Employer which relate to periods of time during the Employment Period (as defined in the Employment Agreement), Executive agrees to make herself reasonably available, upon reasonable notice from

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the Employer and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Employer, meet with attorneys or other representatives of the Employer, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.  Executive shall be reimbursed for reasonable costs and expenses incurred by her as a result of actions taken pursuant to this Section 13.  It is expressly agreed and understood that Executive will provide only truthful testimony if required to do so, and that any payment to her is solely to reimburse her expenses and costs for cooperation with the Employer.  Nothing in this Section 13 is intended to require Executive to expend an unreasonable period of time in activities required by this Section.

14.Amendment.  This Release may not be altered, amended, or modified except in writing signed by both Executive and the Employer.

15.Joint Participation.  The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release.  Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party.  This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16.Binding Effect; Assignment.  This Release and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties and their respective successors, heirs, representatives and permitted assigns.  Neither party may assign its respective interests hereunder without the express written consent of the other party.

17.Applicable Law.  All questions concerning the construction, validity and interpretation of this Release and the performance of the obligations imposed by this Release shall be governed by the internal laws of the State of Illinois applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction and any court action commenced to enforce this Release shall have as its sole and exclusive venue the County of Effingham, Illinois.

18.Execution of Release.  This Release may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT, AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN EMPLOYMENT.

If Executive signs this Release less than 21 days after she receives it from the Employer, she confirms that she does so voluntarily and without any pressure or coercion from anyone at the Employer.

IN WITNESS WHEREOF, the parties have executed this Release as of the date first stated above.

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MIDLAND STATES BANK	SHARON SCHAUBERT
By:
Name:	[Signature]
Its:

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EX-10.15

Exhibit 10.15

MIDLAND STATES BANCORP, INC.

OMNIBUS STOCK OWNERSHIP AND

LONG TERM INCENTIVE PLAN

THIS IS THE OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN (“Plan”) of Midland States Bancorp, Inc. (“the Corporation” or “Company”), a Delaware corporation with its principal office in Effingham County, Illinois, under which Incentive Stock Options and Non-Qualified Options to acquire shares of the Stock, Restricted Stock, Stock Appreciation Rights, and/or Units may be granted from time to time to Eligible Employees of the Corporation and of any of its Subsidiaries (the “Subsidiaries”), subject to the following provisions:

ARTICLE I

DEFINITIONS

The following terms shall have the meanings set forth below.  Additional terms defined in this Plan shall have the meanings ascribed to them when first used herein.

Board.  The Board of Directors of Midland States Bancorp, Inc.

Change in Control Transaction.  The dissolution or liquidation of the Corporation; a reorganization, merger or consolidation of the Corporation as a result of which the outstanding securities of the class then subject to Rights hereunder are changed into or exchanged for cash or property or securities not of the Corporation’s issue; or a sale of all or substantially all of the assets of the Corporation to, or the acquisition of stock representing more than fifty percent (50%) of the voting power of the capital stock of the Corporation then outstanding by, another corporation, bank, other entity or person.

Code.  The Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

Committee.  The Compensation Committee of the Board.

Common Stock.  The Common Stock, $2.00 par value per share, of the Corporation.

Death. The date of death of an Eligible Employee who has received Rights as established by the relevant death certificate.

Disability.  The date on which an Eligible Employee who has received Rights becomes permanently and totally disabled within the meaning of Section 22 (e) (3) of the Code, which shall be determined by the Committee on the basis of such medical or other evidence as it may reasonably require or deem appropriate.

Effective Date.  The date on which this Plan is effective, which shall be the date it is approved by the shareholders of the Corporation.

Eligible Employees.  Those individuals who meet the following eligibility requirements:

(i)Such individual must be a full time employee of the Corporation or a Subsidiary.  For this purpose, an individual shall be considered to be an “employee” only if there exists between the Corporation or a Subsidiary and the individual the legal and bona fide relationship of employer and employee.  In determining whether such relationship exists, the regulations of the United States Treasury Department relating to the determination of such relationship for the purpose of collection of income tax at the source on wages shall be applied.

(ii)Such individual is identified by the Committee as a key employee who is in a position to significantly influence the long-term success of the Corporation, subject to ratification of such action by the Board.

(iii)If the Registration shall not have occurred, such individual must have such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the investment involved in the receipt and/or exercise of a Right.

(iv)Such individual, being otherwise an Eligible Employee under the foregoing items, shall have been selected by the Committee as a person to whom a Right or Rights shall be granted under the Plan.

Fair Market Value.  With respect to the Corporation’s Common Stock, the market price per share of such Common Stock determined by the Committee, consistent with the requirements of Section 422 of the Code and to the extent consistent therewith, as follows, as of the date specified in the context within which such term is used:

(i)if the Common Stock was traded on a stock exchange on the date in question, then the Fair Market Value will be equal to the closing price reported by the applicable composite-transactions report for such date;

(ii)if the Common Stock was traded over-the-counter on the date in question and was classified as a national market issue, then the Fair Market Value will be equal to the last transaction price quoted by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), National Market System (“NMS”);

(iii)if the Common Stock was traded over-the-counter on the date in question but was not classified as a national market issue, then the Fair Market Value will be equal to the average of the last reported representative bid and asked prices quoted by the NASDAQ for such date; and

(iv)if none of the foregoing provisions is applicable, then the Fair Market Value will be determined by the Committee in good faith on such basis as it deems appropriate, subject to the approval of the Board.  In such case, the Committee shall maintain a written record of its method of determining Fair Market Value.

ISO.   An “incentive stock option” as defined in Section 422 of the Code.

Just Cause Termination.   A termination by the Corporation or a Subsidiary of an Eligible Employee’s employment by the Corporation or the Subsidiary in connection with the good faith determination of the Board or the Board of Directors of the Subsidiary, as applicable, that the Eligible Employee is incompetent or otherwise has engaged in any acts involving dishonesty or moral turpitude or in any acts

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that materially and adversely affect the business, affairs or reputation of the Corporation or the Subsidiary.

Long Term Incentive Compensation Units.   The Right of a Long Term Incentive Compensation Unit Recipient to receive cash when, as and in the amounts described in Article V.

Long Term Incentive Compensation Unit Agreement.  The agreement between the Corporation and Long Term Incentive Compensation Unit Recipient with respect to the award of Long Term Incentive Compensation Units to the Long Term Incentive Compensation Unit Recipient, including such terms and conditions as are necessary or appropriate under Article V.

Non-Qualified Option.  Any Option granted under Article III whether designated by the Committee as a Non-Qualified Option or otherwise, other than an Option designated by the Committee as an ISO, or any Option so designated but which, for any reason, fails to qualify as an ISO pursuant to Section 422 of the Code and the rules and regulations thereunder.

Option Agreement.  The agreement between the Corporation and an Optionee with respect to Options granted to such Optionee, including such terms and provisions as are necessary or appropriate under Article III.

Options.  ISOs and Non-Qualified Options are collectively referred to herein as “Options;” provided, however, whenever reference is specifically made only to ISOs or Non-Qualified Options, such reference shall be deemed to be made to the exclusion of the other.

Plan Pool.  A total of 100,000 shares of authorized, but unissued, and/or Treasury shares of Common Stock, as adjusted pursuant to Section 2.3(b), which shall be available as Stock under this Plan.

Registration.   A registration by the Corporation under the 1933 Act and applicable state “Blue Sky” and securities laws of this Plan, the offering of Rights under this Plan, the offering of Stock under this Plan, and/or the Stock acquirable under this Plan.

Restricted Stock.  The Stock that a Holder shall be awarded with restrictions when, as, in the amounts and with the restrictions described in Article IV.

Restricted Stock Grant  Agreement.  The agreement between the Corporation and a Holder with respect to Rights to Restricted Stock, including such terms and provisions as are necessary or appropriate under Article IV.

Restricted Stock Unit.  Any unit granted under Article IV of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share), or any combination of cash and Shares, at some future date.

Restricted Stock Unit Grant  Agreement.  The agreement between the Corporation and a Holder with respect to Rights to Restricted Stock Units, including such terms and provisions as are necessary or appropriate under Article IV.

Retirement.   “Retirement” shall mean

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(i)the termination of an Eligible Employee’s employment under conditions which would constitute “normal retirement” or “early retirement” under any tax qualified retirement plan maintained by the Corporation or a Subsidiary, or

(ii)termination of employment after attaining age 65 (except in the case of a Just Cause Termination).

Rights.  The rights to exercise, purchase or receive the Options, Restricted Stock, Units and SARs described herein.

Rights Agreement.  An Option Agreement, a Restricted Stock Grant Agreement, a Unit Agreement or an SAR Agreement.

SAR.  The Right of an SAR Recipient to receive cash when, as and in the amounts described in Article VI.

SAR Agreement.  The agreement between the Corporation and an SAR Recipient with respect to the SAR awarded to the SAR Recipient, including such terms and conditions as are necessary or appropriate under Article VI.

SEC.  The Securities and Exchange Commission.

Stock.  The shares of Common Stock in the Plan Pool available for issuance pursuant to the valid exercise of a Right or on which the cash value of a Right is to be based.

Tax Withholding Liability.  All federal and state income taxes, social security tax, and any other taxes applicable to the compensation income arising from the transaction required by applicable law to be withheld by the Corporation.

Transfer.  The sale, assignment, transfer, conveyance, pledge, hypothecation, encumbrance, loan, gift, attachment, levy upon, assignment for the benefit of creditors, by operation of law (by will or descent and distribution), transfer by a qualified domestic relations order, a property settlement or maintenance agreement, transfer by result of the bankruptcy laws or otherwise of a share of Stock or of a Right.

1933 Act.  The Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

1934 Act.  The Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

ARTICLE II

GENERAL

Section 2.1. Purpose.

The purposes of this Plan are to encourage and motivate selected key employees to contribute to the successful performance of the Corporation and its Subsidiaries and the growth of the market value of the Corporation’s Common Stock; to achieve a unity of purpose between such employees and shareholders by providing ownership opportunities, and, when viewed in conjunction with potential benefit plans for

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members of the Board and the Boards of Directors of some or all of the Subsidiaries, to achieve a unity of purpose between such employees and directors in the achievement of the Corporation’s primary long term performance objectives; and to retain such employees by rewarding them with potentially tax-advantageous future compensation.  These objectives will be promoted through the granting of Rights to designated Eligible Employees pursuant to the terms of this Plan

Section 2.2. Administration.

(a)The Plan shall be administered by the Committee.  Subject to the provisions of SEC Rule 16b-3(d), the Committee may designate any officers or employees of the Corporation or any Subsidiary to assist in the administration of the Plan, to execute documents on behalf of the Committee and to perform such other ministerial duties as may be delegated to them by the Committee.

(b)Subject to the provisions of the Plan, the determinations and the interpretation and construction of any provision of the Plan by the Committee shall be recommended to the Board for approval, and when so approved by the Board shall be final and conclusive upon persons affected thereby.  By way of illustration and not of limitation, the Committee shall have the discretion, subject to the approval by the Board,

(i)to construe and interpret the Plan and all Rights granted hereunder and to determine the terms and provisions (and amendments thereof) of the Rights granted under the Plan (which need not be identical);

(ii)to define the terms used in the Plan and in the Rights granted hereunder;

(iii)to prescribe, amend and rescind the rules and regulations relating to the Plan;

(iv)to determine the Eligible Employees to whom and the time or times at which such Rights shall be granted, the number of shares of Stock, as and when applicable, to be subject to each Right, the exercise price or, other relevant purchase price or value pertaining to a Right, and the determination of leaves of absence which may be granted to Eligible Employees without constituting a termination of their employment for the purposes of the Plan; and

(v)to make all other determinations and interpretations necessary or advisable for the administration of the Plan.

(c)Notwithstanding the foregoing, or any other provision of this Plan, the Committee will have no authority to determine any matters, or exercise any discretion, to the extent that the power to make such determinations or to exercise such discretion would cause the loss of exemption under SEC Rule 16b-3 of any grant or award hereunder.

(d)It shall be in the discretion of the Committee, subject to approval by the Board, to grant Options to purchase shares of Stock which qualify as ISOs under the Code or which will be given tax treatment as Non-Qualified Options.  Any Options granted which fail to satisfy the requirements for ISOs shall become Non-Qualified Options.

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(e)The Corporation shall make available to Eligible Employees receiving Rights and/or shares of Stock in connection therewith all disclosure documents required under applicable federal and state securities laws.  The Committee shall be responsible for supplying the recipient of a Right and/or shares of Stock in connection therewith with such information about the Corporation as is contemplated by the federal and state securities laws in connection with exemptions from the registration requirements of such laws, as well as providing the recipient of a Right with the opportunity to ask questions and receive answers concerning the Corporation and the terms and conditions of the Rights granted under this Plan.  In addition, if a Registration shall not occur, the Committee shall be responsible, subject to approval by the Board, for determining the maximum number of Eligible Employees and the suitability of particular persons to be Eligible Employees in order to comply with applicable federal and state securities statutes and regulations governing such exemptions.

(f)In determining the Eligible Employees to whom Rights may be granted and the number of shares of Stock to be covered by each Right, the Committee and the Board shall take into account the nature of the services rendered by such Eligible Employees, their present and potential contributions to the success of the Corporation and/or a Subsidiary and such other factors as the Committee and the Board shall deem relevant.  An Eligible Employee who has been granted a Right under this Plan may be granted an additional Right or Rights under this Plan if the Committee and the Board shall so determine.  If pursuant to the terms of this Plan, or otherwise in connection with this Plan, it is necessary that the percentage of stock ownership of an Eligible Employee be determined, the ownership attribution provisions set forth in Section 424(d) of the Code shall be controlling.

(g)The granting of Rights pursuant to this Plan is in the exclusive discretion of the Board, and until the Board acts, no individual shall have any rights under this Plan.  The terms of this Plan shall be interpreted in accordance with this intent.

Section 2.3.  Stock Available For Rights.

(a)Shares of the Stock shall be subject to, or underlying, grants of Options, Restricted Stock, Restricted Stock Units, SARs and Long Term Incentive Compensation Units under this Plan.  The total number of shares of Stock for which, or with respect to which, Rights may be granted (including the number of shares of Stock in respect of which SARs and Long Term Incentive Compensation Units may be granted) under this Plan shall be those designated in the Plan Pool.  In the event that a Right granted under this Plan to any Eligible Employee expires or is terminated unexercised as to any shares of Stock covered thereby, such shares thereafter shall be deemed available in the Plan Pool for the granting of Rights under this Plan; provided, however, if the expiration or termination date of a Right is beyond the term of existence of this Plan as described in Section 7.3, then any shares of Stock covered by unexercised or terminated Rights shall not reactivate the existence of this Plan and therefore shall not be available for additional grants of Rights under this Plan.

(b)In the event the outstanding shares of Common Stock are increased, decreased, changed into or exchanged for a different number or kind of securities as a result of a stock split, reverse stock split, stock dividend, recapitalization, merger, share exchange acquisition, combination or reclassification appropriate proportionate adjustments will be made in: (i) the aggregate number and/or kind of shares of Stock in the Plan Pool that may be issued pursuant to the exercise of, or that are underlying, Rights granted hereunder; (ii) the exercise or other purchase price or value pertaining to, and the number and/or kind of shares of Stock called for

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with respect to, or underlying, each outstanding Right granted hereunder; and (iii) other rights and matters determined on a per share basis under this Plan or any Rights Agreement.  Any such adjustments will be made only by the Committee, subject to approval by the Board, and when so approved will be effective, conclusive and binding for all purposes with respect to this Plan and all Rights then outstanding.  No such adjustments will be required by reason of (i) the issuance or sale by the Corporation for cash of additional shares of its Common Stock or securities convertible into or exchangeable for shares of its Common Stock, or (ii) the issuance of shares of Common Stock in exchange for shares of the capital stock of any corporation, financial institution or other organization acquired by the Corporation or any Subsidiary in connection therewith.

(c)The grant of a Right pursuant to this Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

(d)No fractional shares of Stock shall be issued under this Plan for any adjustment under Section 2.3(b).

Section 2.4.  Severable Provisions.

The Corporation intends that the provisions of each of Articles III, IV, V and VI, in each case together with Articles I, II and VII, shall each be deemed to be effective on an independent basis, and that if one or more of such Articles, or the operative provisions thereof, shall be deemed invalid, void or voidable, the remainder of such Articles shall continue in full force and effect.

ARTICLE III

OPTIONS

Section 3.1.  Grant of Options.

(a)The Company may grant Options to Eligible Employees as provided in this Article III.  Options will be deemed granted pursuant to this Article III only upon (i) authorization by the Committee, (ii) the approval of such grant by the Board, and (iii) the execution and delivery of an Option Agreement by the Eligible Employee optionee (“the “Optionee”) and a duly authorized officer of the Company.  Options will not be deemed granted hereunder merely upon authorization of such grant by the Committee.  The aggregate number of shares of Stock potentially acquirable under all Options granted shall not exceed the total number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquired under, or underlying, all other Rights outstanding under this Plan.

(b)Subject to approval by the Board, the Committee shall designate Options at the time a grant is authorized as either ISOs or Non-Qualified Options.  In accordance with Section 422 (d) of the Code, the aggregate Fair Market Value (determined as of the date an ISO is granted) of the shares of Stock as to which an ISO may first become exercisable by an Optionee in a particular calendar year (pursuant to Article III and all other plans of the Company and/or its Subsidiaries) may not exceed $100,000 (the “$100,000 Limitation”).  If an Optionee is granted Options in excess of the $100,000 Limitation, or if such Options otherwise become exercisable with respect to a number of shares of Stock which would exceed the $100,000 Limitation, such excess Options shall be Non-Qualified Options.

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Section 3.2.  Exercise Price.

(a)Subject to approval by the Board, the initial exercise price of each Option granted under this Plan (the “Exercise Price”) shall be determined by the Committee in its discretion; provided, however, that the Exercise Price of an ISO shall not be less than (i) the Fair Market Value of the Common Stock on the date of grant of the Option, in the case of any Eligible Employee who does not own stock possessing more than ten percent (10%) of the total combined voting power of all classes of the capital stock of the Company (within the meaning of Section 422 (b) (6) of the Code), or (ii) one hundred ten percent (110%) of such Fair Market Value in the case of any Eligible Employee who owns stock in excess of such amount.

(b)Subject to the approval of the Board and the provisions of Section 3.2(a) (as to the establishment of the Exercise Price of an Option on the date of grant), the Committee may establish that the Exercise Price of an Option shall be adjusted upward or downward, on a quarterly basis, based upon the market value performance of the Common Stock in comparison with the aggregate market value performance of one or more indices composed of publicly-traded financial institutions and financial institution holding companies deemed by the Committee to be similar (in terms of asset size, capitalization, trading volumes and other factors deemed relevant by the Committee) to the Corporation (an “Index” and the “Indices”); provided, however, that the Exercise Price of an ISO shall not be adjustable if, under the Code, such adjustable Exercise Price would disqualify the ISO as an ISO.  The Committee may utilize Indices published by third parties and/or may construct one or more Indices meeting the characteristics described above.

The Indices utilized will be recalculated quarterly, including in such quarterly recalculation such adjustments for stock splits, reverse stock splits and stock dividends of the companies in the indices and of the Company as are appropriate.  Each such Index shall include no fewer than fifteen (15) publicly-traded financial institutions and financial institution holding companies.  If more than one Index is utilized by the Committee, it may give such weighting to each Index utilized as the Committee may determine in its sole discretion, consistent with the provisions of this Article III.

Section 3.3.  Terms and Conditions of Options.

(a)All Options must be granted within ten (10) years of the Effective Date.

(b)The Committee, subject to the approval by the Board, may grant ISOs and  Non-Qualified Options, either separately or jointly, to an Eligible Employee.

(c)Each grant of Options shall be evidenced by an Option Agreement in form and substance satisfactory to the Committee in its discretion, consistent with the provisions of this Article III.

(d)At the discretion of the Committee, an Optionee, as a condition to the granting of an Option, must execute and deliver to the Company a confidential information agreement approved by the Committee.

(e)Nothing contained in Article III, any Option Agreement or in any other agreement executed in connection with the granting of an Option under this Article III will confer upon any Optionee

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any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

(f)Except as otherwise provided herein, each Option Agreement may specify the period or periods of time within which each Option or portion thereof will first become exercisable (the “Vesting Period”) with respect to the total number of shares of Stock acquirable thereunder.  Such Vesting Periods will be fixed by the Committee in its discretion, and may be accelerated or shortened by the Committee in its discretion; provided, however, that the Vesting Period for any portion of each ISO shall be at least one year (1) from the date such Option was granted.

(g)Not less than one hundred (100) shares of Stock may be purchased at any one time through the exercise of an Option unless the number purchased is the total number at that time purchasable under all Options granted to the Optionee.

(h)An Optionee shall have no rights as a shareholder of the Company with respect to any shares of Stock covered by Options granted to the Optionee until payment in full of the Exercise Price by such Optionee for the shares being purchased.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such Stock is fully paid for, except as provided in Sections 2.3(b) and 3.2(b).

(i)Additionally and notwithstanding any other provisions of this Article III, no shares of Stock obtained pursuant to an Option may be Transferred until at least six (6) months and one (1) day shall have elapsed since the date such Option was granted.

Section 3.4.  Exercise of Options.

(a)An Optionee must be an Eligible Employee at all times from the date of grant until the exercise of the Options granted, except as provided in Section 3.5(b).

(b)An Option may be exercised to the extent exercisable (i) by giving written notice of exercise to the Company, specifying the number of full shares of Stock to be purchased and, if applicable, accompanied by full payment of the Exercise Price thereof and the amount of the Tax Withholding Liability pursuant to Section 3.4(c) below; and (ii) by giving assurances satisfactory to the Company that the shares of Stock to be purchased upon such exercise are being purchased for investment and not with a view to resale in connection with any distribution of such shares in violation of the 1933 Act; provided, however, that in the event the prior occurrence of the Registration or in the event resale of such Stock without such Registration would otherwise be permissible, this second condition will be inoperative if, in the opinion of counsel for the Company, such condition is not required under the 1933 Act or any other applicable law, regulation or rule of any governmental agency.

(c)As a condition to the issuance of the shares of Stock upon full or partial exercise of a Non-Qualified Option, the Optionee will pay to the Company in cash, or in such other form as the Committee may determine in its discretion, the amount of the Company’s Tax Withholding Liability required in connection with such exercise.

(d)The Exercise Price of an Option shall be payable to the Company either (i) in United States dollars, in cash or by check, or money order payable to the order of the Company, or (ii) at the

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discretion of the Committee and the Board, through the delivery of shares of the Stock owned by the Optionee (including, if the Committee so permits, a portion of the shares of Stock as to which the Option is then being exercised) with a Fair Market Value as of the date of delivery equal to the Exercise Price, or (iii) at the discretion of the Committee and the Board, by a combination of (i) and (ii) above.  No shares of Stock shall be delivered until full payment has been made.

Section 3.5.  Term and Termination of Option.

(a)Subject to approval by the Board, the Committee shall determine, and each Option Agreement shall state, the expiration date or dates of each Option, but such expiration date shall be not later than ten (10) years after the date such Option was granted (the “Option Period”).  In the event an ISO is granted to a 10% Shareholder, the expiration date or dates of each Option Period shall be not later than five (5) years after the date such Option is granted.  Subject to approval by the Board, the Committee may extend the expiration date or dates of an Option Period of any Non-Qualified Option after such date was originally set; provided, however such expiration date may not exceed the maximum expiration date described in this Section 3.5(a).

(b)To the extent not previously exercised, each Option will terminate upon the expiration of the Option Period specified in the Option Agreement; provided, however, that, subject to the provisions of Section 3.5(a), each ISO will terminate upon the earlier of:  (i) ninety (90) days after the date that the Optionee ceases to be an Eligible Employee for any reason, other than by reason of Death, Disability, or a Just Cause Termination; (ii) twelve (12) months after the date that the Optionee ceases to be an Eligible Employee by reason of Disability or Death; or (iii) immediately as of the date that the Optionee ceases to be an Eligible Employee by reason of a Just Cause Termination.  The Committee may, subject to approval by the Board, and compliance with the Code requirements for ISOs, specify other events that will result in the termination of an ISO.  In the case of Non-Qualified Options, the Committee shall have discretion, subject to approval by the Board, to specify what, if any, events will terminate the Option prior to the expiration of the Option Period.

Section 3.6.  Change in Control Transaction.

At any time prior to the date of consummation of a Change in Control Transaction, the Committee may, in its absolute discretion, determine that all or any part of the Options theretofore granted under this Article III shall become immediately exercisable in full and may thereafter be exercised at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of exercisability would result in an “excess parachute payment” within the meaning of Section 280G of the Code).  Any Option that has not been fully exercised before the date of consummation of the Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all Options theretofore granted, or the substitution for such Options of options to acquire the voting stock of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Options theretofore granted shall continue in the manner and under the terms so provided.

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Section 3.7.  Restrictions On Transfer.

An Option granted under Article III may not be Transferred except by will or the laws of descent and distribution and, during the lifetime of the Optionee to whom it was granted, may be exercised only by such Optionee.

Section 3.8.  Stock Certificates.

Certificates representing the Stock issued pursuant to the exercise of Options will bear all legends required by law and necessary to effectuate the provisions hereof.  The Company may place a “stop transfer” order against such shares of Stock until all restrictions and conditions set forth in this Article III, the applicable Option Agreement, and in the legends referred to in this Section 3.8 have been complied with.

Section 3.9.  Amendment and Discontinuance.

The Board may amend, suspend or discontinue the provisions of this Article III at any time or from time to time; provided that no action of the Board will cause ISOs granted under this Plan not to comply with Section 422 of the Code unless the Board specifically declares such action to be made for that purpose; and, provided, further, that no such action may, without the approval of the shareholders of the Company, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees or materially modify eligibility requirements for participation under this Article III.  Moreover, no such action may alter or impair any Option previously granted under this Article III without the consent of the applicable Optionee.

Section 3.10.  Compliance with Rule 16b-3.

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article III are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article III or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

ARTICLE IV

RESTRICTED STOCK AND RESTRICTED STOCK UNIT GRANTS

Section 4.1 Grants of Restricted Stock and Restricted Stock Units.

(a)The Company may issue Restricted Stock and Restricted Stock Units to Eligible Employees as provided in this Article IV.  Restricted Stock and Restricted Stock Units will be deemed issued only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a Restricted Stock or Restricted Stock Units Grant Agreement by the Eligible Employee to whom such Restricted Stock or Restricted Stock Unit is to be issued (the “Holder”) and a duly authorized officer of the Company.   Restricted Stock and Restricted Stock Units will not be deemed to have been issued merely upon authorization by the Committee.

(b)Each issuance of Restricted Stock and Restricted Stock Units pursuant to this Article IV will be evidenced by a Restricted Stock or Restricted Stock Units Grant Agreement between the Company and the Holder in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article IV.  Each Restricted Stock or Restricted Stock Units

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Grant Agreement will specify the purchase price per share, if any, paid by the Holder for the Restricted Stock or Restricted Stock Units, such amount to be fixed by the Committee and the Board.

(c)Without limiting the foregoing, each Restricted Stock or Restricted Stock Units Grant Agreement shall set forth the terms and conditions of any forfeiture provisions regarding the Restricted Stock or Restricted Stock Units, (including any provisions for accelerated vesting in the event of a Change in Control Transaction) as determined by the Committee and the Board.

(d)At the discretion of the Committee, the Holder, as a condition to such issuance, may be required (i) to execute and deliver to the Company a confidential information agreement approved by the Committee, and/or (ii) to pay to the Corporation in cash, or in such other form as the Committee may determine in its discretion, the amount of the Corporation’s Tax Withholding Liability required in connection with such issuance.

(e)Nothing contained in this Article IV, any Restricted Stock or Restricted Stock Units Grant Agreement or in any other agreement executed in connection with the issuance of Restricted Stock and Restricted Stock Units under this Article IV will confer upon any holder any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

Section 4.2.  Restrictions on Transfer of Restricted Stock and Restricted Stock Units.

(a)Shares of Restricted Stock and Restricted Stock Units acquired by a Holder may be transferred only in accordance with the specific limitations on the Transfer of Restricted Stock and Restricted Stock Units imposed by applicable state or federal securities laws or set forth below, and subject to certain undertakings of the transferee set forth in Section 4.2(c).  All Transfers of Restricted Stock and Restricted Stock Units not meeting the conditions set forth in this Section 4.2(a) are expressly prohibited.

(b)Any prohibited Transfer of Restricted Stock or Restricted Stock Units is void and of no effect.  Should such a Transfer purport to occur, the Company may refuse to carry out the Transfer on its books, attempt to set aside the Transfer, enforce any undertaking or right under this Section 4.2(b), and/or exercise any other legal or equitable remedy.

(c)Any Transfer of Restricted Stock or Restricted Stock Units that would otherwise be permitted under the terms of this Plan is prohibited unless the transferee executes such documents as the Company may reasonably require to ensure the Company’s rights under a Restricted Stock or Restricted Stock Units Grant Agreement and this Article IV are adequately protected with respect to the Restricted Stock and Restricted Stock Units so Transferred.  Such documents may include, without limitation, an agreement by the transferee to be bound by all of the terms of this Plan applicable to Restricted Stock and Restricted Stock Units and of the applicable Restricted Stock or Restricted Stock Units Grant Agreement, as if the transferee were the original Holder of such Restricted Stock and Restricted Stock Units.

(d)To facilitate the enforcement of the restrictions on Transfer set forth in this Article IV, the Committee may, at its discretion, require the Holder of shares of Restricted Stock to deliver the certificate(s) for such shares with a stock power executed in blank by the Holder and the Holder’s spouse, to the Secretary of the Company or his or her designee, and the Company

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may hold said certificate(s) and stock power(s) in escrow and take all such actions as are necessary to insure that all Transfers and/or releases are made in accordance with the terms of this Plan.  The certificates may be held in escrow so long as the shares of Restricted Stock whose ownership they evidence are subject to any restriction on Transfer under this Article IV or under a Restricted Stock Grant Agreement.  Each Holder acknowledges that the Secretary of the Company (or his or her designee) is so appointed as the escrow holder with the foregoing authorities as a material inducement to the issuance of shares of Restricted Stock under this Article IV, that the appointment is coupled with an interest, and that it accordingly will be irrevocable.  The escrow holder will not be liable to any party to a Restricted Stock Grant Agreement (or to any other party) for any actions or omissions unless the escrow holder is grossly negligent relative thereto.  The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine.

Section 4.3.  Compliance with Law.

Notwithstanding any other provision of this Article IV, Restricted Stock and Restricted Stock Units may be issued pursuant to this Article IV only after there has been compliance with all applicable federal and state securities laws, and such issuance will be subject to this overriding condition.  The Company may include shares of Restricted Stock in a Registration, but will not be required to register or qualify Restricted Stock with the SEC or any state agency, except that the Company will register with, or as required by local law, file for and secure an exemption from such registration requirements from, the applicable securities administrator and other officials of each jurisdiction in which an Eligible Employee would be issued Restricted Stock hereunder prior to such issuance.

Section 4.4.  Stock Certificates.

Certificates representing the Restricted Stock issued pursuant to this Article IV will bear all legends required by law and necessary to effectuate the provisions hereof.  The Company may place a “stop transfer” order against shares of Restricted Stock until all restrictions and conditions set forth in this Article IV, the applicable Restricted Stock Grant Agreement and the legends referred to in this Section 4.4 have been complied with.

Section 4.5.  Market Standoff.

To the extent requested by the Company and any underwriter of securities of the Company in connection with a firm commitment underwriting, no Holder of any shares of Restricted Stock will Transfer any such shares not included in such underwriting, or not previously registered in a Registration, during the one hundred twenty (120) day period following the effective date of the registration statement filed with the SEC under the 1933 Act in connection with such offering.

Section 4.6.  Amendment and Discontinuance.

The Board may amend, suspend or discontinue this Article IV at any time or from time to time; provided, that no such action of the Board shall alter or impair any rights previously granted to Holders under this Article IV without the consent of such affected Holders; and provided, further, that no such action may, without the approval of the Company’s shareholders, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees under this Article IV or materially modify the requirements as to eligibility for participation under this Article IV.  Moreover, no

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such action may alter or impair any Restricted Stock and Restricted Stock Units previously granted under this Article IV without the consent of the applicable Holder.

Section 4.7.  Compliance with Rule 16b-3.

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article IV are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article IV or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

Section 4.8.  Dividend Equivalent Restricted Stock Units.

On each record date for dividends on the Common Stock, an amount equal to the dividend payable on one share of Common Stock will be determined and credited (the “Dividend Equivalent Credit”) on the payment date to each Restricted Stock Unit Holder’s account for each Unit which has been awarded to the Unit Holder and not distributed or canceled.  Such amount will be converted within the account to an additional number of Units equal to the number of shares of Common Stock that could be purchased at Fair Market Value on such dividend payment date.  These Units will be treated for purposes of this Article IV in the same manner as those Units granted pursuant to Section 4.1.

Section 4.9.  Other Conditions.

(a)No person shall have any claim to be granted an award of Restricted Stock Units under this Article IV and there is no obligation for uniformity of treatment of Eligible Employees or Unit Holders under this Article IV.

(b)The Company shall have the right to deduct from any distribution or payment in cash under this Article IV, and the Restricted Stock Unit Holder or other person receiving shares of Stock under this Article IV shall be required to pay to the Company, any Tax Withholding Liability.  The number of shares of Stock to be distributed to any individual Restricted Stock Unit Recipient may be reduced by the number of shares of Stock, the Fair Market Value of which on the Distribution Date (as defined in Section 4.9(d) below) is equivalent to the cash necessary to pay any Tax Withholding Liability, where the cash to be distributed is not sufficient to pay such Tax Withholding Liability, or the Unit Holder may deliver to the Company cash sufficient to pay such Tax Withholding Liability.

(c)Any distribution of shares of Stock under this Article IV may be delayed until the requirements of any applicable laws or regulations, and any stock exchange or NASDAQ-NMS requirements, are satisfied.  The shares of Stock distributed under this Article IV shall be subject to such restrictions and conditions on disposition as counsel for the Company shall determine to be desirable or necessary under applicable law.

(d)For the purpose of distribution of Restricted Stock Units in cash, the value of a Unit shall be the Fair Market Value on the Distribution Date.  Except as otherwise determined by the Committee, the “Distribution Date’’ shall be March 15th in the year of distribution (or the first business day thereafter), except that in the case of special distributions the Distribution Date shall be the first business day of the month in which the Committee and the Board determine the amount and form of the distribution.

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(e)Notwithstanding any other provision of this Article IV, no Dividend Equivalent Credits shall be made and no distributions of Restricted Stock Units shall be made if at the time a Dividend Equivalent Credit or distribution would otherwise have been made:

(i)The regular quarterly dividend on the Common Stock has been omitted and not subsequently paid or there exists any default in payment of dividends on any such outstanding shares of capital stock of the Corporation:

(ii)The rate of dividends on the Common Stock is lower than at the time the Restricted Stock Units to which the Dividend Equivalent Credit relates were awarded, adjusted for any change of the type referred to in Section 2.3(b).

(iii)Estimated consolidated net income of the Corporation for the twelve month  period preceding the month the Dividend Equivalent Credit or distribution would otherwise have been made is less than the sum of the amount of the Dividend Equivalent Credits and Restricted Stock Units eligible for distribution under this Article IV in that month plus all dividends applicable to such period on an accrual basis, either paid, declared or accrued at the most recently paid rate, on all outstanding shares of Common Stock; or

(iv)The Dividend Equivalent Credit or distribution would result in a default in any agreement by which the Corporation is bound.

(f)In the event net income available under Section 4.9(e) above for Dividend Equivalent Credits and awards eligible for distribution under this Article IV is sufficient to cover part but not all of such amounts, the following order shall be applied in making payments: (i) Dividend Equivalent Credits, and then (ii) Restricted Stock Units eligible for distribution under this Article IV.

ARTICLE V

LONG-TERM INCENTIVE COMPENSATION UNITS

Section 5.1.  Awards of Units.

(a)The Company may grant awards of Units to Eligible Employees as provided in this Article V.  Units will be deemed granted only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a Unit Agreement by the Eligible Employee to whom Units are to be granted (a “Unit Recipient”) and an authorized officer of the Company.  Units will not be deemed granted merely upon authorization by the Committee.  Units may be granted in each of the years 2008 through 2018 in such amounts and to such Unit Recipients as the Committee may determine, subject to approval by the Board and to the limitation in Section 5.2 below.

(b)Each grant of Units pursuant to this Article V will be evidenced by a Unit Award Agreement between the Company and the Unit Recipient in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article V.

(c)Except as otherwise provided herein, Units will be distributed only after the end of a performance period of two or more years (“Performance Period”) beginning with the year in which such Units were awarded.  The Performance Period shall be set by the Committee and the Board for each year’s awards.

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(d)The percentage of the Units awarded under this Section 5.1 or credited pursuant to Section 5.5 that will be distributed to Unit Recipients shall depend on the levels of financial performance and other performance objectives achieved during each year of the Performance Period; provided, however, that the Committee may, subject to approval of the Board, adopt one or more performance categories or eliminate all performance categories other than financial performance.  Financial performance shall be based on the consolidated results of the Company and its Subsidiaries prepared on the same basis as the financial statements published for financial reporting purposes and determined in accordance with Section 5.1(e) below.  Other performance categories adopted by the Committee shall be based on measurements of performance as the Committee shall deem appropriate.

(e)Distributions of Units awarded will be based on the Company’s financial performance with results from other performance categories applied as a factor, not exceeding one (1), against financial results.  The annual financial and other performance results will be averaged over the Performance Period and translated into percentage factors according to graduated criteria established by the Committee, subject to approval of the Board, for the entire Performance Period.  The resulting percentage factors shall determine the percentage of Units to be distributed.  No distributions of Units, based on financial performance and other performance, shall be made if a minimum average percentage of the applicable measurement of performance, to be established by the Committee and approved by the Board, is not achieved for the Performance Period.  The performance levels achieved for each Performance Period and percentage of Units to be distributed shall be conclusively determined by the Committee, subject to approval by the Board.

(f)The percentage of Units awarded which Unit Recipients become entitled to receive based on the levels of performance (including those Units credited under Section 5.5) will be determined as soon as practicable after each Performance Period and are called “Retained Units.”

(g)As soon as practical after determination of the number of Retained Units, such Retained Units shall be distributed in the form of cash as determined by the Committee, subject to approval by the Board.  The Units awarded, but which Unit Recipients do not become entitled to receive, shall be canceled.

(h)Notwithstanding any other provision in this Article V, the Committee, if it determines that it is necessary or advisable under the circumstances, may, subject to approval by the Board, adopt rules pursuant to which Eligible Employees by virtue of hire, or promotion or upgrade to a higher job grade classification, or special individual circumstances, may be granted the total award of Units or any portion thereof, with respect to one or more Performance Periods that began in prior years and at the time of the awards have not yet been completed.

Section 5.2. Limitations.

The aggregate number of all Units granted, including those Units credited pursuant to Section 5.5, shall not exceed the total number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquirable under, or underlying, all other Rights outstanding under this Plan.

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Section 5.3.  Terms and Conditions.

(a)All awards of Units must be made within ten (10) years of the Effective Date.

(b)The award of Units shall be evidenced by a Unit Award Agreement in form and substance satisfactory to the Committee in its discretion, consistent with the provisions of this Article V.

(c)At the discretion of the Committee and the Board, a Unit Recipient, as a condition to the award of Units, may be required to execute and deliver to the Company a confidential information agreement approved by the Committee.

(d)Nothing contained in this Article V, any Unit Award Agreement or in any other agreement executed in connection with the award of Units under this Article V will confer upon any Unit Recipient any right with respect to the continuation of his or her status as an employee of the Company or any of its Subsidiaries.

(e)A Unit Recipient shall have no rights as a shareholder of the Company with respect to any Units granted.

Section 5.4.  Special Distribution Rules.

(a)Except as otherwise provided in this Section 5.4, a Unit Recipient must be an Eligible Employee from the date a Unit is awarded to him or her continuously through and including the date of distribution of such Unit.

(b)In case of the Death or Disability of a Unit Recipient prior to the end of any Performance Period, the number of Units awarded to the Unit Recipient for such Performance Period shall be reduced pro rata based on the number of months remaining in the Performance Period after the month of Death or Disability.  The remaining Units, reduced in the discretion of the Committee and the Board to the percentage indicated by the levels of performance achieved prior to the date of Death or Disability, if any, shall be distributed within a reasonable time after Death or Disability.  All other Units awarded to the Unit Recipient for such Performance Period shall be canceled.

(c)If a Unit Recipient enters into Retirement prior to the end of any Performance Period, the Units awarded to such Unit Recipient under this Article V and not yet distributed shall be prorated to the end of the year in which such Retirement occurs and distributed at the end of the Performance Period based upon the Company’s performance for such period.

(d)In the event of the termination of the Unit Recipient’s status as an Eligible Employee prior to the end of any Performance Period for any reason other than Death, Disability or Retirement, all Units awarded to the Unit Recipient with respect to any such Performance Period shall be immediately forfeited and canceled.

(e)Upon a Unit Recipient’s promotion to a higher job grade classification, the Committee and the Board may award to the Unit Recipient the total Units, or any portion thereof, which are associated with the higher job grade classification for the then current Performance Period.

Notwithstanding any other provision of this Plan, the Committee may reduce or eliminate awards to a Unit Recipient who has been demoted, and where circumstances warrant, may permit continued participation, proration or early distribution, or a combination thereof, of awards which would otherwise be canceled.

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Section 5.5.  Adjustments.

(a)In addition to the provisions of Section 2.3(b), if an extraordinary change occurs during a Performance Period which significantly alters the basis upon which the performance levels were established under Section 5.1 for that Performance Period, to avoid distortion in the operation of this Article V, but subject to Section 5.2, the Committee may, subject to approval by the Board, make adjustments in such performance levels to preserve the incentive features of this Article V, whether before or after the end of the Performance Period, to the extent it deems appropriate in its sole discretion, which adjustments shall be conclusive and binding upon all parties concerned.  Such changes may include, without limitation, adoption of, or changes in, accounting practices, tax laws and regulatory or other laws or regulations; economic changes not in the ordinary course of business cycles; or compliance with judicial decrees or other legal authorities.

(b)At any time prior to the date of consummation of a Change in Control Transaction, the Committee may, subject to approval by the Board, determine that all or any part of the Units theretofore awarded under this Article V shall become immediately distributable (reduced pro rata based on the number of months remaining in the Performance Period after the consummation of the Change in Control Transaction) and may thereafter be distributed at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of distribution would result in an “excess parachute payment” within the meaning of Section 280G of the Code).  Any Units that have not been distributed before the date of consummation of a Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all awards of Units theretofore made, or the substitution for such Units of awards of compensation units having comparable characteristics under a long term incentive award plan of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments, in which event the awards of Units theretofore made shall continue in the manner and under the terms so provided.

Section 5.6.  Other Conditions.

(a)No person shall have any claim to be granted an award of Units under this Article V and there is no obligation for uniformity of treatment of Eligible Employees or Unit Recipients under this Article V.

(b)The Company shall have the right to deduct from any distribution or payment under this Article V, and the Unit Recipient shall be required to pay to the Company, any Tax Withholding Liability.

(c)For the purpose of distribution of Units, the cash value of a Unit shall be the Fair Market Value on the Distribution Date.  Except as otherwise determined by the Committee, the “Distribution Date’’ shall be March 15th in the year of distribution (or the first business day thereafter), except that in the case of special distributions the Distribution Date shall be the first business day of the month in which the Committee and the Board determine the amount and form of the distribution.

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Section 5.7.  Designation of Beneficiaries.

A Unit Recipient may designate a beneficiary or beneficiaries to receive all or part of the cash to be distributed to the Unit Recipient under this Article V in case of Death.  A designation of beneficiary may be replaced by a new designation or may be revoked by the Unit Recipient at any time.  A designation or revocation shall be on a form to be provided for that purpose and shall be signed by the Unit Recipient and delivered to the Corporation prior to the Unit Recipient’s Death.  In case of the Unit Recipient’s Death, any amounts to be distributed to the Unit Recipient under this Article V with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be distributed in accordance with this Article V to the designated beneficiary or beneficiaries.  The amount distributable to a Unit Recipient upon Death and not subject to such a designation shall be distributed to the Unit Recipient’s Estate.  If there shall be any question as to the legal right of any beneficiary to receive a distribution under this Article V, the amount in question may be paid to the estate of the Unit Recipient, in which event the Corporation shall have no further liability to anyone with respect to such amount.

Section 5.8.  Restrictions On Transfer.

Units granted under Article V may not be Transferred, except as provided in Section 5.7, and, during the lifetime of the Unit Recipient to whom it was awarded, cash receivable with respect to Units may be received only by such Unit Recipient.

Section 5.10.  Amendment and Discontinuance.

No award of Units may be granted under this Article V after December 31, 2018.   The Board may amend, suspend or discontinue the provisions of this Article V at any time or from time to time, provided, that no such action may, without the approval of the shareholders of the Corporation, materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees under this Article V or materially modify the eligibility requirements for participation under this Article V.

Section 5.11.  Compliance with Rule 16b-3.

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article V are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article V or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

ARTICLE VI

STOCK APPRECIATION RIGHTS

Section 6.1.  Grants of SARs.

(a)The Corporation may grant SARs under this Article VI.  SARs will be deemed granted only upon (i) authorization by the Committee, (ii) approval by the Board, and (iii) the execution and delivery of a SAR Agreement by the Eligible Employee to whom the SARs are to be granted (the “SAR Recipient”) and a duly authorized officer of the Corporation.  SARs will not be deemed granted merely upon authorization by the Committee.  The aggregate number of shares of Stock which shall underlie SARs granted hereunder shall not exceed the total

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number of shares of Stock remaining in the Plan Pool, less all shares of Stock potentially acquirable under or underlying all other Rights outstanding under this Plan.

(b)Each grant of SARs pursuant to this Article VI shall be evidenced by a SAR Agreement between the Corporation and the SAR Recipient, in form and substance satisfactory to the Committee in its sole discretion, consistent with this Article VI.

Section 6.2.  Terms and Conditions of SARs.

(a)All SARs must be granted within ten (10) years of the Effective Date.

(b)Each SAR issued pursuant to this Article VI shall have an initial base value (the “Base Value”) equal to the Fair Market Value of a share of Common Stock on the date of issuance of the SAR.

(c)Subject to the approval of the Board and to the provisions of Section 6.2(b) (as to the establishment of the initial Base Value of a SAR), the Committee may establish that the Base Value of a SAR shall be adjusted, upward or downward, on a quarterly basis, based upon the market value performance of the Common Stock in comparison with the aggregate market value performance of the Index or Indices utilized under Section 3.2(b).

(d)At the discretion of the Committee and the Board, a SAR Recipient, as a condition to the granting of a SAR, must execute and deliver to the Corporation a confidential information agreement approved by the Committee.

(e)Nothing contained in this Article VI, any SAR Agreement or in any other agreement executed in connection with the granting of a SAR under this Article VI will confer upon any SAR Recipient any right with respect to the continuation of his or her status as an employee of the Corporation or any of its Subsidiaries.

(f)Except as otherwise provided herein, each SAR Agreement may specify the period or periods of time within which each SAR or portion thereof will first become exercisable (the “SAR Vesting Period”).  Such SAR Vesting Periods will be fixed by the Committee, subject to approval by the Board, and may be accelerated or shortened by the Committee, subject to approval by the Board.

(g)SARs relating to no less than one hundred (100) shares of Stock may be exercised at any one time unless the number exercised is the total number at that time exercisable under all SARs granted to the SAR Recipient.

(h)A SAR Recipient shall have no rights as a shareholder of the Corporation with respect to any shares of Stock underlying such SAR.  No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such Stock is fully paid for, except as provided in Sections 2.3(b) and 6.2(c).

Section 6.3.  Restrictions On Transfer of SARs.

SARs granted under this Article VI may not be Transferred, except as provided in Section 6.7, and during the lifetime of the SAR Recipient to whom it was granted, may be exercised only by such SAR Recipient.

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Section 6.4.  Exercise of SARs.

(a)A SAR Recipient (or his or her executors or administrators, or heirs or legatees) shall exercise a SAR by giving written notice of such exercise to the Corporation.  SARs may be exercised only upon the completion of the SAR Vesting Period, if any, applicable to such SAR (the date such notice is received by the Corporation being referred to herein as the “SAR Exercise Date”).

(b)Within ten (10) business days of the SAR Exercise Date applicable to a SAR exercised in accordance with Section 6.4(a), the SAR Recipient shall be paid in cash or shares of Stock the difference between the Base Value of such SAR (as adjusted, if applicable under Section 6.2(c), as of the most recently preceding quarterly period) and the Fair Market Value of the Common Stock as of the SAR Exercise Date, as such difference is reduced by the Company’s Tax Withholding Liability arising from such exercise.

Section 6.5.  Termination of SARs.

Subject to approval by the Board, the Committee shall determine, and each SAR Agreement shall state, the expiration date or dates of each SAR, but such expiration date shall be not later than ten (10) years after the date such SAR is granted (the “SAR Period”).  Subject to approval by the Board, the Committee may extend the expiration date or dates of a SAR Period after such date was originally set; provided, however, such expiration date may not exceed the maximum expiration date described in this Section 6.5(a).

Section 6.6.  Change in Control Transaction.

At any time prior to the date or consummation of a Change in Control Transaction, the Committee may, in its absolute discretion, determine that all or any part of the SARs theretofore granted under this Article VI shall become immediately exercisable in full and may thereafter be exercised at any time before the date of consummation of the Change in Control Transaction (except as otherwise provided in Article II hereof, and except to the extent that such acceleration of exercisability would result in an excess parachute payment within the meaning of Section 280G of the Code).  Any SAR that has not been fully exercised before the date of consummation of the Change in Control Transaction shall terminate on such date, unless a provision has been made in writing in connection with such transaction for the assumption of all SARs theretofore granted, or the substitution for such SARs of grants of stock appreciation rights having comparable characteristics under a stock appreciation rights plan of a successor employer corporation or bank, or a parent or a subsidiary thereof, with appropriate adjustments, in which event the SARs theretofore granted shall continue in the manner and under the terms so provided.

Section 6.7.  Designation of Beneficiaries.

A SAR Recipient may designate a beneficiary or beneficiaries to receive all or part of the cash to be paid to the SAR Recipient under this Article VI in case of Death.  A designation of beneficiary may be replaced by a new designation or may be revoked by the SAR Recipient at any time.  A designation or revocation shall be on a form to be provided for that purpose and shall be signed by the SAR Recipient and delivered to the Corporation prior to the SAR Recipient’s Death.  In case of the SAR Recipient’s Death, the amounts to be distributed to the SAR Recipient under this Article VI with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be distributed in accordance with this Article VI to the designated beneficiary or beneficiaries.  The

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amount distributable to a SAR Recipient upon Death and not subject to such a designation shall be distributed to the SAR Recipient’s estate.  If there shall be any question as to the legal right of any beneficiary to receive a distribution under this Article VI, the amount in question may be paid to the estate of the SAR Recipient in which event the Corporation shall have no further liability to anyone with respect to such amount.

Section 6.8.  Amendment and Discontinuance.

The Board may amend, suspend or discontinue the provisions of this Article VI at any time or from time to time provided that no action of the Board may, without the approval of the shareholders of the Corporation materially increase (other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the maximum aggregate number of shares of Stock in the Plan Pool, materially increase the benefits accruing to Eligible Employees or materially modify eligibility requirements for participation under this Article VI.  Moreover, no such action may alter or impair any SAR previously granted under this Article VI without the consent of the applicable SAR Recipient.

Section 6.9.  Compliance With Rule 16b-3.

With respect to persons subject to Section 16 of the 1934 Act, transactions under this Article VI are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act.  To the extent any provision of this Article VI or action by the Board or the Committee fails so to comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee and the Board.

ARTICLE VII

ADDITIONAL STOCK BASED AND OTHER RIGHTS

Section 7.1.  Stock Based Rights.

The Board shall have the right to grant additional Rights based on, or with respect to the Stock, which may include, without limitation, the grant of Shares based on certain conditions, the payment of cash based on the market performance of the Common Stock, and the grant of securities convertible into Shares.

Section 7.2.  Other Rights.

The Board shall have the right to provide other types of Rights under the Plan in addition to those specifically listed, if the Board believes that such Rights would further the purposes for which the Plan has been established.

ARTICLE VIII

AMENDMENT OR TERMINATION OF THE PLAN

The Board may at any time and from time to time alter or amend, in whole or in part, any or all of the provisions of the Plan, or may at any time suspend or terminate the Plan, provided that no change in any Rights theretofore granted to any Eligible Employee may be made which would impair or diminish the rights of the Eligible Employee without the Eligible Employee’s consent, and provided further, that no alteration or amendment may be made without the approval of the holders of a majority of the Common Stock then outstanding and entitled to vote if such stockholder approval is necessary to comply with the requirements of any Federal or state laws or regulations as may be applicable.  This authority of the

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Board to alter, amend, suspend or terminate the Plan is in addition to the right of the Board to amend, suspend or discontinue the various Articles of the Plan as provided herein.  By way of illustration and not limitation, of the Board’s right to amend the Plan in whole or in part, the Board shall have the authority to make such clarifying and conforming amendments to the Plan as are necessary to obtain or maintain compliance with the Code, applicable Federal and state securities laws, accounting standards and such other laws, rules and regulations as are necessary to carry out the purposes of the Plan.

ARTICLE IX

MISCELLANEOUS

Section 9.1.  Application of Funds.

The proceeds received by the Corporation from the sale of Stock pursuant to the exercise of Rights will be used for general corporate purposes.

Section 9.2.  No Obligation to Exercise Right.

The granting of a Right shall impose no obligation upon the recipient to exercise such Right.

Section  9.3.  Term of Plan.

Except as otherwise specifically provide herein, Rights may be  granted pursuant to this Plan from time to time within ten (10) years from the Effective Date.

Section 9.4.  Captions and Headings; Gender and Number.

Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, are not a part of, and shall not serve as a basis for, interpretation or construction of this Plan.  As used herein, the masculine gender shall include the feminine and neuter, and the singular number shall include the plural, and vice versa, whenever such meanings are appropriate.

Section 9.5.  Expenses of Administration of Plan.

All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Corporation or by one or more Subsidiaries.  The Corporation shall also indemnify, defend and hold each member of the Committee and the Board harmless against all claims, expenses and liabilities arising out of or related to the exercise of the powers of the Committee and the Board and the discharge of the duties of the Committee and the Board hereunder.

Section 9.6.  Governing Law.

Without regard to the principles of conflicts of laws the laws of the State of Illinois shall govern and control the validity, interpretation, performance and enforcement of this Plan.

Section 9.7.  Inspection of Plan.

A copy of this Plan, and any amendments thereto, shall be maintained by the Secretary of the Corporation and shall be shown to any proper person making inquiry about it.

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EX-10.16

Exhibit 10.16

THIRD AMENDMENT AND RESTATEMENT
MIDLAND STATES BANCORP, INC.

1999 STOCK OPTION PLAN

Section 1. Establishment and Purpose

Midland States Bancorp, Inc. (the “Company”) hereby establishes a long-term incentive plan to be named the Third Amended and Restated Midland States Bancorp, Inc. 1999 Stock Option Plan (the “Plan”), for Key Employees of the Company or its subsidiaries. The purpose of this Plan is to encourage those Key Employees who are given awards by the Committee administering this Plan to acquire and maintain an interest in the Common Stock of the Company and thus to have additional incentive to continue to work for the success of the Company and its subsidiaries.

Section 2. Definitions

Whenever used herein, the following terms shall have the respective meanings set forth below:

(a)           Board means the Board of Directors of the Company.

(b)           Code means the Internal Revenue Code of 1986, as amended and in effect from time to time.

(c)           Committee means the Compensation Committee of the Board, or any successor to such Committee, the members of which shall be appointed by the Board.

(d)           Company means Midland States Bancorp, Inc., a Delaware corporation.

(e)           Disability means permanent and total disability as defined in Section 22(e)(3) of the Code, as determined by the Committee in good faith, upon receipt of and in reliance on sufficient competent medical advice.

(f)            Exercise Price of an Option means a price fixed by the Committee upon grant of the Option as the purchase price for Stock under the Option, as such may be adjusted under Section 10 of this Plan.

(g)           Fair Market Value means, for any particular day, the fair market price per share of Stock for such day as determined by the Board.

(h)           Key Employee means an employee (including officers and directors who are also employees) of the Company or its subsidiaries designated by the Committee.

(i)            Option means the right to purchase Stock at the Exercise Price for a specified period of time and subject to specified conditions. For purposes of this Plan, an Option may be an Incentive Stock Option within the meaning of Section 422 of the Code or any successor provision, or a Nonqualified (nonstatutory) Stock Option.

(j)            Option Agreement means the written agreement evidencing an Option under this Plan, which shall be executed by the Company and the Participant.

(k)           Participant means any Key Employee designated by the Committee to receive an Option under this Plan.

(l)            Stock means the Common Stock of the Company.

(m)          Taxable Event means an event relating to an Option granted under this Plan which requires federal, state or local tax to be withheld by the Company or a subsidiary.

(n)           Terminated for Cause means, (i) for Key Employees serving under an employment agreement containing a provision for termination of employment for “cause,” termination of employment of the Key Employee pursuant to such provision, and (ii) for other Key Employees, termination of employment of the Key Employee by a two-thirds (2/3) vote of the entire Board or of Effingham State Bank, an Illinois Banking Corporation and wholly-owned subsidiary of the Company (the “Bank”), or of any other subsidiary employing such Key Employee, expressly for one of the following “causes,” as evidenced in a certified resolution of such Board:

(A)          the willful engaging by the Key Employee in gross misconduct that is materially and demonstrably injurious to the Bank, monetarily or otherwise; or

(B)           the willful and continued failure by the Key Employee to substantially perform such Key Employee’s duties with the Bank or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness or Disability), after a written demand for substantial performance is delivered to the Key Employee by the Board, which demand specifically identifies the manner in which the Key Employee has not substantially performed his or her duties, and the Key Employee fails to comply with such demand within a reasonable time.

Section 3. Administration

(a)           This Plan will be administered by the Committee; provided, however, that notwithstanding anything to the contrary that follows in the balance of this Section, or elsewhere in this Plan, all of the Committee’s actions and decisions shall be subject to the prior approval of the Board as a condition to effectiveness. The determinations of the Committee shall be made in accordance with its judgment as to the best interests of the Company and its stockholders and in accordance with the purposes of this Plan. Subject to the provisions of this Plan, the Committee shall: (i) construe and interpret this Plan and Options granted under this Plan, establish, amend and revoke rules and regulations regulating this Plan and its administration, and correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary, all of which determinations and interpretations made by the Committee, after the requisite approval by the Board, shall be conclusive and binding on all Participants and on their legal representatives and beneficiaries;

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(ii) determine the time or times an Option may be exercised, the number of shares as to which an Option may be exercised at any one time, when an Option may terminate, and any other term or condition of an Option; and (iii) determine all questions of policy and expediency that may arise in the administration of this Plan and generally exercise such powers and perform such acts as are deemed necessary or expedient to promote the best interests of the Company and its subsidiaries.

(b)           A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under this Plan may be made without notice or meeting upon the unanimous written consent of the Committee, and all actions made or taken by the Committee pursuant to the provisions of this Plan and this Section shall be final, binding and conclusive for all purposes and upon all persons.

Section 4. Shares Reserved Under this Plan

There is hereby reserved for issuance under this Plan an aggregate of 49,325 shares of Stock, subject in each case to adjustment as provided in Section 10 of this Plan. Such shares may be authorized but unissued shares or treasury shares.  Shares of Stock underlying outstanding Options will be counted against this Plan maximum while such Options are outstanding; provided, however, any shares of Stock covered by an Option that are not delivered to a Participant or beneficiary because the Option is forfeited, shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock reserved for issuance under this Plan. In addition, if the exercise price of any Option granted under this Plan is satisfied by tendering shares of Stock to the Company, only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock reserved for issuance under this Plan.

Section 5. Participants

Persons eligible for grants of Options under this Plan will be those Key Employees of the Company or of its subsidiaries who are expected to play a significant role in the success and future growth and profitability of the Company and its subsidiaries, as determined by the Committee and as evidenced by the decision of the Committee to grant Options to such individuals, including transferees of Key Employees, to the extent the transfer is permitted by this Plan and the applicable Option Agreement. Designation of a Key Employee as a Participant to receive an Option in any year shall not require the Committee to designate such Key Employee to receive an Option in any other year or to designate any other Key Employee to receive an Option in such year or any other year. The Committee shall consider such factors as it deems pertinent in selecting Key Employees to receive Options and determining the type and amount of their respective Options.

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Section 6. Types of Options

The Committee may grant, in any proportion in accordance with this Plan, Incentive Stock Options and Nonqualified Stock Options, both as described below. Except as specifically limited herein, the Committee shall have complete discretion in determining the type and number of Options to be granted to any Key Employee and, subject to the provisions of this Plan, the terms and conditions which attach to each Option, which terms and conditions need not be uniform as among different Participants.  Each Option shall be evidenced by an Option Agreement, as provided in Section 7 of this Plan. From time to time, as the Committee deems appropriate and in the best long-term interests of the Company and its stockholders, the Committee may elect to modify or waive one or more terms or conditions of an outstanding Option previously granted to a Participant under this Plan, provided that: (a) no such modification or waiver shall give the Participant or any other Participant under this Plan any right to a similar modification or waiver of any other Option previously or subsequently granted under this Plan; (b) no such modification or waiver of an Option shall involve a change in the number of shares subject to the Option or a change in the Exercise Price of an Option or the purchase price, if any; and (c) any such modification or waiver which is adverse or arguably adverse to the interests of the Participant holding such Option shall not be effective unless and until the Participant shall consent thereto.

Section 7. Option Agreements

Within ten business days after the grant of an Option, the Company shall notify the Participant of the grant and shall hand deliver or mail to the Participant an Option Agreement in such form as determined by the Committee, duly executed by and on behalf of the Company, with the requirement that the Participant execute the Option Agreement within 30 days after the date of mailing or delivery by the Company and return the same to the Company. The date of execution and return of the Option Agreement shall not necessarily be or affect the date of grant of the Option, which may precede such date of execution and return, as the Committee may determine.  If the Participant shall fail to execute and return to the Company the Option Agreement within said 30-day period, the Option shall be deemed void and never to have been granted.

Section 8. Incentive Stock Options

(a)           Incentive Stock Options shall consist of Options to purchase shares of Stock at an Exercise Price established by the Committee upon grant, which Exercise Price shall not be less than, but may be more than, one hundred percent (100%) of the Fair Market Value of the Stock on the date of grant; provided, however, if at the time an Incentive Stock Option is granted the Participant receiving the Incentive Stock Option owns or will be considered to own by reason of Section 424(d) of the Code more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, then the Exercise Price shall not be less than, but may be more than, one hundred and ten percent (110%) of the Fair Market Value of the Stock on the date of grant. The aggregate Fair Market Value (determined as of the date of grant) of all shares of stock under all incentive stock options granted by the Company or any subsidiary or affiliate of the Company (under this Plan or any other stock option plan) to any Key Employee which may vest in any one calendar year may not exceed $100,000. If the vesting of an Incentive Stock

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Option hereunder would cause a violation of the foregoing limitation, such portion of such Option that vests in violation of such limitation shall be deemed to be a Nonqualified Stock Option.

(b)           Any outstanding Incentive Stock Option and all unexercised rights thereunder shall expire and terminate automatically upon the earliest of: (i) ten (10) days after the effective date of the termination of the employment or engagement of Participant by the Company or by its subsidiaries where such employment or engagement was Terminated for Cause; (ii) the date which is ninety (90) days following the date of cessation of the employment or engagement of the Participant by the Company or by its subsidiaries for any reason other than as set forth in clause (i), death or Disability; (iii) the date which is one (1) year following the date on which the Participant’s service with the Company or its subsidiaries ceases due to death or Disability; (iv) the date of expiration of the Incentive Stock Option determined by the Committee at the time the Option is granted and specified in such Option; and (v) the tenth anniversary date of the granting of the Incentive Stock Option, or, if at the time such Option is granted the Participant owns (or would be considered to own by reason of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, then on the fifth such anniversary; provided, however, that the Committee shall have the right, but not the obligation, to extend the expiration date of the Incentive Stock Options held by a Participant whose service with the Company or its subsidiaries has ceased for any reason to the end of their original terms, notwithstanding that such Options may no longer qualify as Incentive Stock Options under the Code.

(c)           The Committee may provide, upon grant of an Incentive Stock Option, that full exercisability will be phased in and/or phased out over some designated period of time.  The Committee also may provide upon grant that exercisability of an Incentive Stock Option will be accelerated, to the extent such Option is not already then exercisable, upon the subsequent occurrence of a “change of control” of the Company as defined by the Committee.

(d)           Upon exercise of an Incentive Stock Option, in whole or in part, the Exercise Price with respect to the number of shares as to which the Option is then being exercised may be paid only by check or, if the Participant so elects and the Committee shall have authorized such form of payment upon grant of the Option, in whole or in part by delivery to the Company of shares of Stock, provided that such shares shall have been then owned by the Participant for a period of at least six months prior to the exercise. Any Participant-owned Stock to be used in full or partial payment of the Exercise Price shall be valued at the Fair Market Value of the Stock on the date of exercise. Delivery by the Company of the shares as to which an Incentive Stock Option has been exercised shall be made to the person exercising the Option or the designee of such person.  If so provided by the Committee upon grant of the Option, the shares received upon exercise may be subject to certain restrictions upon subsequent transfer or sale by the Participant.

Section 9. Nonqualified Stock Options

(a)           Nonqualified Stock Options shall consist of Options to purchase shares of Stock at an Exercise Price established by the Committee upon grant, which Exercise Price shall be determined by the Committee in its sole discretion.

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(b)           Any outstanding Nonqualified Stock Option and all unexercised rights thereunder shall expire and terminate automatically upon the earliest of: (i) ten (10) days after the effective date of the termination of the employment or engagement of Participant by the Company or by its subsidiaries where such employment or engagement was Terminated for Cause; (ii) the date which is ninety (90) days following the date of cessation of the employment or engagement of the Participant by the Company or by its subsidiaries for any reason other than as set forth in clause (i), death or Disability; (iii) the date which is one (1) year following the date on which the Participant’s service with the Company or its subsidiaries ceases due to death or Disability; (iv) the date of expiration of the Option determined by the Committee at the time the Nonqualified Stock Option is granted and specified in such Option; and (v) the tenth annual anniversary date of the granting of such Option; provided, however, that the Committee shall have the right, but not the obligation, to extend the expiration date of the Options held by a Participant whose service with the Company or its subsidiaries has ceased for any reason to the end of their original terms.

(c)           The Committee may provide, upon grant of a Nonqualified Stock Option, that full exercisability will be phased in and/or phased out over some designated period of time.  The Committee also may provide upon grant that exercisability of a Nonqualified Stock Option will be accelerated, to the extent such Option is not already then exercisable, upon the subsequent occurrence of a “change of control” of the Company as defined by the Committee.

(d)           Upon exercise of a Nonqualified Stock Option, in whole or in part, the Exercise Price with respect to the number of shares as to which the Option is then being exercised may be paid only by check or, if the Participant so elects and the Committee shall have authorized such form of payment upon grant of the Option, in whole or in part by delivery to the Company of shares of Stock, provided that such shares shall have been then owned by the Participant for a period of at least six months prior to the exercise. Any Participant-owned Stock to be used in full or partial payment of the Exercise Price shall be valued at the Fair Market Value of the Stock on the date of exercise. Delivery by the Company of the shares as to which a Nonqualified Stock Option has been exercised shall be made to the person exercising the Option or the designee of such person.  If so provided by the Committee upon grant of the Option, the shares received upon exercise may be subject to certain restrictions upon subsequent transfer or sale by the Participant.

Section 10. Adjustment Provisions

(a)           If the Company shall at any time change the number of issued shares of Stock without new consideration to the Company (such as by a stock dividend or stock split), the total number of shares reserved for issuance under this Plan, the maximum number of shares available for Options to a particular Participant and the number of shares and the Exercise Price covered by each outstanding Option shall be adjusted so that the aggregate consideration payable to the Company, if any, and the value of each such Option to the Participant, shall not be changed. Options may also contain provisions for their continuation or for other equitable adjustments after changes in the Stock resulting from reorganization, sale, merger, consolidation, issuance of stock rights or warrants or similar occurrence.

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(b)           Notwithstanding any other provision of this Plan, and without affecting the number of shares reserved or available for issuance hereunder, the Board shall use its best efforts to authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization involving the liquidation, discontinuation, merger out of existence or fundamental corporate restructuring of the Company, upon such terms and conditions as it may deem appropriate.

Section 11. Transfers of Options

Subject to any overriding restrictions and conditions as may be established from time to time by the Board, the Committee may determine that any Option granted under this Plan may be transferable prior to exercise thereof under such terms and conditions as the Committee may specify; provided, that no Incentive Stock Option granted under this Plan shall be assignable or transferable by the Participant, either voluntarily or by operation of law, other than by will or the laws of descent and distribution and, during the lifetime of the Participant, shall be exercisable only by the Participant.  Unless the Committee shall specifically determine that an Option is transferable prior to exercise thereof, each Option granted under this Plan to a Participant shall not be transferable otherwise than by will or the laws of descent and distribution, and, during the Participant’s lifetime, shall be exercisable only by the Participant or, in the event of the Disability of the Participant, by the attorney-in-fact or guardian of the Participant. In the event of the death of a Participant holding an unexercised Option, exercise of the Option may be made only by the executor, administrator or personal representative of the estate of the deceased Participant or the person or persons to whom the deceased Participant’s rights under the Option shall pass by will or the laws of descent and distribution, and such exercise may be made only to the extent that the deceased Participant was entitled to exercise such Option at the date of death.

Section 12. Taxes

The Company shall be entitled to withhold, and shall withhold, the minimum amount of any Federal, state or local tax attributable to any Stock deliverable under this Plan, whether upon exercise of an Option or occurrence of any other Taxable Event, and the Committee may condition the delivery of any shares or other benefits under this Plan on satisfaction of the applicable withholding obligations.  Such withholding obligation of the Company may be satisfied by any reasonable method including, if the Committee so provides upon grant of the Option, reducing the number of shares otherwise deliverable to or on behalf of the Participant on such Taxable Event by a number of shares having a fair value, based on the Fair Market Value of the Stock on the date of such Taxable Event, equal to the amount of such withholding obligation.

Section 13. No Right to Employment

A Participant’s right, if any, to continue to serve the Company or its subsidiaries as an officer, employee or otherwise shall not be enhanced or otherwise affected by the designation of such employee as a Participant under this Plan.

Section 14. Duration, Amendment and Termination

No Option shall be granted under this Plan on or after the date which is the tenth

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anniversary date of the adoption by the Board of this Plan. The Board may, from time to time, with respect to any shares at the time not subject to Options, suspend or terminate this Plan or amend or revise the terms of this Plan; provided that any amendment to this Plan shall be approved by a majority of the shareholders of the Company if the amendment would: (a) materially increase the benefits accruing to participants under this Plan; (b) increase the number of shares of Stock which may be issued under this Plan, except as permitted under the provisions of Section 10 above; or (c) materially modify the requirements as to eligibility for participation in this Plan. By mutual agreement between the Company and a Participant, one or more Options may be granted to such Participant in substitution and exchange for, and in cancellation of, any certain Options previously granted such Participant under this Plan, provided that any such substitution Option shall be deemed a new Option for purposes of calculating any applicable exercise period for Options.  To the extent that any Options which may be granted within the terms of this Plan would qualify under present or future laws for tax treatment that is beneficial to a Participant, any such beneficial treatment shall be considered within the intent, purpose and operational purview of this Plan and the discretion of the Committee, and to the extent that any such Options would so qualify within the terms of this Plan, the Committee shall have full and complete authority to grant Options that so qualify (including the authority to grant, simultaneously or otherwise, Options which do not so qualify) and to prescribe the terms and conditions (which need not be identical as among Participants) in respect to the grant or exercise of any such Options under this Plan.

Section 15. Miscellaneous Provisions

(a)           Naming of Beneficiaries. In connection with an Option, a Participant may name one or more beneficiaries to receive the Participant’s benefits, to the extent permissible pursuant to the various provisions of this Plan, in the event of the death of the Participant.

(b)           Successors.  All obligations of the Company under this Plan with respect to Options issued hereunder shall be binding on any successor to the Company.

(c)           Governing Law.  The provisions of this Plan and all Option Agreements under this Plan shall be construed in accordance with, and governed by, the laws of the State of Illinois without reference to conflict of laws provisions, except insofar as any such provisions may be expressly made subject to the laws of any other state or federal law.

(d)           Section 409A. Notwithstanding anything in the Plan to the contrary, it is the intent of the Company that the administration of the Plan, and the granting of all Options under this Plan, shall be done in accordance with Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including any guidance or regulations that may be issued after the effective date of this Plan, and shall not cause the acceleration of, or the imposition of the taxes provided for in Section 409A of the Code. In the event that it is reasonably determined by the Board that any amounts payable in respect of any Option under the Plan will be taxable to a Participant under Section 409A of the Code prior to the payment and/or delivery to such Participant of such amounts or will be subject to the acceleration of taxation or the imposition of penalty taxation under Section 409A of the Code, the Company may either (i) adopt such amendments to the Plan and related Option, and appropriate policies and procedures, including amendments and policies with retroactive effect,

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that the Board determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Options hereunder, and/or (ii) take such other actions as the Board determines necessary or appropriate to comply with the requirements of Section 409A of the Code.

Section 16. Restriction on Shares

If the Company shall be advised by counsel that certain requirements under the Federal or state securities laws must be met before Stock may be issued under this Plan, the Company shall notify all persons who have been issued Options, and the Company shall have no liability for failure to issue Stock under any exercise of Options because of delay while such requirements are being met or the inability of the Company to comply with such requirements.

Section 17. Investment Purpose

Each Option granted hereunder may be issued on the condition that any purchase of Stock pursuant to the exercise of an Option which shall not be the subject of a registration statement permitting the sale or other distribution thereof shall be for investment purposes and not with a view to resale or distribution (the “Restricted Stock”). If requested by the Company, each Participant must agree, at the time of the purchase of any Restricted Stock, to execute an “investment representation letter” setting forth such investment intent in the form acceptable to the Company and must consent to any stock certificate issued to such Participant thereunder bearing a restrictive legend setting forth the restrictions applicable to the further resale, transfer or other conveyance thereof without registration under the Securities Act of 1933, as amended, and under the applicable securities or blue sky laws of any other jurisdiction (together, the “Securities Laws”), or the availability of exemptions from registration thereunder and to the placing of transfer restrictions on the records of the transfer agent for the Stock.  No Restricted Stock may thereafter be resold, transferred or otherwise conveyed unless:

(a)           an opinion of the Participant’s counsel is received, in form and substance satisfactory to counsel for the Company, that registration under the applicable Securities Laws is not required; or

(b)           such Stock is registered under the applicable Securities Laws; or

(c)           “no action” letters are received from the staff of the Securities and Exchange Commission and from the administrative agencies administering all other applicable securities or blue sky laws, based on the opinion of counsel for Participant in form and substance reasonably satisfactory to counsel for the Company, advising that registrations under the Securities Laws are not required.

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Section 18. Effective Date of Plan

This Plan shall become effective upon adoption by the Board and approval by the Company’s stockholders; provided, however, that prior to approval of this Plan by the Company’s stockholders but after adoption by the Board, Options may be granted under this Plan subject to obtaining such approval.

Adopted by the Board of Directors of the Company as of March 9, 1999.

Adopted by the Stockholders of the Company as of April 13, 1999.

Amended and Restated by the Board of Directors of the Company as of March 8, 2000 (Stockholder approval not being required).

Second Amendment and Restatement by the Board of Directors of the Company as of August 6, 2002. (Stockholder approval not being required).

Third Amendment and Restatement by the Board of Directors of the Company as of March 5, 2007.

Third Amendment and Restatement approved by the Stockholders of the Company as of April 2, 2007.

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EX-10.17

Exhibit 10.17

MIDLAND STATES BANCORP, INC.

AMENDED AND RESTATED

2010 LONG-TERM INCENTIVE PLAN

Article 1
GENERAL

Section 1.1Purpose, Effective Date and Term.  The purpose of this MIDLAND STATES BANCORP, INC. AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN (the “Plan”) is to promote the long-term financial success of MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), and any Subsidiary by providing a means to attract, retain and reward individuals who can and do contribute to such success and to further align their interests with those of the Company’s stockholders.  The “Effective Date” of the Plan is October 18, 2010, in accordance with the approval of the Plan by the Company’s stockholders.  The Plan has been amended and restated effective December 31, 2010 to reflect a ten-for-one Stock exchange that occurred as part of the Company’s reincorporation from the State of Delaware to the State of Illinois, on December 31, 2010.  The Plan shall remain in effect as long as any awards under it are outstanding; provided, however, that no awards may be granted under the Plan after the ten-year anniversary of the Effective Date.

Section 1.2Administration.  The authority to control and manage the operation of the Plan shall be vested in a committee of the Board (the “Committee”), in accordance with Section 5.1.

Section 1.3Participation.  Each employee or Director of, or service provider to, the Company or any Subsidiary of the Company who is granted, and currently holds, an award in accordance with the terms of the Plan shall be a “Participant” in the Plan.  Awards under the Plan shall be limited to employees and Directors of, and service providers to, the Company or any Subsidiary; provided, however, that an award (other than an award of an ISO) may be granted to an individual prior to the date on which he or she first performs services as an employee or a Director, provided that such award does not become vested prior to the date such individual commences such services.

Section 1.4Definitions.  Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Article 8).

Article 2
AWARDS

Section 2.1General.  Any award under the Plan may be granted singularly, in combination with another award (or awards), or in tandem whereby the exercise or vesting of

one award held by a Participant cancels another award held by the Participant.  Each award under the Plan shall be subject to the terms and conditions of the Plan and such additional terms, conditions, limitations and restrictions as the Committee shall provide with respect to such award and as evidenced in the Award Agreement.  Subject to the provisions of Section 2.6, an award may be granted as an alternative to or replacement of an existing award under (i) the Plan; (ii) any other plan of the Company or any Subsidiary; (iii) any Prior Plan; or (iv) as the form of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or any Subsidiary, including without limitation the plan of any entity acquired by the Company or any Subsidiary.  The types of awards that may be granted under the Plan include:

(a)Stock Options.  A stock option represents the right to purchase shares of Stock at an Exercise Price established by the Committee.  Any option may be either an incentive stock option (an “ISO”) that is intended to satisfy the requirements applicable to an “incentive stock option” described in Code Section 422(b) or a non-qualified option that is not intended to be an ISO, provided, however, that no ISOs may be:  (i) granted after the ten-year anniversary of the earlier of the Effective Date or stockholder approval of the Plan; or (ii) granted to a non-employee.  Unless otherwise specifically provided by its terms, any option granted under the Plan shall be a non-qualified option.  Any ISO granted under this Plan that does not qualify as an ISO for any reason shall be deemed to be a non-qualified option.  In addition, any ISO granted under this Plan may be unilaterally modified by the Committee to disqualify such option from ISO treatment such that it shall become a non-qualified option.

(b)Stock Appreciation Rights.  A stock appreciation right (an “SAR”) is a right to receive, in cash, Stock or a combination of both (as shall be reflected in the Award Agreement), an amount equal to or based upon the excess of: (i) the Fair Market Value of a share of Stock at the time of exercise; over (ii) an Exercise Price established by the Committee.

(c)Stock Awards.  A stock award is a grant of shares of Stock or a right to receive shares of Stock (or their cash equivalent or a combination of both) in the future.  Such awards may include, but shall not be limited to, bonus shares, stock units, performance shares, performance units, restricted stock or restricted stock units or any other equity-based award as determined by the Committee.

(d)Cash Incentive Awards.  A cash incentive award is the grant of a right to receive a payment of cash, determined on an individual basis or as an allocation of an incentive pool (or Stock having a value equivalent to the cash otherwise payable) that is contingent on the achievement of performance objectives established by the Committee.

Section 2.2Exercise of Options and SARs.  An option or SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee.  In no event, however, shall an option or SAR expire later than ten (10) years after the date of its grant (five (5) years in the case of a 10% Stockholder with respect to an ISO).  The “Exercise Price” of each option and SAR shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant (or, if greater, the par value of a share of Stock); provided, however, that the Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a share of Stock on the date of grant in the case of a 10% Stockholder; further,

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provided, that, to the extent permitted under Code Section 409A, the Exercise Price may be higher or lower in the case of options or SARs granted in replacement of existing awards held by an employee, Director or service provider granted under a Prior Plan or by an acquired entity.  The payment of the Exercise Price of an option shall be by cash or, subject to limitations imposed by applicable law, by such other means as the Committee may from time to time permit, including:  (a) by tendering, either actually or by attestation, shares of Stock acceptable to the Committee, and valued at Fair Market Value as of the day of exercise; (b) by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise; (c) with respect to options, payment through a net exercise such that, without the payment of any funds, the Participant may exercise the option and receive the net number of shares of Stock equal in value to (i) the number of shares of Stock as to which the option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value (on such date as is determined by the Committee) less the Exercise Price, and the denominator of which is such Fair Market Value (the number of net shares of Stock to be received shall be rounded down to the nearest whole number of shares of Stock); (d) by personal, certified or cashiers’ check; (e) by other property deemed acceptable by the Committee; or (f) by any combination thereof.

Section 2.3Performance-Based Compensation. Any award under the Plan which is intended to be “performance-based compensation” within the meaning of Code Section 162(m) shall be conditioned on the achievement of one or more objective performance measures, to the extent required by Code Section 162(m), as may be determined by the Committee.  The grant of any award and the establishment of performance measures that are intended to be performance-based compensation shall be made during the period required under Code Section 162(m).

(a)Performance Measures.  Such performance measures may be based on any one or more of the following: earnings (e.g., earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization; or earnings per share); financial return ratios (e.g., return on investment, return on invested capital, return on equity or return on assets); increase in revenue, operating or net cash flows; cash flow return on investment; total stockholder return; market share; net operating income, operating income or net income; debt load reduction; loan and lease losses; expense management; economic value added; stock price; book value; overhead; assets, asset quality level, charge offs, loan reserves, non-performing assets, loans, deposits, growth of loans, deposits or assets; interest sensitivity gap levels, regulatory compliance, improvement of financial rating, achievement of balance sheet or income statement objectives; efficiency ratio; net interest margin and strategic business objectives, consisting of one or more objectives based on meeting specific cost targets, business expansion goals and goals relating to acquisitions or divestitures.  Performance measures may be based on the performance of the Company as a whole or of any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan and may be stated in the aggregate or on a per share basis or other measure.

(b)Partial Achievement.  The terms of any award may provide that partial achievement of the performance measures may result in a payment or vesting based upon the degree of achievement.

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(c)Extraordinary Items.  In establishing any performance measures, the Committee may provide for the exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management’s Discussion and Analysis section of the Company’s annual report:  (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions.  To the extent not specifically excluded, such effects shall be included in any applicable performance measure.

(d)Adjustments.  Pursuant to this Section 2.3, in certain circumstances the Committee may adjust performance measures; provided, however, no adjustment may be made with respect to an award that is intended to be performance-based compensation, except to the extent the Committee exercises such negative discretion as is permitted under applicable law for purposes of an exception under Code Section 162(m).  If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or any Subsidiary conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify such performance measures, in whole or in part, as the Committee deems appropriate.  If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that the selected performance measures or applicable performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable performance period; or (ii) cause to be made a cash payment to the Participant in an amount determined by the Committee.

Section 2.4Dividends and Dividend Equivalents.  Any award under the Plan may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to shares of Stock subject to the award, which payments may be either made currently or credited to an account for the Participant, may be settled in cash or Stock and may be subject to restrictions similar to the underlying award.

Section 2.5Deferred Compensation.  If any award would be considered “deferred compensation” as defined under Code Section 409A (“Deferred Compensation”), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to avoid the application of, or to maintain compliance with, Code Section 409A.  Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section 2.5 shall maintain, to the extent practicable, the original intent of the applicable provision without violating Code Section 409A.  A Participant’s acceptance of any award under the Plan constitutes acknowledgement and consent to such rights of the Committee, without further consideration or action.  Any discretionary authority retained by the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an award which is determined to constitute Deferred Compensation, if such discretionary authority would contravene Code Section 409A.

Section 2.6Repricing of Awards.  Except for adjustments pursuant to Section 3.3 (relating to the adjustment of shares), and reductions of the Exercise Price approved by the Company’s stockholders, the Exercise Price for any outstanding option or SAR may not be

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decreased after the date of grant nor may an outstanding option or SAR granted under the Plan be surrendered to the Company as consideration for the grant of a replacement option or SAR with a lower exercise price.

Section 2.7Forfeiture of Awards.  Unless specifically provided to the contrary in an Award Agreement, upon notification of Termination of Service for Cause, any outstanding award, whether vested or unvested, held by a Participant shall terminate immediately, the award shall be forfeited and the Participant shall have no further rights thereunder.

Article 3
SHARES SUBJECT TO PLAN

Section 3.1Available Shares.  The shares of Stock with respect to which awards may be made under the Plan shall be shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company, including shares purchased in the open market or in private transactions.

Section 3.2Share Limitations.

(a)Share Reserve.  Subject to the following provisions of this Section 3.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries in the aggregate under the Plan shall be 1,500,000 shares of Stock (all of which may be granted as ISOs to the extent that such shares are granted under the Plan) (the “Share Reserve”).  As of the date of stockholder approval, no further awards shall be granted pursuant to the Prior Plans.  The aggregate number of shares available for grant under this Plan (including the number that may be granted as ISOs and as awards other than options and SARs) and the number of shares of Stock subject to outstanding awards shall be subject to adjustment as provided in Section 3.3.  Notwithstanding the foregoing, the Share Reserve shall automatically be reduced by up to 500,000 shares of Stock (the “Offering Share Reserve”) if by December 31, 2011 the Company has not had an Offering.  Prior to the occurrence of an Offering, the Committee may grant awards under the Plan with respect to Offering Shares Reserve, provided that such awards are contingent upon an Offering occurring on or before December 31, 2011 and that such award cannot become vested prior to the date of such Offering.

(b)Reuse of Shares.  To the extent any shares of Stock covered by an award (including stock awards), under the Plan are forfeited or are not delivered to a Participant or beneficiary for any reason, including because the award is forfeited, canceled or settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan and shall again become eligible for issuance under the Plan.  Any shares of Stock that are covered under the terms of a Prior Plan award which would otherwise become available for reuse under the terms of a Prior Plan shall instead become available for issuance under the Plan and shall be subject to adjustment as provided in Section 3.3.  With respect to SARs that are settled in Stock, only actual shares delivered shall be counted for purposes of these limitations.  If the Exercise Price of any option granted under the Plan is satisfied by tendering shares of Stock to the Company (whether by actual delivery or by attestation and whether or not such surrendered shares were

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acquired pursuant to any award granted under the Plan), only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for issuance under the Plan.

Section 3.3Corporate Transactions.  To the extent permitted under Code Section 409A, to the extent applicable, in the event of a corporate transaction involving the Company or the shares of Stock of the Company (including any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), whether or not such event constitutes a Change in Control, all outstanding awards under the Plan and the Prior Plans, the number of shares reserved for issuance under the Plan and the Prior Plans under Section 3.2 shall automatically be adjusted to proportionately and uniformly reflect such transaction (but only to the extent that such adjustment will not affect the status of an award intended to qualify as “performance-based compensation” under Code Section 162(m), if applicable); provided, however, that the Committee may otherwise adjust awards (or prevent such automatic adjustment) as it deems necessary, in its sole discretion, to preserve the benefits or potential benefits of the awards and the Plan.  Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding awards; (iii) adjustment of the Exercise Price of outstanding options and SARs; and (iv) any other adjustments that the Committee determines to be equitable (which may include, (A) replacement of awards with other awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (B) cancellation of the award in return for cash payment of the current value of the award, determined as though the award were fully vested at the time of payment, provided that in the case of an option or SAR, the amount of such payment shall be the excess of the value of the Stock subject to the option or SAR at the time of the transaction over the Exercise Price; provided, that no such payment shall be required in consideration of the award if the Exercise Price is greater than the value of the Stock at the time of such corporate transaction or event).

Section 3.4Delivery of Shares.  Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:

(a)Compliance with Applicable Laws.  Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.

(b)Certificates.  To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

Section 3.5Participant’s Representation Statement and Stockholders Agreement.  In the event that the shares of Stock have not been registered under the Securities Act, at the time of exercise, settlement or delivery of shares pursuant to an award under the Plan, the Participant shall, if requested by the Company (i) execute and deliver to the Company his or her investment representation statement (in the form provided by the Company); and (ii) agree to execute and

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become a party to a stockholders agreement, as may be in effect from time to time.  Failure to execute and deliver the foregoing documents to the Company within thirty (30) days of request by the Company, shall relieve the Company of any obligations under the applicable award and the Participant shall forfeit any and all interest under such award as of such thirtieth day.

Section 3.6Lock-Up Period.  The Participant hereby agrees that, if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, the Participant shall not sell or otherwise transfer any shares or other securities of the Company during the 180-day period, or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act.  Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period.

Article 4
CHANGE IN CONTROL

Section 4.1Consequence of a Change in Control.  Subject to the provisions of Section 3.3 (relating to the adjustment of shares), and except as otherwise provided in the Plan or in the terms of any Award Agreement:

(a)At the time of a Change in Control, all options and SARs then held by the Participant shall become fully exercisable immediately upon the Change in Control (subject to the expiration provisions otherwise applicable to the option or SAR).

(b)At the time of a Change in Control, all stock awards described in Section 2.1(c) or cash incentive awards described in Section 2.1(d) shall be fully earned and vested immediately upon the Change in Control.

Section 4.2Definition of Change in Control.  For purposes of the Plan, “Change in Control” shall mean the first to occur of the following:

(a)Any person (as defined in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of Stock of the Company, is or becomes the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding Voting Securities; or

(b)During any period of twelve (12) consecutive months, individuals who at the beginning of such period constitute the Board and any new member of the Board whose election by the Board or nomination for election by the Company’s stockholders was approved

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by a vote of at least two-thirds (2/3) of the members of the Board then still in office who either were members of the Board at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c)Consummation of:  (i) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a complete liquidation of the Company or Midland States Bank or an agreement for the sale or disposition by the Company of all or substantially all the Company’s or Midland States Bank’s assets.

However, in no event shall a Change in Control be deemed to have occurred, with respect to the Participant if the Participant is part of a purchasing group which consummates the Change-in-Control transaction.  The Participant shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Participant is an equity participant in the purchase company or group (except for (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing members of the Board).

In the event that any award under the Plan constitutes Deferred Compensation, and the settlement of, or distribution of benefits under such award is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in the ownership” or “change in the effective control” of the Company, as permitted under Code Section 409A.

Article 5
COMMITTEE

Section 5.1Administration.  The authority to control and manage the operation and administration of the Plan shall be vested in the Committee in accordance with this Article 5.  The Committee shall be selected by the Board, provided that the Committee shall consist of two (2) or more members of the Board, each of whom are (each as may be applicable to the Company) (i) a “non-employee director” (within the meaning of Rule 16b-3 promulgated under the Exchange Act), (ii) an “outside director” (within the meaning of Code Section 162(m)) and (iii) an “independent director” (within the meaning of the applicable principal stock exchange of the Company).  Subject to applicable stock exchange rules, if the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.

Section 5.2Powers of Committee.  The Committee’s administration of the Plan shall be subject to the following:

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(a)Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Company’s and any Subsidiary’s employees, Directors and service providers those persons who shall receive awards, to determine the time or times of receipt, to determine the types of awards and the number of shares covered by the awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such awards, (subject to the restrictions imposed by Article 6) to cancel or suspend awards and to reduce or eliminate any restrictions or vesting requirements applicable to an award at any time after the grant of the award.

(b)The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.

(c)The Committee will have the authority to define terms not otherwise defined herein.

(d)Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

(e)In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and bylaws of the Company and applicable state corporate law.

Section 5.3Delegation by Committee.  Except to the extent prohibited by applicable law, the applicable rules of a stock exchange or the Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3 promulgated under the Exchange Act, if applicable, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including: (a) delegating to a committee of one or more members of the Board who are not “outside directors” within the meaning of Code Section 162(m), the authority to grant awards under the Plan to eligible persons who are either: (i) not then “covered employees,” within the meaning of Code Section 162(m) and are not expected to be “covered employees” at the time of recognition of income resulting from such award; or (ii) not persons with respect to whom the Company wishes to comply with Code Section 162(m); and/or (b) delegating to a committee of one or more members of the Board who are not “non-employee directors,” within the meaning of Rule 16b-3, the authority to grant awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act.  The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report regularly to the Committee regarding the delegated duties and responsibilities and any awards so granted.  Any such allocation or delegation may be revoked by the Committee at any time.

Section 5.4Information to be Furnished to Committee.  As may be permitted by applicable law, the Company and any Subsidiary shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties.  The records of the Company and any Subsidiary as to an employee’s or Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be manifestly incorrect.  Subject to applicable

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law, Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.

Section 5.5Expenses and Liabilities.  All expenses and liabilities incurred by the Committee in the administration and interpretation of the Plan or any Award Agreement shall be borne by the Company.  The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration and interpretation of the Plan.  The Company, and its officers and Directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons.

Article 6
AMENDMENT AND TERMINATION

Section 6.1General.  The Board may, as permitted by law, at any time, amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination (except as provided in Section 2.5, Section 3.3 and Section 6.2) may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), impair the rights of any Participant or beneficiary under any award granted which was granted under the Plan prior to the date such amendment is adopted by the Board; provided, however, that, no amendment may (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the aggregate number of securities which may be issued under the Plan, other than pursuant to Section 3.3, or (c) materially modify the requirements for participation in the Plan, unless the amendment under (a), (b) or (c) above is approved by the Company’s stockholders.

Section 6.2Amendment to Conform to Law.  Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A).  By accepting an award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 6.2 or Section 2.5 to any award granted under this Plan without further consideration or action.

Article 7
GENERAL TERMS

Section 7.1No Implied Rights.

(a)No Rights to Specific Assets.  Neither a Participant nor any other person shall by reason of participation in the Plan acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractual right to the Stock or amounts, if any, payable or distributable under the Plan, unsecured by any assets of the

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Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.

(b)No Contractual Right to Employment or Future Awards.  The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating employee the right to be retained in the employ of the Company or any Subsidiary or any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.  No individual shall have the right to be selected to receive an award under this Plan, or, having been so selected, to receive a future award under this Plan.

(c)No Rights as a Stockholder.  Except as otherwise provided in the Plan, no award under the Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.

Section 7.2Transferability.  Except as otherwise provided by the Committee, awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order, as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended.  The Committee shall have the discretion to permit the transfer of awards under the plan; provided, however, that such transfers shall be limited to immediate family members of Participants, trusts and partnerships established for the primary benefit of such family members or to charitable organizations, and; provided, further, that such transfers are not made for consideration to the Participant.

Section 7.3Designation of Beneficiaries.  A Participant hereunder may file with the Company a written designation of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend any such designation (“Beneficiary Designation”).  Any designation of beneficiary under this Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Committee is in doubt as to the entitlement of any such beneficiary to any award, the Committee may determine to recognize only the legal representative of the Participant in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone.

Section 7.4Non-Exclusivity.  Neither the adoption of this Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Committee to adopt such other incentive arrangements as either may deem desirable, including, without limitation, the granting of restricted stock, stock options or other equity awards otherwise than under the Plan or an arrangement that is or is not intended to qualify under Code Section 162(m), and such arrangements may be either generally applicable or applicable only in specific cases.

Section 7.5Award Agreement.  Each award granted under the Plan shall be evidenced by an Award Agreement.  A copy of the Award Agreement, in any medium chosen by the Committee, shall be provided (or made available electronically) to the Participant, and the Committee may but need not require that the Participant sign a copy of the Award Agreement.

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Section 7.6Form and Time of Elections.  Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.

Section 7.7Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

Section 7.8Tax Withholding.  All distributions under the Plan are subject to withholding of all applicable taxes and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations.  Except as otherwise provided by the Committee, such withholding obligations may be satisfied:  (a) through cash payment by the Participant; (b) through the surrender of shares of Stock which the Participant already owns; or (c) through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such shares under clause (c) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 7.9Action by Company or Subsidiary.  Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of the Company or such Subsidiary.

Section 7.10Successors.  All obligations of the Company under this Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business, Stock, and/or assets of the Company.

Section 7.11Indemnification.  To the fullest extent permitted by law, each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority was delegated in accordance with Section 5.3, or an employee of the Company shall be indemnified and held harmless by the Company against and from any loss (including amounts paid in settlement), cost, liability or expense (including reasonable attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such

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persons may be entitled under the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

Section 7.12No Fractional Shares.  Unless otherwise permitted by the Committee, no fractional shares of Stock shall be issued or delivered pursuant to the Plan or any award.  The Committee shall determine whether cash, Stock or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

Section 7.13Governing Law.  The Plan, all awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 7.14Benefits Under Other Plans.  Except as otherwise provided by the Committee, awards to a Participant (including the grant and the receipt of benefits) under the Plan shall be disregarded for purposes of determining the Participant’s benefits under, or contributions to, any Qualified Retirement Plan, non-qualified plan and any other benefit plans maintained by the Participant’s employer.  The term “Qualified Retirement Plan” means any plan of the Company or a Subsidiary that is intended to be qualified under Code Section 401(a).

Section 7.15Validity.  If any provision of this Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been included herein.

Section 7.16Notice.  Unless otherwise provided in an Award Agreement, all written notices and all other written communications to the Company provided for in the Plan, or any Award Agreement, shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the Company at the address set forth below:

Midland States Bancorp, Inc.

133 West Jefferson Avenue

Effingham, Illinois  62401

Fax:  (217) 342-7397

Such notices, demands, claims and other communications shall be deemed given:

(a)in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;

(b)in the case of certified or registered U.S. mail, five (5) days after deposit in the U.S. mail; or

(c)in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

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provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received, provided they are actually received.  In the event a communication is not received, it shall only be deemed received upon the showing of an original of the applicable receipt, registration or confirmation from the applicable delivery service provider.  Communications that are to be delivered by the U.S. mail or by overnight service to the Company shall be directed to the attention of the Company’s senior human resource officer and Corporate Secretary.

Article 8
DEFINED TERMS; CONSTRUCTION

Section 8.1In addition to the other definitions contained herein, unless otherwise specifically provided in an Award Agreement, the following definitions shall apply:

(a)“10% Stockholder” means an individual who, at the time of grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company.

(b)“Award Agreement” means the document (in whatever medium prescribed by the Committee) which evidences the terms and conditions of an award under the Plan.  Such document is referred to as an agreement regardless of whether Participant signature is required.

(c)“Board” means the Board of Directors of the Company.

(d)If the Participant is subject to an employment agreement (or other similar agreement) with the Company or a Subsidiary that provides a definition of termination for “cause,” then, for purposes of this Plan, the term “Cause” shall have meaning set forth in such agreement.  In the absence of such a definition, “Cause” means (1) any act of (A) fraud or intentional misrepresentation, or (B) embezzlement, misappropriation or conversion of assets or opportunities of the Company or Subsidiary, or (2) willful violation of any law, rule or regulation in connection with the performance of a Participant’s duties (other than traffic violations or similar offenses), or (3) with respect to any employee of the Company or Subsidiary, commission of any act of moral turpitude or conviction of a felony, or (4) the willful or negligent failure of the Participant to perform his duties in any material respect.

(e)“Change in Control” has the meaning ascribed to it in Section 4.2.

(f)“Code” means the Internal Revenue Code of 1986, as amended, and   any rules, regulations and guidance promulgated thereunder, as modified from time to time.

(g)“Code Section 409A” means the provisions of Section 409A of the Code and any rules, regulations and guidance promulgated thereunder.

(h)“Committee” means the Committee acting under Article 5.

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(i)“Director” means a member of the board of directors of the Company or a Subsidiary.

(j)“EESA” means the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, and any rules and regulations promulgated thereunder.

(k)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

(l)“Exercise Price” means the price established with respect to an option or SAR pursuant to Section 2.2.

(m)“Fair Market Value”shall, on any date, mean the officially-quoted closing selling price of the shares on such date on the principal national securities exchange on which such shares are listed or admitted to trading (including the New York Stock Exchange, Nasdaq Stock Market, Inc. or such other market or exchange in which such prices are regularly quoted) or, if there have been no sales with respect to shares on such date, or if the shares are not so listed or admitted to trading, the Fair Market Value shall be the value established by the Board in good faith and in accordance with Code Sections 422 and 409A.

(n)“ISO” has the meaning ascribed to it in Section 2.1(a).

(o)“Offering” means one or more public or private placement(s) of newly issued shares of Stock, which in the aggregate equals or exceeds 5,000,000 shares.  In the event that as of December 31, 2011 the aggregate of such newly issued shares is less than 5,000,000 shares, then the term “Offering Share Reserve” shall automatically be reduced proportionately to reflect the aggregate of new shares issued as of December 31, 2011, divided by 5,000,000.

(p)“Participant” means any individual who has received, and currently holds, an outstanding award under the Plan.

(q)“Prior Plans” means collectively the Midland States Bancorp, Inc. Omnibus Stock Ownership and Long-Term Incentive Plan and the Midland States Bancorp, Inc. 1999 Stock Option Plan, Second Amendment and Restatement.

(r)“Securities Act” means the Securities Act of 1933, as amended from time to time.

(s)“SAR” has the meaning ascribed to it in Section 2.1(b).

(t)“Stock” means the common stock of the Company, $00.01 par value per share which the Company is authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.

(u)“Subsidiary” means any corporation, affiliate or other entity which would be a subsidiary corporation with respect to the Company as defined in Code Section 424(f) and,

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other than with respect to an ISO, shall also mean any partnership or joint venture in which the Company and/or other Subsidiary owns more than fifty percent (50%) of the capital or profits interests.

(v)“Termination of Service” means the first day occurring on or after a grant date on which the Participant ceases to be an employee of, or service provider to (which, for purposes of this definition, includes Directors), the Company or any Subsidiary, regardless of the reason for such cessation, subject to the following:

(i)The Participant’s cessation as an employee or service provider shall not be deemed to occur by reason of the transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries.

(ii)The Participant’s cessation as an employee or service provider shall not be deemed to occur by reason of the Participant’s being on a leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise receiving the Participant’s services.

(iii)If, as a result of a sale or other transaction, the Subsidiary for whom Participant is employed (or to whom the Participant is providing services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an Employee of or service provider to the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Participant’s Termination of Service caused by the Participant being discharged by the entity for whom the Participant is employed or to whom the Participant is providing services.

(iv)A service provider whose services to the Company or a Subsidiary are governed by a written agreement with the service provider will cease to be a service provider at the time the term of such written agreement ends (without renewal); and a service provider whose services to the Company or a Subsidiary are not governed by a written agreement with the service provider will cease to be a service provider on the date that is ninety (90) days after the date the service provider last provides services requested by the Company or any Subsidiary (as determined by the Committee).

(v)Unless otherwise provided by the Committee, an employee who ceases to be an employee, but becomes or remains a Director, or a Director who ceases to be a Director, but becomes or remains an employee, shall not be deemed to have incurred a Termination of Service.

(vi)Notwithstanding the forgoing, in the event that any award under the Plan constitutes Deferred Compensation, the term Termination of Service shall be interpreted by the Committee in a manner not to be inconsistent with the definition of “Separation from Service” as defined under Code Section 409A.

(w)“Voting Securities” means any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

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Section 8.2In this Plan, unless otherwise stated or the context otherwise requires, the following uses apply:

(a)actions permitted under this Plan may be taken at any time and from time to time in the actor’s reasonable discretion;

(b)references to a statute shall refer to the statute and any successor statute, and to all regulations promulgated under or implementing the statute or its successor, as in effect at the relevant time;

(c)in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”;

(d)references to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality;

(e)indications of time of day shall be based upon the time applicable to the location of the principal headquarters of the Company;

(f)“including” means “including, but not limited to”;

(g)all references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Plan unless otherwise specified;

(h)all words used in this Plan will be construed to be of such gender or number as the circumstances and context require;

(i)the captions and headings of articles, sections, schedules and exhibits appearing in or attached to this Plan have been inserted solely for convenience of reference and shall not be considered a part of this Plan nor shall any of them affect the meaning or interpretation of this Plan or any of its provisions;

(j)any reference to a document or set of documents in this Plan, and the rights and obligations of the parties under any such documents, shall mean such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and

(k)all accounting terms not specifically defined herein shall be construed in accordance with GAAP.

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EX-10.18

Exhibit 10.18

THE AMENDED AND RESTATED

DEFERRED COMPENSATION PLAN

OF MIDLAND STATES BANCORP, INC.

R E C I T A L S

WHEREAS, Midland States Bancorp, Inc. (the “Company”) desires to assist its directors and certain employees in their ability to better provide for their own financial future by permitting such directors and certain employees to defer all or a portion of their current director fees and a portion of their annual salary and any bonus compensation;

WHEREAS, the Company desires that such deferrals are to be made without restrictions imposed by those provisions of the Code which apply to tax-qualified retirement plans.

WHEREAS, The Company previously adopted the Deferred Compensation Plan For Directors and Executives of Midland States Bancorp, Inc. to allow for certain directors and employees to make such deferrals of director fees, salary and bonus compensation; and

WHEREAS, the Company desires to amend, restate and rename the Plan to best reflect the eligibility and participation by certain selected employees by modifying the name of the Plan and modifying descriptive provisions of the Plan.

SECTION 1
DEFINITIONS

1.1“Applicable Interest Rate” shall mean with respect to each calendar quarterly period, the average during the then most recently completed calendar quarter of the monthly averages for 20-year U.S. Treasury securities, adjusted to a constant maturity, as published by the Board of Governors of the Federal Reserve System in its “Federal Reserve Statistical Release.”

1.2“Applicable Interest Rate Fund” shall mean a Measurement Fund in which earnings are calculated based on the Applicable Interest Rate.

1.3“Bank” shall mean Midland States Bank, a wholly owned banking subsidiary of the Company.

1.4“Beneficiary” shall mean the person or persons Participant has designated in writing to the Company to receive benefits under this Plan in the event of the Participant’s death.  If the Participant has not specifically designated any Beneficiary for purposes of the Agreement, then the Beneficiary shall become the Participant’s estate.  In the case of the death of the Beneficiary before completion of payments under the

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Agreement to the Beneficiary, then the Beneficiary’s estate shall become entitled to any remaining payments.

1.5“Board” means the Board of Directors of the Company, or the Board of Directors of any member of the Controlled Group.

1.6“Bonus” shall mean any special and/or discretionary compensation amounts in excess of Salary determined by the Company to be payable to a Participant with respect to services rendered.

1.7“Change in Capital Stock” shall mean any increase or decrease in the number of shares of issued Stock resulting from a subdivision or consolidation of shares, whether through reorganization, recapitalization, stock split-up, stock distribution or combination of shares, or the payment of a share dividend or other increase or decrease in the number of such shares outstanding effected without receipt of consideration by the Company.

1.8“Change Of Control” shall mean the occurrence of the earliest of any of the following events:

A.The acquisition by any entity, person or group, excluding any entity, person or group owning Voting Stock at the effective date of this Plan, of beneficial ownership, as that term is defined in Rule  13d-3 of the Securities Exchange Act of 1934, of twenty-five percent (50%) or more of the Voting Stock of the Company; or

B.The commencement and consummation by any entity, person, or group (other than the Company) of a tender offer or an exchange offer for more  than twenty-five percent (50%) or more of the Voting Stock of the Company; or

C.The effective date of a (i) merger or consolidation of the Company with one or more other corporations, the result of which is that the holders of the Voting Stock of the Company immediately prior to such merger or consolidation hold less than fifty percent (50%) of the Voting Stock of the surviving or resulting corporation, or (ii) a sale or transfer of a majority of the property of the Company, other than to an entity of which the Company controls fifty percent (50%) or more of the Voting Stock.

An event or transaction described in paragraph A., B., or C. shall be a “Change of Control” only if such event or transaction is a “change in ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Section 409A(a)(2)(A)(v) of the Code, to the extent provided by the Secretary of the Treasury.

1.9“Code” shall mean the Internal Revenue Code of 1986, as amended.

1.10“Committee” shall mean, initially, the Compensation and Benefits Committee, as designated by the Executive Committee of the Board and thereafter, any

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other committee designated from time to time by the Board with the oversight of this Plan.

1.11“Common Stock” shall mean the common stock of the Company.

1.12“Company” shall mean Midland States Bancorp, Inc.

1.13“Controlled Group” shall mean any and all entities which share common ownership with the Company resulting in a “parent-subsidiary controlled group”, as that term is defined by Code Section 1563(a)(1), or “brother-sister controlled group”, as that term is defined by Code Section 1563(a)(2), or any “combined group”, as that term is defined by Code Section 1563(a)(3).

1.14“Deferred Compensation” shall mean (i) with respect to eligible employees (excluding Inside Directors), the sum of his or her Salary and/or Bonus that is the subject of an elective deferral under Section 4.1 of the Plan, (ii) with respect to Inside Directors the sum of his or her Salary, Bonus and/or Director Fees that is the subject of an elective deferral under Section 4.1 of the Plan, and (iii) with respect to a Director, his or her Director Fees that are the subject of an elective deferred under Section 4.1 of the Plan.

1.15“Deferred Compensation Election Form” shall mean the form which Participants use to defer Salary and/or Bonus and to elect distribution options.

1.16“Deferred Compensation Subaccount” shall mean the bookkeeping account established for a Participant under the Plan to which Deferred Compensation amounts with respect to such Participant are credited from time to time, as provided in Section 5.2 of the Plan.  For purposes of this definition, unless otherwise indicated by the Plan, a Deferred Compensation Subaccount shall refer to both the Cash Subpart Account and Stock Subpart Account thereof.

1.17“Director” shall mean any person duly elected or appointed and serving as a director of the Company, the Bank or any other member of the Controlled Group and who is not a current employee of the Company, the Bank or any other member of the Controlled Group and has not been an employee of the Company, the Bank or any other member of the Controlled Group for at least one year.

1.18“Director Fees” shall mean with respect to a Director the sum of his or her retainer and fees paid to such Director for services rendered in the capacity of a Director.

1.19“Disability” shall mean with respect to a Participant, that the Participant: (1) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (2) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less

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than three months under an accident or health plan covering employees of such Participant’s Employer, as determined in accordance with Section 409A(a)(2)(C) of the Code and the Treasury Regulations thereunder.

1.20“Distributable Amount” of a Participant’s subaccounts with respect to a Plan Year shall mean the sum of the vested balance of the subaccount in a Participant’s Deferred Compensation Subaccount with respect to such PlanYear subject to the rules of Article 7 of the Plan.

1.21“Dividend Payment Date” shall mean the date upon which cash dividends are paid to holders of the Common Stock of the Company.

1.22“Election Period” with respect to a Plan Year shall mean the period designated by the Committee; provided, however, that such period shall be no less than ten business days. The Election Period with respect to a Plan Year shall end not later than the last day of the prior Plan Year; provided, however, that, in the case of a Participant who first becomes eligible to participate in the Plan during a Plan Year, the Election Period may be the thirty (30) day period commencing on the date such Participant first becomes eligible to participate in accordance with Section 409A(a)(4)(B)(ii) of the Code and the Treasury Regulations thereunder.

1.23“Eligible Employee” shall mean any Employee who is selected to participate in the Plan in accordance with Section 2 of the Plan, including any Eligible Employee who is also an Inside Director.

1.24“Employee” shall mean any officer or other employee of the Company, the Bank or any other member of the Controlled Group whom the Committee in its own discretion, or its designee, determines in his own discretion, is a member of a select group of management or highly compensated employees.

1.25“Fair Market Value” means with respect to the Common Stock at any date shall be the share value determined by the Board, in good faith, taking into account the per share book value thereof and any other factor deemed appropriate by the Board.

1.26“Inside Director” means a Director of the Company, the Bank or any other member of the Controlled Group who is an employee of the Company, the Bank or any other member of the Controlled Group and is also an Eligible Employee.

1.27“Matching Contributions Subaccount” shall mean the bookkeeping account established for a Participant under Section 5.4 of the Plan to which the Company’s Matching Contributions under Section 4.2 of the Plan are credited from time to time.

1.28“Measurement Fund” shall mean one or more of the investment funds selected by the Committee or its designee.

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1.29“Participant” shall mean a Director, an Inside Director or an Eligible Employee who has been selected by the Committee to participate in the Plan, and who has elected to participate in the Plan.

1.30“Participation Certificate” shall mean that Agreement entered into by a Participant (as set forth in Exhibit A to the Plan) prior to participation in the Plan

1.31“Payment Date “ shall mean the time as soon as practicable after one of the following dates as designated by the Participant in his distribution form election with respect to a Plan Year:  (1) the last day of the calendar month following the date of the Participant’s Separation from Service, or (2) the last day of the calendar month specified by the Participant that is no earlier than the year after the year in which the Compensation would have been paid but for the Participant’s election to defer such Compensation, or (3) the earlier of:  (i) the last day of the calendar month following the date of the Participant’s Separation from Service, or (ii) the last day of the calendar month specified by the Participant that is no earlier than the year after the year in which the Compensation would have been paid but for the Participant’s election to defer such Compensation.

1.32“Plan” shall mean the Amended and Restated Deferred Compensation Plan of Midland States Bancorp, Inc., as set forth herein and as amended from time to time.

1.33“Plan Year” shall mean the twelve (12) consecutive month period beginning on each January 1 and ending on each December 31.

1.34“Retirement” shall mean the cessation of the services of a Director for any reason other than death or Disability if, and provided that, such Director is at least 70 years of age.

1.35“Rule 701” means Rule 701 promulgated under the Securities Act of 1933, as amended.

1.36“Salary” shall mean the regular annual base compensation paid by a member of the Controlled Group to an Eligible Employee (without regard to any reduction thereof pursuant to the Plan, any 401(k) plan or Code Section 125 flexible benefits plan maintained by the Company), exclusive of Bonus and any other incentive payments made by the Company to such Participant.

1.37“Separation from Service” shall mean with respect to a Participant, such Participant’s Termination, if such Termination is a “separation from service,” within the meaning of Section 409A(a)(2)(A)(i) of the Code, as determined by the Secretary of the Treasury (or such Participant’s other “separation from service,” as so defined).

1.38“Stock Units” shall mean the number of shares of Common Stock (carried to four decimal places) credited to a Participant’s Deferred Compensation or Matching Contribution Subaccount in accordance with the provisions of Sections 5.2 and 5.3 of the Plan; provided, however, that in the event of a Change in Capital Stock, the Stock Units then credited to a Participant’s Deferred Compensation and Matching

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Contribution Subaccounts shall be appropriately adjusted, based on the Committee’s directions, to account for the change in number of issued and outstanding shares of Common Stock.

1.39“Stock Unit Election” shall mean the election by a Director with respect to Director Fees or an Inside Director, with respect to such Inside Director’s Director Fees (but not with respect to such Inside Director’s Salary or Bonus), to designate all or any portion of such Participant’s Director Fees to constitute Stock Units to be allocated to the Stock Subpart portion of his or her Deferred Compensation Subaccount.

1.40“Subaccount” means the accounts established for each Participant pursuant to Section 5.1, consisting of a Deferred Compensation Subaccount (comprised of a Cash Subpart and a Stock Subpart) and a Matching Contribution Subaccount.

1.41“Subsidiary” means any bank or corporation or other entity in which the Company owns a majority of and class of voting securities entitled to vote for the directors (or persons to serve in a similar capacity) of such bank, corporation or other entity.

1.42“Termination” shall mean for any Participant who is an employee, ceasing to be an employee of the Company or any member of the Controlled Group for reasons other than death or Disability. If a Participant is both an employee of the Company and a Director, he shall not have a Termination until he resigns from both positions.

1.43“Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from (a) an illness or accident of the Participant, or the Participant’s spouse, Beneficiary, or dependent (as defined in Section 152 of the Code, without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B) of the Code), (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control, as determined by the Committee based on the relevant facts and circumstances and as provided for in Treasury Regulations §1.409A-3(i)(3) or any successor provision.

1.44“Voting Stock” shall mean that class (or classes) of common stock of the Company entitled to vote in the election of the Company’s directors.

SECTION 2

ELIGIBILITY AND PARTICIPATION

2.1Eligibility.  Individuals eligible to participate in the Plan shall consist of the Directors and Certain Employees within the Controlled Group.

2.2Participation.   Participation in the Plan by Eligible Employees shall be determined by the Committee in its sole discretion, the President & CEO of the Company, or, as set forth in Section 3.1 of the Plan, a designee of the Committee, in his or her sole discretion, and shall be subject to the terms and conditions of the Plan;

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provided, however, that all Directors shall be eligible to participate in the Plan without discretion on the part of the Committee, the President & CEO, or the Committee’s designee.  All Participants in the Plan shall, prior to participation, execute a Participation Certificate in the form of Exhibit A to the Plan.

Once becoming a Participant in the Plan, a Participant shall continue to participate in the Plan until such time as (i) the Participant ceases to be a Director or an Eligible Employee, as the case may be, or (ii) the Committee or its designee takes action to terminate the Eligible Employee’s right to continued participation in the Plan.  Should an individual cease to be a Participant under the provisions of (i) or (ii) above while still employed by or serving as a Director of the Company, any payment to Participant will be made in accordance with the provisions of Section 7.1 upon the termination of employment by the individual with the Company.

SECTION 3
ADMINISTRATION

3.1General Powers of Administration.  The Plan shall be administered by the Committee.  The Committee is authorized to construe and interpret the Plan and promulgate, amend and rescind rules and regulations relating to the implementation, administration and maintenance of the Plan.  Subject to the terms and conditions of the Plan, the Committee shall make all determinations necessary or advisable for the implementation, administration and maintenance of the Plan including, without limitation, determining the Eligible Employees and correcting any technical defect(s) or technical omission(s), or reconciling any technical inconsistencies, in the Plan.

The Committee may designate persons other than members of the Committee to carry out the day-to-day ministerial administration of the Plan under such conditions and limitations as it may prescribe; provided, however, that the Committee shall only delegate its authority with regard to the determination of Eligible Employees to certain officers of the Company and may only delegate such authority in writing.  The Committee’s determinations under the Plan need not be uniform and may be made selectively among Eligible Employees (but not Directors), whether or not such Eligible Employees are similarly situated.

Any determination, decision or action of the Committee in connection with the construction, interpretation, administration, implementation or maintenance of the Plan shall be final, conclusive and binding upon all Participants and any person(s) claiming any Plan benefits under or through any Participants.

3.2The Company As Fiduciary.  The Company is hereby designated as a fiduciary under the Plan.  Any decision by the Company or the Committee denying a claim by Participant or a Beneficiary for benefits under the Agreement shall be stated in writing and shall be delivered or mailed to the Participant or Beneficiary.  Such statement shall set forth the specific reasons for the denial, written to the best of the Company’s ability in a manner that may be understood without legal counsel.  In addition, the

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Company shall afford a reasonable opportunity to the Participant or Beneficiary for a full and fair review of the decision denying such claim.

Notwithstanding the above provisions of Section 3.2, to the extent that the Employee Retirement Income Security Act (“ERISA”) may require specific procedures to be followed in the event of a denial of a claim, such provisions of ERISA will be followed.

3.3Indemnification.  The Company will indemnify and hold harmless the Committee and each member thereof against any cost or expense (including, without limitation, attorneys’ fees) or liability (including, without limitation, any sum paid with the approval of the Company in settlement of a claim) arising out of any act or omission to act, except in the case of willful gross misconduct or gross negligence.

SECTION 4

DEFERRAL AND MATCHING CONTRIBUTIONS

4.1Deferred Compensation.  Participants may defer all or a portion of their Salary and/or Bonus, in the case of Eligible Employees (including Inside Directors), or Director Fees, in the case of Directors (including Inside Directors), earned during any calendar year, in accordance with the following provisions.

A.Deferral Election.  To defer compensation during any particular year, those Directors or Eligible Employees participating in the Plan must execute a Deferred Compensation Election Form (“Form”) and file such Form with the Committee (or its designee).

B.Timing of Election.  In the year in which the Plan is first implemented, those Directors and Eligible Employees must make an election to defer Director Fees or Salary and/or Bonus, respectively, within 30 days after the later of (i) in the case of an Eligible Employee, the date such Eligible Employee is selected by the Committee to participate in the Plan, or (ii) the effective date of the Plan.  Such election will only be effective for Director Fees or Salary and/or Bonus earned subsequent to such election.

Once participating in the Plan, deferral elections by Participants during subsequent years shall be completed and filed with the Committee (or its designee) during the Election Period.

C.Content of Deferral Elections.  The following shall apply to all deferral elections:

(i)  All deferral elections shall contain a statement that the Participant elects to defer all or a portion of such Participant’s Director Fees or Salary and/or Bonus, as the case may be, for a specified calendar year, that is earned and becomes payable to the Participant after the filing

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of such deferral election and, with respect to a Director, including an Inside Director, that portion of such Participant’s Deferred Compensation to constitute Stock Units;

(ii)  Except for the provisions of subsection (iii) below, any deferral election shall only apply to the Director Fees or Salary and/or Bonus, as the case may be, that is attributable to the Participant’s services rendered to the Company during the calendar year for which such election is made (whether or not such compensation is actually paid and received in such calendar year);

(iii)  If a Participant is currently deferring Director Fees or Salary and/or Bonus and fails to complete and return a Form prior to the January 1 of the calendar year to which such Form is to be effective, then the deferral election made by the Participant on the most recently filed Form shall be considered effective for the new calendar year; and

(iv)  A Participant may terminate a deferral election for any calendar year by filing with the Committee (or its designee) written notice of such termination prior to January 1 of the calendar year in which such termination is to become effective, whereupon a Participant shall not be entitled to participate in the Plan for such calendar year.  Such a participant may, however, participate in the Plan effective for the calendar year following the calendar year in which such termination becomes effective in the same manner as prescribed in the Plan.

4.2Matching Contributions.  Provided the Participant is then serving as a Director or Inside Director and has elected to defer all (but not less than all) of his or her Director Fees relative to service for a particular Board in the form of Stock Units pursuant to Section 4.1C(i), on the first business day of each month the Company shall credit to the Participant’s Matching Contribution Subaccount, pursuant to Section 5.3, a contribution equal to 25% of such Participant’s Director Fees deferred under the Plan by the Participant during the preceding month.  No matching contributions shall be made with respect to Salary or Bonus.

SECTION 5

DEFERRAL PLAN ACCOUNTS

5.1Establishment of Deferral Plan Accounts.  The Company shall establish a Deferral Plan Account (“DPA”) for each Participant.  Each Participant’s DPA shall be comprised of (i) a Deferred Compensation Subaccount, consisting of a Cash Subpart Account and, in the case of Directors and Inside Directors who so elect, a Stock Subpart Account, and (ii) a Matching Contribution Subaccount.

5.2Election of Measurement Funds in Cash Subpart Account.  In the manner designated by the Committee or its designee, Participants may elect one or more Measurement Funds to be used to determine the additional amounts to be credited to their

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Cash Subpart Account. The Committee or its designee shall select from time to time, in the Committee’s or its designee’s sole discretion, the Measurement Funds to be available under the Plan.

Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s election of any such Measurement Fund, the allocation to his Cash Subpart Account thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Cash Subpart Account shall not be considered or construed in any manner as an actual investment of his Cash Subpart Account in any such Measurement Fund. In the event that the Company, in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Cash Subpart Account shall at all times be a bookkeeping entry only and shall not represent any investment made on a Participant’s behalf by the Company. The Participant shall at all times remain an unsecured creditor of the Company.

A.  Investment Elections. Participants may designate how their CashSubpart Accounts, if any, shall be deemed to be invested under the Plan.

(i) Such Participants may make separate investment elections for their future deferrals, and the existing balances of their Cash Subpart Accounts.

(ii) Such Participants may make and change their investment elections by choosing from the Measurement Funds designated by the Committee or its designee in accordance with the procedures established by the Committee or its designee.

(iii) Except as otherwise designated by the Committee or its designee, the available Measurement Funds under this Section 5.2 shall generally be the investment funds found in the Plan’s summary plan description.

(iv) If a Participant fails to elect a Measurement Fund under this Section, he shall be deemed to have elected a default Measurement Fund as selected by the Compensation and Benefits Committee for his Cash Subpart Account.

B.  Continuing Investment Elections. Participants who have had a Termination but not yet commenced distributions under the Plan or Participants who are receiving installment payments may continue to make investment elections pursuant tosubsection A. above, as applicable, except as otherwise determined by the Committee.

5.3Credit to Deferred Compensation Subaccount.  A Deferred Compensation Subpart shall be created for each Participant, to which all Deferred Compensation

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amounts deferred by a Participant in accordance with Section 4.1 of the Plan shall be credited.

A.Initial Credit To Subaccount.  Each Participant’s Deferred Compensation Subaccount, Cash Subpart, shall be credited no less frequently than the last day of each valuation period which will generally be the last day of each calendar quarter, unless otherwise designated by the Compensation and Benefits Committee, an amount equal to the sum of the Deferred Compensation deferred by the Participant during the valuation period, in accordance with Section 4.1 of the Plan.  Each Participant’s Deferred Compensation Subaccount, Stock Subpart, shall be credited no less frequently than the first day of the month following the month of the deferral.

(i)  Credit To Cash Subpart.  The actual dollar amount of Deferred Compensation as to which no Stock Unit Election has been deferred shall initially be credited as cash to the Participant’s Cash Subpart.

(ii)  Credit To Stock Subpart.  The dollar amount of the Deferred Compensation as to which (and to the extent that) a Stock Unit Election has been made shall be credited as Stock Units, the number of which shall be calculated by dividing the dollar amount deferred by the Fair Market Value of the Common Stock as of the date such Deferred Compensation is credited to the Participant’s Stock Subpart.

B.Earnings Credit To Subaccount.  The Cash Subpart and Stock Subpart (if any) of Participant’s Deferred Compensation Subaccount shall be credited with earnings amounts equal to the following.

(i)  Earnings Credit To Stock Subpart.  On each Dividend Payment Date, an amount equal to the sum of the cash dividends that would have been payable on all Stock Units then allocated to the Participant’s Stock Subpart had such Stock Units then been converted to shares of Common Stock and distributed to the Participant immediately prior to such Dividend Payment Date, shall be credited to such Participant’s Stock Subpart, whereupon the dollar amount of such cash dividends shall be converted into Stock Units by dividing such dollar amount by the Fair Market Value of the Common Stock as of such Dividend Payment Date.

(ii)  Earnings Credit To Cash Subpart.  Each such subaccount shall be further divided into separate investment fund subaccounts, each of which corresponds to a Measurement Fund elected by the Participant.  The performance of each elected Measurement Fund (either positive or negative) shall be determined by the Committee or its designee and will be determined at the Committee or designee’s discretion, based on the performance of the Measurement Funds during the applicable valuation period.

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A Participant’s Cash Subpart Account shall be credited or debited on the earlier of the last day of each valuation period or each December 31st  (the “Applicable Period”), based on the performance of each Measurement Fund selected by the Participant, as though (a) a Participant’s Cash Subpart Account and the underlying separate investment fund subaccounts of amounts deferred in periods prior to the present Applicable Period, were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such Cash Subpart Account, on the first day of the present Applicable Period; (b) fifty-percent (50%) of the portion of the Participant’s Deferred Compensation that was actually deferred during such Applicable Period, if any, were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such period, no later than the close of business on the first business day of such Applicable Period; (c) any withdrawal or distribution made to a Participant, if any, that decreases such Participant’s Cash Subpart Account ceased being invested in the Measurement Fund(s), in the percentages applicable to such period, no earlier than one business day prior to the distribution; and, (d) any transfers into or out of a Measurement Fund will be credited or debited, as applicable, as of the first business day of the Applicable Period which contains the effective date of the transfer.

The Committee shall establish and maintain, with respect to a Participant’s Cash Subpart Account, an additional subaccount with respect to each Plan Year, to which shall be credited the amount equal to the portion of the Participant’s Deferred Compensation for such Plan Year, debited by amounts equal to distributions to and withdrawals made by the Participant and adjusted for investment earnings and losses as described herein.

5.4Matching Contribution Subaccount.   Each Participant’s Matching Stock Subaccount shall be credited no less frequently than the first business day of each month with an amount equal to the Company’s contributions made in accordance with Section 4.2 of the Plan.  The dollar amount of such Company’s contributions shall be converted into Stock Units by dividing such dollar amount by the Fair Market Value of the Common Stock as of the date such Deferred Compensation is credited, which shall be credited to the Participant’s Stock Subpart.

SECTION 6

VESTING OF DPA SUBACCOUNTS

6.1Vesting.  A Participant’s Subaccounts shall vest in accordance with the following.

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A.Deferred Compensation Subaccount.  A Participant’s Deferred Compensation Subaccount shall at all times be 100% Vested.

B.Matching Contribution Subaccount.  A Participant’s Matching Contribution Subaccount shall vest in accordance with the following schedule:

At End of Year	Vested Percentage
1	25%
2	50%
3	75%
4	100%

Notwithstanding the above vesting schedule under Section 6.1 (B), upon the following events, a Participant’s Matching Contribution Subaccount shall become 100% vested: (i) the death or Disability of the Participant; (ii) a Change in Control of the Company; or (iii) Retirement.

SECTION 7

PAYMENT TO PARTICIPANTS

7.1General Rule. Each Participant shall make a separate distribution election with respect to each Plan Year for which such Participant elects to defer Salary, Bonus or Director Fees.  A Participant’s distribution election with respect to a Plan Year shall apply to each subaccount in his Deferred Compensation Subaccount.  A Participant’s distribution election with respect to a Plan Year shall elect the Payment Date and the form of distribution of his Distributable Amount with respect to such Plan Year for purposes of distributions in the event of such Participant’s Separation from Service or Disability. Such Payment Date and distribution form elections shall be made on such Participant’s deferral election form during the Election Period for which such Participant elects to defer Salary, Bonus or Director Fees for such Plan Year, and such Payment Date and distribution form elections with respect to such Plan Year shall be irrevocable.  A Participant’s distribution for his Distributable Amount with respect to a Plan Year shall be made or commence as soon as administratively practicable after such Participant’s Payment Date.

The limitations under this subsection shall be applied in accordance with Section 409A(a)(4)(C) of the Code and the Treasury Regulations thereunder.

A.Normal Form. Except as provided in paragraph B, a Participant’s Distributable Amount with respect to each Plan Year shall be paid to the Participant in a single lump sum in cash on the Participant’s Payment Date.

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B.Optional Forms. Instead of receiving his Distributable Amount with respect to each Plan Year, the Participant may elect an optional form of payment (on the form provided by Company) at the time of his deferral election for such Plan Year to receive his Distributable Amount in equal annual installments in cash over a period of from two (2) up to fifteen (15) years beginning on the Participant’s Payment Date. The payment of such Participant’s Distributable Amount with respect each Plan Year shall be made or commence on such Participant’s Payment Date.

All installment payments made under the Plan shall be determined in accordance with the annual fractional payment method, calculated as follows: the balance of subaccounts in the Participant’s Accounts with respect to a Plan Year shall be calculated as of the close of business on the last business day of the year. The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects 10 year installments for the distribution of the subaccounts in his Accounts with respect to a Plan Year, the first payment shall be 1/10 of the balance of such subaccounts in his Accounts calculated as described in this definition. The following year, the payment shall be 1/9 of such subaccounts in the balance of the Participant’s Accounts, calculated as described in this definition. Each annual installment shall be paid on or as soon as practicable after the last business day of the applicable year.

7.2Death Before Payment of Benefits.  Should a Participant die before the balance of the Participant’s Deferred Compensation and Matching Contribution Subaccounts have been paid to the Participant, any remaining payments will be made to the Participant’s Beneficiary in the same form and manner as they would have been made to the Participant under the provisions of Section 7.1 of the Plan.

7.3.Distributions in Cases of Hardship.  Notwithstanding the provisions of Section 7.1 of the Plan, the Committee may, in its sole discretion, choose to permit a Participant to withdraw amounts from his or her Deferred Compensation Subaccount upon a showing by such Participant that an Unforeseeable Emergency has occurred.  Such distribution shall be limited to the amount shown to be necessary to meet the Unforeseeable Emergency, and no more than one withdrawal will be permitted from a Participant’s Deferred Compensation Subaccount during any calendar year.

The dollar amount of any withdrawal shall reduce the value of both the Participant’s Cash and Stock Subparts.  To determine the cash value of the Participant’s Stock Subpart on the date of withdrawal of funds, the number of Stock Units credited on the date of withdrawal of funds shall be multiplied by the Fair Market Value of the Common Stock as of such date.  To determine the value of the Participant’s Cash Subpart on the date of withdrawal of funds, the cash amount credited to such Cash Subpart on such date shall be utilized.

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Any amounts distributed to a Participant pursuant to a hardship withdrawal shall be considered to be taxable wages to the Participant in the calendar year of withdrawal.

7.4Prohibition on Acceleration of Distributions.  The time or schedule of payment of any withdrawal or distribution under the Plan shall not be subject to acceleration, except as provided under Treasury Regulations promulgated in accordance with Section 409A of the Code.

SECTION 8

PARTICIPANT STATEMENTS

8.1Annual Participant Statements.  Within a reasonable period of time following the end of each Plan Year each Participant shall be provided with a statement showing the balances (vested and nonvested) in the Participant’s Deferred Compensation and Matching Contribution Subaccounts.

8.2Termination of Participant’s Service.  Within 30 days following the date of the termination of service by a Participant (for any reason) to the Company, as a Director, employee or both (in the case of an Inside Director), such Participant shall be provided with a statement showing the vested balances of his or her Deferred Compensation and Matching Contribution Subaccounts as of the date of such termination of service.

SECTION 9

AMENDMENT OR TERMINATION OF PLAN

9.1Amendment or Termination of Plan.  Any amendment to this Plan shall be made pursuant to a duly adopted resolution of the Board; provided, however, that if such amendment directly or indirectly affects the benefits payable under the Plan, such amendment must be mutually agreed to in writing by a Participant (or, in the event that such Participant is deceased at the date of amendment, the Beneficiary).

SECTION 10

GENERAL PROVISIONS

10.1Participant’s Rights Unfunded.  The Plan at all times shall be unfunded as defined under provisions of the Code.  The right of any Participant or Beneficiary to receive a distribution hereunder shall be an uninsured claim against the general assets of the Company in the event of the Company’s insolvency or bankruptcy.  The Company shall implement a form of trust arrangement (known generally as a “rabbi trust”) to hold the Company assets which will be used to make payments to the Participant (or any Beneficiary) under the terms of the Plan.  Such trust arrangement will not be a “funded” arrangement under the provisions of the Code.

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10.2Independence of Other Benefit Arrangements.  Participation in the Plan shall in no way restrict or otherwise impact Participant’s participation in any other welfare benefit plan, employment or other contract, deferred compensation arrangement, equity participation plan or any other form of retirement benefit arrangement sponsored by the Company.

10.3No Secured Guarantee of Benefits.  In the event of the insolvency or bankruptcy of the Company, Participant shall remain a general creditor of the Company with respect to any benefits payable under the Plan, and nothing contained in the Plan shall constitute a secured guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder in the event of the Company’s insolvency or bankruptcy.

10.4No Enlargement of Rights.  No Participant shall have any right to receive a distribution of any benefits under the Plan except in accordance with the terms of the Plan.  Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company, whether as an employee, officer or director.

10.5Spendthrift Provision.  No interest of any person or entity in, or right to receive a distribution under the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings.

10.6Applicable Law.  The Plan shall be construed and administered under the laws of the State of Illinois.

10.7Severability.  In the event that any of the provisions of the Plan are held to be inoperative or invalid by any court of competent jurisdiction, then: (i) insofar as is reasonable, effect will be given to the intent manifested in the provision held invalid or inoperative; and (ii) the validity and enforceability of the remaining provisions of the Plan will not be affected thereby.

10.8Incapacity of Recipient.  If any person entitled to a distribution under the Plan is deemed by the Company to be incapable (physically or mentally) of personally receiving and giving a valid receipt for any payment pursuant to the Plan, then, unless and until claim therefore shall have been made by a duly appointed guardian or other legal representative of such person, the Company may provide for such payment or any part thereof to be made to any other person or institution then contributing towards or providing for the care and maintenance of such person.  Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan with respect to such payment.

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10.9Successors.  The terms and conditions of the Plan will be binding on the Company’s and Participant’s successors, heirs and assigns (herein, “Participant Successors” and “the Company Successors”).

10.10Unclaimed Benefits.  Participant shall keep the Company informed of his or her current address and the current address of his or her Beneficiary.  The Company shall not be obligated to search for the whereabouts of any person.  If the location of any Participant is not made known to the Company within a one (1) year period after the date on which payment is to be made under the provisions of Section 7.1, then payment may be made by the Company to the Beneficiary instead.  If, within one (1) additional year after such initial one (1) year period, the Company is unable to locate any designated Beneficiary of the Participant, then the Company shall use its reasonable best efforts to distribute all unclaimed benefits to the estate or other representative of the Participant.

10.11Limitations on Liability.  Participant and any other person claiming benefits under the Plan shall be entitled under this Plan only to those payments provided in accordance with the provisions of the Plan (“Payment Claims”).  With the exception of the provisions of Section 10.13 of the Plan, neither the Company, the Company Successor nor any individual acting as an employee or agent of the Company or the Company Successor, shall be liable to Participant or any other person for any other claim, loss, liability or expense under this Plan not directly related to a Payment Claim.

10.12Forfeiture of Benefits.  Notwithstanding any other provision of the Plan, should Participant engage in theft, fraud or embezzlement causing significant property damage to the Company, then any benefits payable to such Participant under the Plan will automatically be forfeited.  The determination of theft or embezzlement will be made by the Board in good faith, but such determination does not require an actual criminal indictment or conviction prior to or after such decision.  In any determination of forfeiture pursuant to this Section 10.12, the Participant will be given the opportunity to refute any such decision by the Board, but the Board’s decision on the matter will be considered final and binding on Participant and all other parties.

10.13Payment of Attorneys’ Fees, Court Costs, and Interest on Loss of Benefits.  Should either the Company or the Company Successor (for these purposes, “the Company”) or Participant bring an action at law (or through arbitration) in order that the Plan’s terms be enforced, then the party prevailing in the action at law (or through arbitration) shall be entitled to reimbursement from the losing party for reasonable attorneys’ fees, court costs and other similar amounts expended in the enforcement of the terms of the Plan.  In addition, should the prevailing party be Participant, he or she shall also be entitled to interest on any delayed payments, with such interest computed at the Applicable Rate.

10.14Payment of Taxes.  Should the payment of any benefits under this Plan be classified as payment of an excess parachute payment under the provisions of Code Sections 280G and 4999, then an additional payment will be made to the Participant based on the amount of excise tax or penalty payable by the Participant because of such

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classification.  Such payment will be made within two (2) months following Participant’s termination of employment, once a good faith determination is made by either the Company or Participant that the payment of any benefit under the Plan will constitute an excess parachute payment.  The amount payable to the Participant will be determined by the Committee, in its reasonable judgment, as to the amount required to meet the intent of this Section 10.14.

10.15Withholding.  There shall be deducted from all payments under the Plan the amount of any taxes required to be withheld by any federal, state or local government.  The Participants, any Beneficiaries and personal representatives shall bear any and all federal, foreign, state, local, income or other taxes imposed on amounts paid under the Plan.

10.16Participants Bound By Terms of the Plan.  Each Participant shall be deemed conclusively to have accepted and consented to all terms of the Plan and all actions or decisions made by the Company with regard to the Plan.  Such terms and consent shall also apply to and be binding upon any Beneficiaries, personal representatives and other Participant Successors of each Participant.  Each Participant shall receive a copy of the Plan.

10.17Rule 701.  It is the intent of the Board in establishing the Plan that the offering and sale of any securities to a Participant hereunder be exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Rule 701.  Accordingly, notwithstanding anything to the contrary contained herein, any offer or sale of securities hereunder shall be subject to the limitations set forth in Rule 701, and any and all constructions of this Plan by the Committee shall be consistent with the requirements of Rule 701.

10.18No Distribution of Fractional Shares.  Notwithstanding the credit of fractional interest in Stock Units in a Participant’s Stock Subpart, no fractional shares or interests shall be distributed to a Participant.  Rather, such Participant shall be entitled to receive cash for such fractional shares or interest in an amount equal to the value thereof, determined with reference to the then per share Fair Market Value of the common Stock.

IN WITNESS WHEREOF, this Amendment and Restatement is hereby adopted and effective by the Company on this 6th day of April, 2011.

MIDLAND STATES BANCORP, INC.
By:	/s/ Leon J. Holschbach
Name:		Leon J. Holschbach
Title:		President & CEO

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EXHIBIT A

PARTICIPATION CERTIFICATE

THIS PARTICIPATION CERTIFICATE certifies that the Executive Committee of the Board of Directors of Midland States Bancorp, Inc., or its designee, has selected                                                        (“Participant”) as a Participant in its Amended and Restated Deferred Compensation Plan of Midland States Bancorp (the “Plan”), with all of the rights and privileges appurtenant thereto.

By signing this Certificate in the space provided below, Participant acknowledges having received a copy of the Plan and having read and reviewed the terms and provisions thereof.  Participant also acknowledges that Participant must elect to participate for the Plan Year of his initial election no later than the 30th day following the date of his selection as a Participant.  If Participant fails to elect to participate in the Plan for the Plan Year of his initial selection within thirty (30) days of his selection, Participant acknowledges that his deferrals into the Plan may begin only upon the first day of the Plan Year subsequent to the Plan Year of his selection as a Participant.  Any deferral election for the Participant for a Plan Year other than the Plan Year of his initial selection must be made by the Participant prior to the beginning of the Plan Year for which deferrals are being elected.

Dated as of the                day of                         , 200    .
		MIDLAND STATES BANCORP, INC.
		By:
		Title:
Received by Participant the        day of                           , 200    .
	[Name of Participant]
	Address
	City, State and Zip Code

EXHIBIT B-1

[For Directors, with respect to Director Fees]

THE AMENDED AND RESTATED

DEFERRED COMPENSATION PLAN

OF

MIDLAND STATES BANCORP, INC.

Deferral and Distribution Election

Pursuant to the Amended and Restated Deferred Compensation Plan of Midland States Bancorp, Inc. (the “Plan”), a copy of which I have in my possession and have read, I hereby elect the following actions in conjunction with my service as a Director.  Defined terms herein shall have the same meanings as ascribed to them under the Plan.

·To defer Director Fees otherwise payable to me for calendar year 20         in the aggregate amount of  o all or  o $                          .

Of the amount deferred,                      shall be allocated to the Stock Subpart of my Deferred Compensation Subaccount and                            shall be allocated to the Cash Subpart of my Deferred Compensation Subaccount.

I understand that no Matching Contributions will be credited unless all of my Director Fees are deferred and allocated to the Stock Subpart of my Deferred Compensation Subaccount.

·Timing of Distributions:

oDate Certain Election:  For all deferrals for the 20     Plan Year, I elect payment on the last day of                  (month)                  (year), or

oSeparation from Service:  For all For all deferrals for the 20     Plan Year, I elect payment only upon a Separation from Service, or

oI elect payment on earlier of the last day of                (month)                  (year) or upon a Separation from Service.

·Method of Distribution (select one):

oMonthly Installments over                years (maximum of 15).

oLump-sum.

I understand that this election relates to only a single year and that I must make a new election for later years not covered by this election form.

Date:
	Signature
	Print Name

EXHIBIT B-2

[For Certain Employees, including Inside Directors,

with respect to Salary and/or Bonus Only]

THE AMENDED AND RESTATED

DEFERRED COMPENSATION PLAN

OF MIDLAND STATES BANCORP, INC.

Deferral and Distribution Election

Pursuant to the Amended and Restated Deferred Compensation Plan of Midland States Bancorp, Inc. (the “Plan”), a copy of which I have in my possession and have read, I hereby elect the following actions in conjunction with my employment with                                         .  Defined terms herein shall have the same meanings as ascribed to them under the Plan.

·Deferrals:

o   Salary otherwise payable to me for the Plan Year 20             in the aggregate amount of
       o all, or  o $                          , or o                           % thereof,  and/or

o   Bonus otherwise payable to me for the Plan Year 20             in the aggregate amount of
       o all, or o  $                          , or o                           % thereof.

·Timing of Distributions:

oDate Certain Election:  For all deferrals for the 20     Plan Year, I elect payment on the last day of                  (month)                  (year), or

oSeparation from Service:  For all For all deferrals for the 20     Plan Year, I elect payment only upon a Separation from Service, or

oI elect payment on ealier of the last day of                (month)                  (year) or upon a Separation from Service.

·Method of Distribution (select one):

oMonthly Installments over                years (maximum of 15).

oLump-sum.

I understand that neither my participation in the Plan nor my election deferral of all or any portion of my Bonus shall affect in any manner my right to continued employment with my employer or guarantee that I will receive a Bonus for any year.  Additionally, I understand that this election relates to only a single year and that I must make a new election for later years not covered by this election form.

Date:
	Signature
	Print Name

EXHIBIT B-3

THE AMENDED AND RESTATED

DEFERRED COMPENSATION PLAN

OF MIDLAND STATES BANCORP, INC.

Beneficiary Designation Form

Pursuant to the Amended and Restated Deferred Compensation Plan of Midland States Bancorp, Inc.  (the “Plan”), a copy of which I have in my possession and have read, I hereby designate the following persons as my beneficiaries to receive all amounts held for me under the Plan which have not been paid to me at the date of my death:

Primary Beneficiary(ies):

Name	Relationship	Percentage
			%
			%

Secondary Beneficiary(ies)

Name	Relationship	Percentage
			%
			%

The designation of beneficiaries specified above (if any) will continue in effect for future years until revoked.

Date:
	Signature
	Print Name

EXHIBIT B-4

THE AMENDED AND RESTATED

DEFERRED COMPENSATION PLAN

OF MIDLAND STATES BANCORP, INC.

Request for Hardship Withdrawal

Pursuant to the Amended and Restated Deferred Compensation Plan of Midland States Bancorp, Inc. (the “Plan”), a copy of which I have in my possession and have read, I hereby request a hardship withdrawal from the balance in my Deferred Compensation Subaccount relative to the                Plan Year in the amount of $                                 as a result of the occurrence of an Unforseeable Emergency, as more particularly described on the page attached hereto.

Date:
	Signature
	Print Name

EX-10.19

Exhibit 10.19

MIDLAND STATES BANCORP, INC.

AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN

INCENTIVE STOCK OPTION AWARD TERMS

The Participant specified below has been granted this Option by MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), under the terms of the MIDLAND STATES BANCORP, INC. AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN (the “Plan”).  The Option shall be subject to the Plan as well as the following terms and conditions (the “Option Terms”):

Section 1.Award.  In accordance with the Plan, the Company hereby grants an option (the “Option”) for the number of Covered Shares set forth in Section 2 to the Participant, subject to the Option Terms.

Section 2.Terms of Option Award.  The following words and phrases relating to the grant of the Option shall have the following meanings:

(a)The “Participant” is [               ].

(b)The “Grant Date” is [               ].

(c)The number of “Covered Shares” is [               ] shares of Stock.

(d)The “Exercise Price” is [$               ] per Covered Share.

Except where the context clearly implies to the contrary, any capitalized term in this Option award shall have the meaning ascribed to that term under the Plan.

Section 3.Incentive Stock Option.  The Option is intended to constitute an “incentive stock option” as that term is used in Code Section 422.  To the extent that the aggregate fair market value (determined at the time of grant) of shares of Stock with respect to which incentive stock options are exercisable for the first time by the Participant during any calendar year under all plans of the Company and its Subsidiaries exceeds $100,000, the options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as nonstatutory stock options.  It should be understood that there is no assurance that the Option will, in fact, be treated as an incentive stock option.

Section 4.Vesting.  Subject to the limitations of the Option Terms, each installment of Covered Shares of the Option (“Installment”) shall become vested and exercisable on and after the “Vesting Date” for such Installment as described in the following schedule (but only if the Participant’s Termination of Service has not occurred before the Vesting Date):

INSTALLMENT VESTING DATE
APPLICABLE TO INSTALLMENT

The Option may be exercised on or after a Termination of Service only as to that portion of Covered Shares for which it was exercisable immediately prior to the Termination of Service, or became exercisable on the date of the Termination of Service.

Notwithstanding the foregoing provisions of this Section 4, the Option shall become fully and immediately vested upon a Change in Control that occurs on or before the Participant’s Termination of Service or upon a Participant’s Termination of Service due to [Retirement,] Disability or death.

For purposes of this Award Agreement: (a) [“Retirement” shall mean a Termination of Service, other than for Cause, upon or after attaining age sixty-five (65); and, (b)] “Disability” shall mean that a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Company’s employees.

Section 5.Expiration.  The Option shall not be exercisable after the Company’s close of business on the last business day that occurs prior to the Expiration Date.  The “Expiration Date” shall be the earliest to occur of:

(a)the ten-year anniversary of the Grant Date;

(b)the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated for Cause;

(c)the six-month anniversary of the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated for any reason other than Retirement, Disability, death, or Cause (provided that the Option shall cease to constitute an “incentive stock option” on the three-month anniversary of such termination); or

(d)the one-year anniversary of the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated as a result of Retirement, Disability or death.

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Section 6.Option Exercise.

(a)Method of Exercise.  Subject to the Option Terms and the Plan, the Option may be exercised in whole or in part by filing an exercise notice with the Secretary of the Company at its corporate headquarters prior to the Company’s close of business on the last business day that occurs prior to the Expiration Date.  The notice requirement may only be satisfied by the method prescribed by the Committee; provided, however, the Committee shall retain the right to limit or expand the method of exercise to any one or more methods with respect to any individual Participant or group or class of Participants.  Such notice shall specify the number of Covered Shares which the Participant elects to purchase, and shall be accompanied by payment of the Exercise Price for such Covered Shares indicated by the Participant’s election.

(b)Payment of Exercise Price.  Payment may be by cash or, subject to limitations imposed by applicable law, by such means as the Committee from time to time may permit, including, (i) by tendering, either actually or by attestation, Stock acceptable to the Committee, valued at Fair Market Value on the date of exercise; (ii) by irrevocably authorizing a third party, acceptable to the Committee, to sell Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price; (iii) by personal, certified or cashiers’ check; or (iv) by payment through a net exercise such that, without the payment of any funds, the Participant may exercise the Option and receive the net number of Covered Shares equal to (1) the number of Covered Shares as to which the Option is being exercised, multiplied by (2) a fraction, the numerator of which is the Fair Market Value per Covered Share (on such date as is determined by the Company) less the Exercise Price per Covered Share, and the denominator of which is such Fair Market Value per Covered Share (the number of net Covered Shares to be received shall be rounded down to the nearest whole number of Covered Shares).  If payment is made pursuant to clauses (i) or (ii) above, the Participant’s election must be made on or prior to the date of exercise of the Option and must be irrevocable.  The Option shall not be exercisable if and to the extent the Company determines that such exercise would violate applicable state or federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded and shall not be exercisable during any blackout period established by the Company from time to time.

Section 7.Delivery of Shares.  Delivery of Stock or other amounts under this Award Agreement and the Plan shall be subject to the following:

(a)Compliance with Applicable Laws.  Notwithstanding any other provision of this Award Agreement or the Plan, the Company shall have no obligation to deliver any Stock or make any other distribution of benefits under this Award Agreement or the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.

(b)Certificates.  To the extent that this Award Agreement and the Plan provide for the issuance of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

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Section 8.Withholding.  The exercise of the Option, and the Company’s obligation to issue shares upon exercise, is subject to withholding of all applicable taxes.  Except as may otherwise provided by the Committee from time-to-time, such withholding obligations may be satisfied:  (i) through cash payment by the Participant; (ii) through the surrender of shares of Stock which the Participant already owns; or (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such shares under clause (iii) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 9.Transferability.  The Option, or a portion thereof, may be transferable or assignable: (i) by will or the laws of descent and distribution; or (ii) pursuant to a qualified domestic relations order, as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended.  Except as provided in the preceding sentence, the Option may not be assigned, transferred, pledged or hypothecated by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge or hypothecation, or other disposition of this Option contrary to the provisions hereof, and the levy of any attachment or similar process upon this option, shall be null and void and without effect.

Section 10.Heirs and Successors.  The Option Terms shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any rights of the Participant or benefits distributable to the Participant under this Award Agreement have not been exercised or distributed, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Award Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee on the Beneficiary Designation Form, or such other form as the Committee may require.  The Beneficiary Designation Form may be amended or revoked from time to time by the Participant.  If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant.  If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under this Award Agreement or before the complete distribution of benefits to the Designated Beneficiary under this Award Agreement, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.

Section 11.Administration.  The authority to manage and control the operation and administration of the Option Terms and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to the Option Terms as it has with respect to the Plan. Any interpretation of the Option Terms or the Plan by the Committee and any decision made by it with respect to the Option Terms or the Plan are final and binding on all persons.

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Section 12.Plan Governs.  Notwithstanding anything in the Option Terms to the contrary, the Option Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and the Option Terms are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.

Section 13.Not An Employment Contract.  The Option will not confer on the Participant any right with respect to continuance of employment or other service with the Company, nor will it interfere in any way with any right the Company would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.

Section 14.No Rights As Shareholder.  The Participant shall not have any rights of a shareholder with respect to the Covered Shares, until a stock certificate has been duly issued following exercise of the Option as provided herein.

Section 15.Amendment.  The Option Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.

Section 16.Governing Law.This Award Agreement, the Plan, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 17.Section 409A Amendment.  The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A.  Participant’s acceptance of this Option award constitutes acknowledgement and consent to such rights of the Committee.

(Signature Page to Follow)

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed in its name and on its behalf, all as of the Grant Date and the Participant acknowledges acceptance of the terms and conditions of this Award Agreement.

MIDLAND STATES BANCORP, INC.
By:
Its:
PARTICIPANT
[               ]	Date

5

EX-10.20

Exhibit 10.20

MIDLAND STATES BANCORP, INC.

AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AWARD TERMS

The Participant specified below has been granted this Non-Qualified Stock Option (the “Option”) by MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), under the terms of the MIDLAND STATES BANCORP, INC. AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN (the “Plan”).  The Option shall be subject to the Plan as well as the following terms and conditions (the “Option Agreement”):

Section 1.Award.  In accordance with the Plan, the Company hereby grants this Option for the number of Covered Shares set forth in Section 2 to the Participant, subject to the Option Agreement.

Section 2.Terms of Option Award.  The following words and phrases relating to the grant of the Option shall have the following meanings:

(a)The “Participant” is [               ].

(b)The “Grant Date” is [               ].

(c)The number of “Covered Shares” is [               ] shares of Stock.

(d)The “Exercise Price” is $[               ] per Covered Share.

Except where the context clearly implies to the contrary, any capitalized term in this Option award shall have the meaning ascribed to that term under the Plan.

Section 3.Non-Qualified Stock Option.  The Option is not intended to constitute an “incentive stock option” as that term is used in Code Section 422.

Section 4.Vesting.  Subject to the limitations of the Option Agreement, each installment of Covered Shares of the Option (“Installment”) shall become vested and exercisable on and after the “Vesting Date” for such Installment as described in the following schedule (but only if the Participant’s Termination of Service has not occurred before the Vesting Date):

INSTALLMENT VESTING DATE
APPLICABLE TO INSTALLMENT

The Option may be exercised on or after a Termination of Service only as to that portion of Covered Shares for which it was exercisable immediately prior to the Termination of Service, or became exercisable on the date of the Termination of Service.

Notwithstanding the foregoing provisions of this Section 4, the Option shall become fully and immediately vested upon a Change in Control that occurs on or before the Participant’s Termination of Service or upon a Participant’s Termination of Service due to [Retirement], Disability or death.

For purposes of this Option Agreement: [(a) “Retirement” shall mean a Termination of Service, other than for Cause, upon or after attaining age sixty-five (65); and, (b)] “Disability” shall mean that a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Company’s employees.

Section 5.Expiration.  The Option shall not be exercisable after the Company’s close of business on the last business day that occurs prior to the Expiration Date.  The “Expiration Date” shall be the earliest to occur of:

(a)the ten-year anniversary of the Grant Date;

(b)the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated for Cause;

(c)the six-month anniversary of the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated for any reason other than Retirement, Disability, death or Cause; or

(d)the one-year anniversary of the date upon which a Termination of Service occurs, if the Participant’s employment with, or service to, the Company or any Subsidiary is terminated as a result of Retirement, Disability or death.

Section 6.Option Exercise.

(a)Method of Exercise.  Subject to the Option Agreement and the Plan, the Option may be exercised in whole or in part by filing an exercise notice with the Secretary of the Company (or other party established by the Committee) at its corporate headquarters prior to the Company’s close of business on the last business day that occurs prior to the Expiration Date.  The notice requirement may only be satisfied by the method prescribed by the Committee; provided, however, the Committee shall retain the right to limit or expand the method of exercise to any one or more methods with respect to any individual Participant or group or class of Participants.  Such notice shall specify the number of Covered Shares which the Participant elects to purchase, and shall be accompanied by payment of the Exercise Price for such Covered Shares indicated by the Participant’s election.

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(b)Payment of Exercise Price.  Payment may be by cash or, subject to limitations imposed by applicable law, by such means as the Committee from time to time may permit, including, (i) by tendering, either actually or by attestation, Stock acceptable to the Committee, valued at Fair Market Value on the date of exercise; (ii) by irrevocably authorizing a third party, acceptable to the Committee, to sell Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price; (iii) by personal, certified or cashiers’ check; (iv) by payment through a net exercise such that, without the payment of any funds, the Participant may exercise the Option and receive the net number of Covered Shares equal to (1) the number of Covered Shares as to which the Option is being exercised, multiplied by (2) a fraction, the numerator of which is the Fair Market Value per Covered Share (on such date as is determined by the Company) less the Exercise Price per Covered Share, and the denominator of which is such Fair Market Value per Covered Share (the number of net Covered Shares to be received shall be rounded down to the nearest whole number of Covered Shares); (v) by other property deemed acceptable by the Committee;  or (vi) any combination of the above.  If payment is made pursuant to clauses (i) or (ii) above, the Participant’s election must be made on or prior to the date of exercise of the Option and must be irrevocable.  The Option shall not be exercisable if and to the extent the Company determines that such exercise would violate applicable state or federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded and shall not be exercisable during any blackout period established by the Company from time to time.

Section 7.Delivery of Shares.  Delivery of Stock or other amounts under this Option Agreement and the Plan shall be subject to the following:

(a)Compliance with Applicable Laws.  Notwithstanding any other provision of this Option Agreement or the Plan, the Company shall have no obligation to deliver any Stock or make any other distribution of benefits under this Option Agreement or the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.

(b)Certificates.  To the extent that this Option Agreement and the Plan provide for the issuance of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

Section 8.Withholding.  The exercise of the Option, and the Company’s obligation to issue shares upon exercise, is subject to withholding of all applicable taxes.  Except as may otherwise provided by the Committee from time-to-time, such withholding obligations may be satisfied:  (i) through cash payment by the Participant; (ii) through the surrender of shares of Stock which the Participant already owns; or (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such shares under clause (iii) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

Section 9.Transferability.  The Option, or a portion thereof, may be transferable or assignable: (i) by will or the laws of descent and distribution; or (ii) pursuant to a qualified domestic relations order, as defined in the Code or Title I of the Employee Retirement Income

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Security Act of 1974, as amended.  Except as provided in the preceding sentence, the Option may not be assigned, transferred, pledged or hypothecated by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge or hypothecation, or other disposition of this Option contrary to the provisions hereof, and the levy of any attachment or similar process upon this option, shall be null and void and without effect.

Section 10.Heirs and Successors.  The Option Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any rights of the Participant or benefits distributable to the Participant under this Option Agreement have not been exercised or distributed, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Option Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee on the Beneficiary Designation Form, or such other form as the Committee may require.  The Beneficiary Designation Form may be amended or revoked from time to time by the Participant.  If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant.  If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under this Option Agreement or before the complete distribution of benefits to the Designated Beneficiary under this Option Agreement, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.

Section 11.Administration.  The authority to manage and control the operation and administration of the Option Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to the Option Agreement as it has with respect to the Plan. Any interpretation of the Option Agreement or the Plan by the Committee and any decision made by it with respect to the Option Agreement or the Plan are final and binding on all persons.

Section 12.Plan Governs.  Notwithstanding anything in the Option Agreement to the contrary, the Option Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and the Option Agreement are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.

Section 13.Not An Employment Contract.  The Option will not confer on the Participant any right with respect to continuance of employment or other service with the Company, nor will it interfere in any way with any right the Company would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.

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Section 14.No Rights As Shareholder.  The Participant shall not have any rights of a shareholder with respect to the Covered Shares, until a stock certificate has been duly issued following exercise of the Option as provided herein.

Section 15.Amendment.  The Option Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.

Section 16.Governing Law.This Option Agreement, the Plan, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 17.Section 409A Amendment.  The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Option Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A.  Participant’s acceptance of this Option award constitutes acknowledgement and consent to such rights of the Committee.

IN WITNESS WHEREOF, the Company has caused this Option Agreement to be executed in its name and on its behalf, all as of the Grant Date and the Participant acknowledges acceptance of the terms and conditions of this Option Agreement.

MIDLAND STATES BANCORP, INC.
By:
Its:
PARTICIPANT
[               ]	Date

5

EX-10.21

Exhibit 10.21

MIDLAND STATES BANCORP, INC.

AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD TERMS

The Participant specified below has been granted this Restricted Stock Unit Award (“Award”) by MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), under the terms of the MIDLAND STATES BANCORP, INC. AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN (the “Plan”).  The Award shall be subject to the Plan as well as the following terms and conditions (the “Award Agreement”):

Section 1.Award.  In accordance with the Plan, the Company hereby grants to the Participant this Award of Restricted Stock Units (each, an “RSU”) where each RSU represents the right to receive one share of Stock in the future as set forth in Section 2. This Award is in all respects limited and conditioned as provided herein.

Section 2.Terms of Restricted Stock Award.  The following words and phrases relating to the grant of the Award shall have the following meanings:

(a)The “Participant” is [                 ].

(b)The “Grant Date” is [                 ].

(c)The number of “RSUs” is [                 ].

Except where the context clearly implies to the contrary, any capitalized term in this Award shall have the meaning ascribed to that term under the Plan.

Section 3.Restricted Period.  This Award Agreement evidences the Company’s grant to the Participant as of the Grant Date, on the terms and conditions described in this Award Agreement and in the Plan, a number of RSUs, each of which represents the right of the Participant to receive a share of Stock free of restrictions once the Restricted Period ends.

(a)Subject to the limitations of this Award Agreement, the “Restricted Period” for each installment of such RSUs (“Installment”) shall begin on the Grant Date and end as described in the following schedule (but only if the Participant has not had a Termination of Service before the end of the Restricted Period):

INSTALLMENT RESTRICTED PERIOD WILL END ON:

(b)Notwithstanding the foregoing provisions of this Section 3, the Restricted Period for the RSUs shall cease immediately, and the RSUs shall become immediately and fully

vested, upon (i) a Change in Control that occurs on or before the Participant’s Termination of Service or (ii) upon the Participant’s Termination of Service due to Disability or death.

(c)In the event the Participant’s Termination of Service, other than as provided in subsection (b) above, occurs prior to the expiration of one or more Restricted Periods, the Participant shall forfeit all rights, title and interest in and to any Installment(s) of RSUs still subject to a Restricted Period as of the Participant’s Termination of Service date.

For purposes of this Award Agreement:  “Disability” shall mean that a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Company’s employees.

Section 4.Settlement of Units.  Delivery of Stock or other amounts under this Award Agreement and the Plan shall be subject to the following:

(a)Delivery of Stock.  As soon as administratively practicable following the end of a Restricted Period or upon immediate vesting as described in Section 3, the Company shall deliver to the Participant one share of the Company’s Stock free and clear of any restrictions in settlement of each of the unrestricted units.

(b)Compliance with Applicable Laws.  Notwithstanding any other provision of this Award Agreement or the Plan, the Company shall have no obligation to deliver any Stock or make any other distribution of benefits under this Award Agreement or the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.

(c)Certificates.  To the extent that this Award Agreement and the Plan provide for the issuance of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

Section 5.Withholding.  All deliveries of shares of Stock pursuant to this Award Agreement shall be subject to withholding of all applicable taxes.  The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs or Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any shares of Stock under this Award Agreement.  At the election of the Participant, subject to the rules and limitations as may be established by the Committee, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which Participant is otherwise entitled under the Plan.

Section 6.Non-Transferability of Award.  Prior to settlement, the Participant shall not sell, assign, transfer, pledge, hypothecate, mortgage, encumber or dispose of any RSUs awarded under this Award.

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Section 7.Dividends.  The Participant shall [not] be entitled to receive a payment of additional RSUs equal in value to any cash dividends and property distributions paid with respect to the RSUs (other than dividends or distributions of securities of the Company which may be issued with respect to its shares by virtue of any stock split, combination, stock dividend or recapitalization — to the extent covered in Section 3.3 of the Plan) that become payable during the Restricted Period (“Dividend Equivalents”); provided, however, that no Dividend Equivalents shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions occurring prior to the Grant Date, or with respect to record dates for such dividends or distributions occurring on or after the date, if any, on which the Participant has forfeited the RSUs.  Dividend Equivalents shall be paid at such times as the Committee shall determine in its discretion and shall be subject to the same restrictions applicable to the underlying RSUs.  [Dividend Equivalents may also be paid in cash when dividends are paid to shareholders.]

Section 8.Voting Rights.  The Participant shall not be a shareholder of record with respect to the RSUs during the Restricted Period and shall have no voting rights with respect to the RSUs during the Restricted Period.

Section 9.Heirs and Successors.  This Award Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any rights of the Participant or benefits distributable to the Participant under this Award Agreement have not been settled or distributed, respectively, at the time of the Participant’s death, such rights shall be settled and payable to the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Award Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require.  The designation of beneficiary form may be amended or revoked from time to time by the Participant.  If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been payable to the Participant and shall be payable to the legal representative of the estate of the Participant.  If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the settlement of Designated Beneficiary’s rights under this Award Agreement, then any rights that would have been payable to the Designated Beneficiary shall be payable to the legal representative of the estate of the Designated Beneficiary.

Section 10.Administration.  The authority to manage and control the operation and administration of this Award Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Award Agreement as it has with respect to the Plan. Any interpretation of this Award Agreement or the Plan by the Committee and any decision made by it with respect to this Award Agreement or the Plan are final and binding on all persons.

Section 11.Plan Governs.  Notwithstanding anything in this Award Agreement to the contrary, this Award Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Award

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Agreement are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.  Notwithstanding anything in this Award Agreement to the contrary, in the event of any discrepancies between the corporate records and this Award Agreement, the corporate records shall control.

Section 12.Not an Employment Contract.  The Award will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.

Section 13.No Rights As Shareholder.  The Participant shall not have any rights of a shareholder with respect to the RSUs, until a stock certificate has been duly issued as provided herein.

Section 14.Amendment.  This Award Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written Award Agreement of the Participant and the Company without the consent of any other person.

Section 15.Governing Law.This Award Agreement, the Plan, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 16.Section 409A Amendment.  The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A.  Participant’s acceptance of this Option award constitutes acknowledgement and consent to such rights of the Committee.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed in its name and on its behalf, all as of the Grant Date and the Participant acknowledges acceptance of the terms and conditions of this Award Agreement.

MIDLAND STATES BANCORP, INC.
By:
Its:
PARTICIPANT
[             ]	Date

4

EX-10.22

Exhibit 10.22

MIDLAND STATES BANCORP, INC.

AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AWARD TERMS

The Participant specified below has been granted this Restricted Stock Award (“Award”) by MIDLAND STATES BANCORP, INC., an Illinois corporation (the “Company”), under the terms of the MIDLAND STATES BANCORP, INC. AMENDED AND RESTATED 2010 LONG-TERM INCENTIVE PLAN (the “Plan”).  The Award shall be subject to the Plan as well as the following terms and conditions (the “Award Agreement”):

Section 1.Award.  In accordance with the Plan, the Company hereby grants to the Participant this Award which represents the right to receive Stock (the “Covered Shares”) as set forth in Section 2. This Award is in all respects limited and conditioned as provided herein.

Section 2.Terms of Restricted Stock Award.  The following words and phrases relating to the grant of the Award shall have the following meanings:

(a)The “Participant” is [                ].

(b)The “Grant Date” is [                ].

(c)The number of “Covered Shares” is [                ] shares of Stock.

Except where the context clearly implies to the contrary, any capitalized term in this Award Agreement shall have the meaning ascribed to that term under the Plan.

Section 3.Restricted Period.  This Award Agreement evidences the Company’s grant to the Participant as of the Grant Date, on the terms and conditions described in this Award Agreement and in the Plan, the right of the Participant to receive stock free of restrictions once the Restricted Period ends.

(a)Subject to the limitations of this Award Agreement, the “Restricted Period” for each installment of such Covered Shares (“Installment”) shall begin on the Grant Date and end as described in the following schedule (but only if the Participant has not had a Termination of Service before the end of the Restricted Period):

INSTALLMENT RESTRICTED PERIOD WILL END ON:

(b)Notwithstanding the foregoing provisions of this Section 3, the Restricted Period for the Restricted Stock shall cease immediately, and the Restricted Stock shall become immediately and fully vested, upon (i) a Change in Control that occurs on or before the Participant’s Termination of Service or (ii) upon the Participant’s Termination of Service due to Disability or death.

(c)In the event the Participant’s Termination of Service, other than as provided in subsection (b) above, occurs prior to the expiration of one or more Restricted Periods, the Participant shall forfeit all rights, title and interest in and to any Installment(s) of Covered Shares still subject to a Restricted Period as of the Participant’s Termination of Service date.

For purposes of this Award Agreement “Disability” shall mean that a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Company’s employees.

Section 4.Delivery of Shares.  Delivery of Stock or other amounts under this Award Agreement and the Plan shall be subject to the following:

(a)Compliance with Applicable Laws.  Notwithstanding any other provision of this Award Agreement or the Plan, the Company shall have no obligation to deliver any Stock or make any other distribution of benefits under this Award Agreement or the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.

(b)Certificates.  To the extent that this Award Agreement and the Plan provide for the issuance of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

Section 5.Withholding.  All deliveries of Covered Shares pursuant to this Award Agreement shall be subject to withholding of all applicable taxes.  The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs or Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any certificate or certificates for Stock under this Award Agreement.  At the election of the Participant, subject to the rules and limitations as may be established by the Committee, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which Participant is otherwise entitled under the Plan.

Section 6.Non-Transferability of Award.  During the Restricted Period, the Participant shall not sell, assign, transfer, pledge, hypothecate, mortgage, encumber or dispose of any Covered Shares awarded under this Award.

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Section 7.Dividends.  The Participant shall be [not] entitled to receive dividends and distributions paid on the Covered Shares during the Restricted Period [; provided, however, that no dividends or distributions shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions occurring before or prior to the Grant Date, or with respect to record dates for such dividends or distributions occurring on or after the date, if any, on which the Participant has forfeited those Covered Shares].

Section 8.Voting Rights.  The Participant shall be entitled to vote the Covered Shares during the Restricted Period; provided, however, that the Participant shall not be entitled to vote Covered Shares with respect to record dates for any Covered Shares occurring on or after the date, if any, on which the Participant has forfeited those Covered Shares.

Section 9.Deposit of Restricted Stock Award.  Each certificate issued with respect to Covered Shares awarded under this Award Agreement and subject to the restrictions contained herein, shall be registered in the name of the Participant and shall be retained by the Company, or an agent of the Company, until the end of the Restricted Period with respect to such Covered Shares.

Section 10.Heirs and Successors.  This Award Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any rights of the Participant or benefits distributable to the Participant under this Award Agreement have not been settled or distributed, respectively, at the time of the Participant’s death, such rights shall be settled and payable to the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Award Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require.  The designation of beneficiary form may be amended or revoked from time to time by the Participant.  If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been payable to the Participant and shall be payable to the legal representative of the estate of the Participant.  If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the settlement of Designated Beneficiary’s rights under this Award Agreement, then any rights that would have been payable to the Designated Beneficiary shall be payable to the legal representative of the estate of the Designated Beneficiary.

Section 11.Administration.  The authority to manage and control the operation and administration of this Award Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Award Agreement as it has with respect to the Plan. Any interpretation of this Award Agreement or the Plan by the Committee and any decision made by it with respect to this Award Agreement or the Plan are final and binding on all persons.

Section 12.Plan Governs.  Notwithstanding anything in this Award Agreement the contrary, this Award Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Award

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Agreement are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.  Notwithstanding anything in this Award Agreement to the contrary, in the event of any discrepancies between the corporate records and this Award Agreement, the corporate records shall control.

Section 13.Not an Employment Contract.  The Award will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.

Section 14.No Rights As Shareholder.  Except as otherwise provided herein, the Participant shall not have any rights of a shareholder with respect to the Covered Shares, until Stock has been duly issued and delivered to Participant.

Section 15.Amendment.  This Award Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written Award Agreement of the Participant and the Company without the consent of any other person.

Section 16.Governing Law.This Award Agreement, the Plan, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws, except as superseded by applicable federal law.

Section 17.Section 409A Amendment.  The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A.  Participant’s acceptance of this Award constitutes acknowledgement and consent to such rights of the Committee.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed in its name and on its behalf, all as of the Grant Date and the Participant acknowledges acceptance of the terms and conditions of this Award Agreement.

MIDLAND STATES BANCORP, INC.
By:
Its:
PARTICIPANT
[                 ]	Date

4

EX-10.23

Exhibit 10.23

Midland States Bancorp, Inc. Management Incentive Program

Compensation Philosophy

It is the desire of the Compensation Committee of Midland States Bancorp, Inc. (Company) to provide the Executive Management Team of the Company and Midland States Bank (Bank) a compensation plan that aligns with the overall performance and health of the Company and the Bank.  We believe that a total reward strategy that provides both short term and long term rewards is in the best interest of the Executives and the shareholders of the Company. This plan is designed using independent third party compensation information, is Compensation Committee driven and Risk Management approved.

Total Rewards Strategy

Base Salary is established using a third party evaluation of selected peer group companies within the Central States Region and representative of the Bank’s size.  The plan provides a base salary that amplifies the reward as it relates to the performance of the Bank; upper market performance translates to upper market base salary.

Short Term and Long Term Bonus plans are built using qualifying metrics that incentivize the Executives for managing the Bank’s growth balanced with the assumption of reasonable risk.  One element of our bonus program is the annual performance based bonus, which is intended to be formula driven, based on specific performance measures at both the personal and the business level, and, with respect to our executives best positioned to manage risk,  designed to create disincentives for excessive risk.

Annual Performance Based Bonus Payment Calculations

Each Executive is assigned a target bonus based on their roles and responsibilities within the Company and/or the Bank.

Having evaluated other options as well as published peer group metrics, the Compensation Committee will, for each executive covered by the plan, annually select one or more of the performance metrics, including adjustments, described in Section 2.3 of the Company’s 2010 Long-Term Incentive Plan, as the metric that best reflects the value of the respective executive’s performance to the Company and its shareholders, and such metric(s) will be the major driver in the respective executive’s bonus plan for that year.  Each year, the Compensation Committee will also establish a target level of performance with respect to such performance metric(s) which takes into consideration: previous performance, budgeted

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performance, and peer performance. This target will be commensurate with the strategic direction established at the annual planning session of the Company’s Board of Directors (Board) and may incorporate metrics and adjustments different from those used by the Board for planning purposes.  The Compensation Committee shall take such steps as it believes appropriate, with the advice of counsel, to seek to insure that publicly filed documents disclose that the Compensation Committee’s chosen metrics or performance thresholds do not necessarily reflect the Board’s or management’s forecasts, budgets, or projections for the Company or the Bank.

Qualifying Metrics

The Board believes that Risk Management metrics within the bonus plan encourage management to remain focused on the long term performance of the Bank and therefore Company shareholder value.  The Board has identified two qualifying metrics that will be used in determining the level of bonus paid to the Executives: Capital Quality and Asset Quality; and believes that the failure to meet specified targets of capital and asset quality should result in a partial or complete reduction of a performance bonus for such year, subject to certain restoration opportunities if corrective measures are successfully executed within specified time periods.

Capital Quality.  Maintaining sufficient capital is critical to the continued success and growth of the Bank.  In order for a full bonus to be earned with respect to any year, the Bank must maintain a Capital Level of 100 basis points above Well Capitalized for such year.  Falling short of this level will result in a partial or complete reduction of the bonus earned for such year.

  100 bp above Well Capitalized in each of the three regulatory capital classifications = full bonus earned

 Progressive reduction in earned bonus

  50 bp above Well Capitalized = no bonus earned for the year

Asset Quality.  Maintaining Asset Quality is critical to the health of the Bank and the shareholder’s investment in the Company.  As a global measure of risk, the Bank’s ratio of non-performing assets (calculated as non-current loans + OREO/total loans + OREO, but in each case on a loss share adjusted basis), will be the second qualifying metric.  The Bank will benchmark its performance against the FDIC’s National UBPR Peer Group of banks with assets between $1B-$3B.

. . . . . . . . . . progressive reduction in earned bonus;

Peer. . . . . . . full bonus earned (but in any event , at or below 1% the full bonus will be earned)

 . . . . . . . . . full bonus earned

In order to be eligible to receive an annual bonus for an applicable year under this program, an executive must be employed by the Company or the Bank at the end of the year in which such bonus is earned.

2

The Compensation Committee intends that earned bonuses shall be paid within 2½ months following the end of the year in which they are earned, but in the event the information it deems to be relevant for making such awards is not available prior to such date, the Committee reserves the right to delay making such award and/or authorizing such payment.

Restoration Bonuses

To the extent either the Qualifying Capital or Asset Quality Metric results in a reduction or a elimination of the bonus earned for a given year (Year 1), each Executive affected by such reduction or elimination shall be eligible to earn a Restoration Bonus payment for the following fiscal year (Year 2) if at the end of Year 2 the Bank’s capital and/or asset quality, as the case may be, has returned to the level that would have been required for a full or partial bonus to have been earned for the applicable Year 1.  The amount of the Restoration Bonus shall be equal to (i) the amount the Year 1 bonus which would have been paid if the Qualifying Capital or Asset Quality Metric had been measured at the end of the Year 2 instead of Year 1, minus (ii) the actual bonus paid to such executive in Year 1.

In order to be eligible to receive a Restoration Bonus for an applicable year, an executive must be employed by the Company or the Bank at the end of the year in which such bonus is earned .

Earned Restoration Bonuses shall be paid within 2½ months following the end of the year in which they are earned.

Form of Payment

The Compensation Committee believes it is appropriate for annual bonuses above a certain level to be paid in the form of Company equity.  However, the Compensation Committee also believes that in determining the appropriate split between cash and equity, it is appropriate to take into consideration the current level of equity ownership by the respective Executive and the overall mix of after-tax cash and equity.  Based on the current significant level of equity ownership levels and current tax rates, the Compensation Committee believes that the following is an appropriate mix of cash and equity, until such time as it shall determine otherwise:

Title	Bonus Target	Maximum	Form of Payout
CEO	50% of Base Salary	200% of Base Salary	Target — 125% of Base = Cash Payment
			126% - 200% = Equity Payment
CFO	40% of Base Salary	200% of Base Salary	Target — 125% of Base = Cash Payment
			126% - 200% = Equity Payment
Others	% of Base Salary	200% of Base Salary	Target — 150% of Base = Cash Payment
	per Empl. Agrmt.		151% - 200% = Equity Payment

The Compensation Committee reserves the discretion to include other of the Company’s or the Bank’s senior executives in this Program.

3

The selected performance metric (if not reduced by the Qualifying Metrics of Capital Quality or Asset Quality) will provide for a potential incentive payout up to two times the Executive’s annual salary.  The Compensation Committee maintains discretionary authority for eliminating the payment of bonuses as deemed appropriate for underperformance in any area that would place the Bank or the Company shareholders at risk.

2010 Long-Term Incentive Plan

All cash and equity payments made as a result of this Management Incentive Program shall be paid pursuant to the Midland States Bancorp, Inc.  2010 Long-Term Incentive Plan.

Other Performance Awards

This MIP is designed to outline the metrics, risk based metrics and form of payment provisions for our executive’s annual performance bonus.  The Compensation Committee expressly reserves the right to award cash or equity bonuses, including other short and long-term awards, based on other metrics deemed to be appropriate by the Compensation Committee for any given year.

4

EX-16.1

Exhibit 16.1

[Letterhead of McGladrey & Pullen]

May 11, 2011

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-7561

Dear Sirs/Madams:

We have read the statements made by Midland States Bancorp, Inc. in the section titled “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” in its Registration Statement on Form S-1, expected to be filed with the SEC on or about May 13, 2011.  We agree with the statements insofar as they relate to our firm.

Yours truly,

/s/ McGladrey & Pullen, LLP

EX-21.1

Exhibit 21.1

LIST OF SUBSIDIARIES OF MIDLAND STATES BANCORP, INC.

Subsidiary	Organized Under Laws of	Percent Owned by the Company
Midland States Bank	State of Illinois	100%
Midland States Preferred Securities Trust	State of Delaware	100% of common securities

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Midland States Bancorp, Inc.:

In connection with the Form S-1 registration statement to be filed by Midland States Bancorp, Inc. and subsidiary, we consent to the use of our report dated May 13, 2011, with respect to the consolidated balance sheets of Midland States Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

St. Louis, Missouri
May 13, 2011

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Midland States Bancorp, Inc.:

In connection with the Form S-1 registration statement to be filed by Midland States Bancorp, Inc. and subsidiary, we consent to the use of our report dated May 13, 2011, with respect to the statement of assets acquired and liabilities assumed as of March 26, 2010 by Midland States Bank (the Bank) (a wholly owned subsidiary of Midland States Bancorp, Inc.) pursuant to the Branch Sale Agreement, dated December 31, 2009, executed by the Bank with AMCORE Bank, N.A. and AMCORE Investment Services, Inc., included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

St. Louis, Missouri
May 13, 2011