2015Annual Report Grow. Change. Diversify. As you will see in our 2015 Annual Report, our Company continues to grow, change and diversify – adding new revenue streams and providing our shareholders with a more dynamic investment. We remain keenly focused on our primary goal of providing exceptional value for both our customers and shareholders by driving every key business decision from our five Strategic Initiatives to achieve success. I hope you enjoy reading this year’s report. COVERB Our Strategic Initiatives These five initiatives represent our blueprint for driving revenue and net income growth and are the basis for every key decision we make. We believe this has led to the success we have achieved over the past eight years. • Revenue Diversification • Customer Centric Culture • De Novo Expansion • Accretive Acquisitions • Enterprise-Wide Risk Management Table of Contents Our Strategic Initiatives ........................ 1 Letter to Shareholders ......................... 2 Financial Highlights .............................. 8 Summary Financial Information ...........10 Board of Directors ..............................16 Management Team ..............................17 Strategic Footprint ...............................18 Banking Center Locations ...................19 The Company’s 2015 Annual Report to Shareholders is available on the Company’s website, and printed copies are available by request. Please contact Ms. Sarah Leonard, Assistant Secretary of the Company, at 217-342-7321 or sleonard@midlandsb.com for access/delivery information. 1 Letter to Shareholders Strategic Growth History ($ in Billions) $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2006-07 New management team 2007 Strategic plan adopted 2008 Peoples National Bank branch acquisition 2009 Waterloo Bancshares and Strategic Capital acquisitions 2010 Westbridge Bank and AMCORE acquisitions 2012 EnablePay acquisition 2013 Grant Park Bancshares and Settlement Trust Group acquisitions 2014 Heartland Bank acquisition 2016 Sterling National Bank Trust Group acquisition (pending) 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Deposits Total Assets 2 Leon J. Holschbach President and CEO Midland States Bancorp, Inc. Fellow Shareholders: 2015 was another strong year for the Company. By several financial measures our performance improved markedly over 2014, driven by strong organic growth and the Heartland Bank acquisition, which was completed on December 31, 2014. For the 2015 fiscal year, net income was $24.3 million, an increase of 124.9% from 2014. Earnings per share (diluted) rose to $2.00, up 277.4% from 2014. Book value per share increased to $19.74, and tangible book value per share grew to $15.20, representing increases of 5.4% and 10.0%, respectively. Total assets grew by 7.8%, to $2.9 billion, during 2015. We also increased per share dividends on our common stock by 10.2%, representing the 15th year in a row we have increased dividends by at least 10%. 3 Common Dividends Per Share $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.65 $0.59 $0.53 $0.48 $0.43 $0.39 $0.33 $0.30 2008 2009 2010 2011 2012 2013 2014 2015 2007 Revenue Composition Other 7.9% Residential Mortgage 2.3% Wealth Management 1.5% Service Charges 7.4% Net Interest Income 80.9% 2015 Revenue Composition Other 6.4% Commercial Mortgage 12.3% Residential Mortgage 10.7% Wealth Management 4.4% Service Charges 2.4% I also believe it was a key year in the Company’s continued growth. The Heartland Bank acquisition provided greater breadth and scale, and several key metrics showing solid improvement. Perhaps the most noteworthy example is reflected by the growth in our percentage of noninterest revenue to total revenue. This metric generally reflects the extent to which a bank is not solely reliant on interest income, and therefore not fully exposed to decreasing interest margin. A higher percentage of noninterest income generally reflects a lower dependence on net interest margin, which tends to decrease in times of low interest rates. While our noninterest income represented a healthy 24.0% of total revenue in 2014, our noninterest income rose to 36.2% of total revenue in 2015. Principal drivers of this increase in 2015 were the addition of Love Funding, which originated almost $400 million of commercial and multi-family FHA loans in 2015, and the significant expansion in our residential mortgage business, which grew from $105.6 million of originations in 2014 (excluding Heartland Bank) to $580.8 million by the combined mortgage business in 2015. This increase in noninterest income demonstrates the significance of the revenue diversification initiative in our Strategic Plan. Net Interest Income 63.8% Based on strong efforts by our commercial and retail bankers, we also experienced strong loan, deposit and leasing growth in 2015. Total deposits grew to $2.4 billion, representing 10.1% growth, while total loans grew to $2.0 billion, an increase of 11.0%. I view these levels of growth in a year of nominal expansion in the U.S. economy as truly impressive. Heartland Business Credit, our commercial leasing company located in Denver, Colorado, also had its best year ever, finishing 2015 with a lease portfolio of $144.2 million, up 26.0% from 2014 year-end. Our leasing team did a tremendous job in an extremely competitive environment. In 2015, we principally focused on integrating Heartland Bank’s businesses, employees and systems with ours. Overall the process went well, and it was gratifying to see the “can do” attitude displayed by the Heartland personnel, who had to quickly become familiar with new data systems, operating procedures, products and services. I am grateful to all of the Midland employees, old and new, for their dedication and hard work during this process. The growth that resulted from the Heartland acquisition has also led us to bring in additional management talent. I’ve mentioned a few of these new hires in the 2015 quarterly shareholder letters, and I am pleased to say that we are already benefitting from their expertise. We look forward to introducing you to other new hires and internal promotions as we continue to grow. 4 In late 2015 we also added a new director to the holding company board - Deborah Golden. Deb filled the board vacancy created by Tony Siemer’s retirement, and brings additional business, legal and executive level experience to our board. Deb is Executive Vice President, General Counsel and Secretary of GATX, a NYSE listed company headquartered in Chicago. Deb’s experience at GATX, which is in the equipment leasing business, is particularly relevant to us following our acquisition of Heartland Business Credit. Deb has also served as Assistant General Counsel for the Office of the Governor, State of Illinois, and in various executive legal positions at Ameritech Corporation. She was also a partner at the law firm of Schiff, Hardin & Waite. Deb holds a B.A. from Boston College, a J.D. from Loyola University School of Law and an M.B.A. from Loyola University. Please join me in welcoming her to the Midland family. Another area of increased focus for us in 2015 was on building the same types of close-knit, boots-on-the-ground relationships in our newer communities as we have always maintained in our long-standing neighborhoods. Part of this effort involved the opening of two new banking offices, one in downtown Joliet, Illinois, and one in Jennings, Missouri. Another part involves working with additional community development groups, government agencies and community business leaders. These collective efforts are part of a larger vision and plan, which in this case is described in our Community Development Plan (CDP). The CDP is designed to increase our deposit, lending and business services relationships with lower and moderate income families and minority owned businesses, and help drive economic development, in our communities. We believe these efforts can provide us with opportunities for further growth. Deborah Golden Executive Vice President, General Counsel and Secretary of GATX We also opened our new downtown Effingham branch in October 2015, after having been in the former location since 1883. We know that there are many pundits who say that branch banking is on its way out and will be completely overtaken by mobile banking and “fintechs”, but I see strong indications that community banks will continue to play an important role in the U.S. banking sector. For example, according to the Banc Investment Daily, a recent survey performed by the Federal Reserve of small businesses with less than 500 employees found that 75% of borrowers were satisfied with their borrowing experience at small banks, while only 15% were satisfied with online lenders. I also believe Midland’s relationship-based banking does, and will likely continue to, play an important role in our overall business model and efforts to drive further shareholder value. For example, I mentioned that our total deposits increased by more than 10% in 2015. But all deposits are not of equal value to a bank. Banks that rely heavily on the Internet, out-of- market mass mailings and other non-branch bank deposit gathering activities often wind up with significant levels of “non-core” deposits. These non-core deposits, including “brokered” deposits, tend to come and go quickly since they are constantly chasing the highest yield, and as a result banks often must pay higher rates to attract these deposits. Midland, however, enjoys a stable and growing base of more permanent “core” deposits, and we generally maintain lower costs of funds and stronger net interest margin than many of our competitors. At December 31, 2015, core deposits represented 88.4% of our total deposits, and for 2015, our weighted average cost of interest bearing deposits was 0.44%. Moreover, noninterest bearing deposits represented 23.0% of our total deposits at year-end. These factors helped contribute to a 4.38% net interest margin for 2015, which we believe compares very favorable to many of our peers as 5 well as to most regional and national banks. So while there is no doubt that Midland’s online and mobile banking, as well as other technology conveniences we may launch in the future, improve our customers’ banking experience, I also believe branch locations will continue to drive our business for some time to come. This all leads me to the final points I want to make in this year’s letter. As I have said on many occasions, the Company’s most important asset is our people. This is true across our entire organization, from top to bottom, and is why we began a program we refer to as “Ensuring Leadership Continuity” approximately five years ago. The program is designed to help us plan for continued growth, as well as expected and unexpected changes in personnel, including senior management personnel. Jeff Ludwig Executive Vice President and Chief Financial Officer Midland States Bancorp, Inc. President and Chief Financial Officer Midland States Bank As part of this effort, in early February our Bank Board promoted Jeff Ludwig, who had been the Bank’s Executive Vice President and Chief Financial Officer, to the position of President of the Bank. Jeff remains the Chief Financial Officer of the Bank and the Executive Vice President and Chief Financial Officer of the Company. At the same time, the board also promoted Jeff Mefford, who had been Senior Vice President, Community Banking, to the role of Executive Vice President, Banking, of the Bank. These promotions were well warranted and serve as an important part of our overall succession planning. Both Jeff Ludwig and Jeff Mefford have been instrumental in the development and the execution of our Strategic Plan, and I have come to rely on each of them for sound advice and general business and banking knowledge. Both Jeffs have also had a strong hand in running our overall operations during the past eight years of growth. In addition to running Finance, Jeff Ludwig has been responsible for Treasury, Operations, Wealth Management, IT, and Facilities. Jeff Mefford has lead our entire Retail and Commercial Banking operation, and has been the key management link to our efforts to use our bank to support the growth of Heartland Business Credit and Love Funding. In addition to other important roles, in his new position he will oversee Marketing as well, allowing for full coordination of our marketing and branding efforts Company-wide. Moreover, in addition to the operational roles each has had, over the past few years, virtually all of our business leaders and senior management personnel have reported to one or both of them. While each of their roles have expanded as a result of these promotions, they will continue to run their respective areas of responsibility. Please join me in congratulating each of them on their very well deserved promotions, and in knowing that we are taking the steps necessary to provide for the continued leadership of our organization. Jeff Mefford Executive Vice President, Banking Midland States Bank These promotions also proved to be a timely way to test our leadership continutiy efforts. Less than two weeks after the promotions were made I learned that I needed to take an unexpected six week leave of absense for health reasons. While it was enormously frustrating for me to be sitting at home while our Company continued moving forward, in hindsight it was actually quite useful for my role as CEO in at least two important ways. First, it allowed me the 6 time to consider all we have done in the eight years that I have been with the Company, and to consider whether our community banking model in general, and our Strategic Plan in particular, can continue to drive shareholder value. I believe the answer is a resounding “yes.” I also believe we are better positioned to capitalize on further growth opportunities than we were in 2007 when I arrived at the Company. Second, it reaffirmed my belief in our management team and employees. Almost any good business book describes the importance of hiring the best possible people and providing them the resources and training to perform well. We have accomplished many things in the past eight years, including nine acquisitions, several capital raises, an almost ten-fold increase in the number of employees and a more than ten-fold increase in the number of locations. But, in my view, none of these compare in importance for driving further shareholder value than the management team we have built during this period, both at the board level and in our operating units. I believe the combination of our board members, who are business savvy, but also thoughtful and cautious, coupled with our talented and dedicated management team, gives us the organizational strength we need to continue our growth and further drive earnings and dividends. Should you wish to receive a printed copy of the 2015 Annual Report, please contact Ms. Sarah Leonard, Assistant Secretary of the Company, at 217-342-7321 or sleonard@midlandsb.com. Very truly yours, Leon J. Holschbach President and CEO Midland States Bancorp, Inc. 7 Financial Highlights Total Gross Loans ($ in Millions) Total Deposits ($ in Millions) $1,996 $1,798 $1,206 $1,047 $958 $979 $2,000 $1,500 $1,000 $624 $500 $337 $2,500 $2,000 $1,500 $1,000 $500 $352 $2,368 $2,151 $1,365 $1,222 $1,268 $1,382 $918 $0 2008 2009 2010 2011 2012 2013 2014 2015 $0 2008 2009 2010 2011 2012 2013 2014 2015 Trust Assets Under Administration ($ in Millions) Total Shareholders’ Equity ($ in Millions) $1,186 $1,181 $1,088 $907 $769 $703 $1,200 $1,000 $800 $600 $400 $200 $95 $266 $233 $220 $149 $127 $131 $109 $77 $250 $200 $150 $100 $50 $37 $0 2008 2009 2010 2011 2012 2013 2014 2015 $0 2008 2009 2010 2011 2012 2013 2014 2015 Tangible Book Value / Share(1) Book Value Per Share(1) $20 $15 $10 $8.28 $12.52 $11.10 $15.91 $14.34 $13.68 $13.82 $15.20 $20 $15 $12.40 $9.25 $10 $17.81 $18.72 $19.74 $15.99 $16.37 $15.14 $5 $0 2008 2009 2010 2011 2012 2013 2014 2015 $5 $0 2008 2009 2010 2011 2012 2013 2014 2015 (1) Amounts shown assume the conversion of all preferred shares that were outstanding prior to December 31, 2014. 8 Return on Average Tangible Common Equity(1)(2) Return on Average Assets(1)(2) % 4 . 8 3 % 4 . 0 2 % 0 . 7 % 3 . 7 % 3 . 5 ) % 7 . 0 ( % 0 . 0 3 % 4 . 2 2 % 1 . 6 1 % 5 . 5 1 % 7 . 9 1 % 0 . 5 1 % 0 . 7 1 % 1 . 4 1 % 6 . 1 1 % 3 . 3 2008 2009 2010 2011 2012 2013 2014 2015 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 2.0% 1.5% 1.0% 0.5% 0.0% % 4 7 . 1 % 4 8 . 0 % 4 4 . 0 % 5 5 . 0 % 0 4 . 0 % 2 2 . 0 % 7 1 . 1 % 4 7 . 0 % 3 1 . 1 % 8 0 . % 1 1 9 . 0 % 9 8 . 0 % 5 0 . 1 % 8 8 . 0 % 0 9 . 0 % 2 6 . 0 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted GAAP Adjusted GAAP Diluted Earnings Per Share(1)(2) Revenue ($ in Millions) $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $-0.50 0 7 . 2 $ 5 7 . 1 $ 3 7 . 0 $ 2 5 . 0 $ 8 3 . 0 $ ) 6 0 . 0 ( $ 4 3 . 2 $ 3 4 . 1 $ 8 0 . 2 $ 2 6 . 1 $ 8 0 . 2 $ 0 7 . 1 $ 4 7 . 1 $ 9 3 . 2 $ 0 0 . 2 $ 3 5 . 0 $ 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted GAAP $200 $150 $100 $50 $0 $164 $81 $77 $77 $82 $85 $68 $16 2008 2009 2010 2011 2012 2013 2014 2015 Noninterest Income / Revenue(2) Net Interest Margin 60% 50% 40% 30% 20% 10% 0% 54.9% 36.2% 27.1% 21.5% 24.0% 19.8% 18.2% 14.7% 2008 2009 2010 2011 2012 2013 2014 2015 5% 4% 3.57% 4.52% 4.04% 4.88% 4.82% 4.68% 4.38% 4.21% 3% 2% 1% 0% 2008 2009 2010 2011 2012 2013 2014 2015 (1) Adjusted financial metrics exclude the following items: bargain purchase gains on acquisitions; payments received under our FDIC settlement; FDIC loss sharing income; amortization of FDIC indemnification assets, net; gain on sales of investment securities, net; gain on sales of other assets; and other than temporary impairment on investment securities. (2) Net income in 2009 was positively affected by a $19.2 million bargain purchase gain recognized in connection with the Strategic Capital acquisition. 9 Summary Financial Information The following selected historical consolidated financial data as of and for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 has been derived from our audited consolidated financial statements. (dollars in thousands, except per share data) Per Common Share Data Basic earnings per share Diluted earnings per share Dividends declared Book value(1) Weighted average shares outstanding: Basic Diluted Shares outstanding at period end Performance Ratios Adjusted earnings(2) Return on average assets Return on average shareholders’ equity Return on average tangible common equity Yield on earning assets Cost of average interest bearing liabilities Net interest spread Net interest margin(3) Efficiency ratio(4) Common stock dividend payout ratio(5) Loan to deposit ratio Regulatory Capital Ratios(6) Tier 1 common capital to risk-weighted assets Tier 1 leverage ratio Tier 1 capital to risk-weighted assets Total capital to risk-weighted assets Credit Quality Data Loans 30-89 days past due Loans 30-89 days past due to total loans Nonperforming loans Nonperforming loans to total loans Nonperforming assets Nonperforming assets to total assets Allowance for loan losses to total loans Allowance for loan losses to nonperforming loans Net charge-offs to average loans $ $ $ $ $ 2015 2.03 2.00 0.65 19.74 11,902,455 12,112,403 11,797,404 29,193 0.88% 10.68% 14.14% 4.91% 0.66% 4.25% 4.38% 66.15% 32.02% 84.29% 6.50% 7.49% 8.62% 11.82% 10,120 0.51% 24,891 1.25% 29,206 1.01% 0.80% 64.23% 0.39% For the Year Ended December 31, 2013 2012 2014 $ $ $ $ $ 0.53 0.53 0.59 18.72 5,945,615 6,025,454 11,725,158 15,715 0.62% 6.82% 3.26% 4.74% 0.65% 4.09% 4.21% 71.42% 111.32% 83.60% N/A 10.48% 8.65% 9.59% 5,744 0.32% 32,172 1.80% 39,542 1.48% 0.69% 38.23% 0.94% $ $ $ $ $ 2.12 1.70 0.53 17.81 4,558,549 7,151,471 4,620,026 17,541 0.89% 10.45% 15.04% 5.29% 0.72% 4.57% 4.68% 67.37% 25.00% 87.24% N/A 8.14% 9.98% 11.77% 9,193 0.76% 21,822 1.81% 28,481 1.64% 1.96% 108.48% 0.25% $ $ $ $ $ 1.96 1.62 0.48 16.37 4,300,578 6,898,791 4,257,319 16,969 0.91% 10.75% 16.12% 5.65% 0.96% 4.69% 4.82% 66.04% 24.49% 77.16% N/A 7.98% 10.36% 12.03% 3,037 0.31% 19,829 2.03% 25,860 1.64% 2.68% 132.08% 0.28% $ $ $ $ $ 2011 1.69 1.43 0.43 15.99 4,245,500 6,896,393 4,198,947 18,109 0.74% 10.05% 15.49% 6.07% 1.36% 4.71% 4.88% 62.36% 25.44% 78.39% N/A 7.60% 9.96% 11.67% 5,785 0.60% 21,674 2.26% 24,023 1.58% 2.80% 123.79% 0.56% 1) Book value per share gives effect to the conversion of all of the issued and outstanding shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock into shares of the Company’s common stock. Book value per share is a non-GAAP measure. 2) Adjusted earnings is a non-GAAP measure – see reconciliation to income before taxes on page 13. 3) Net 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. 4) Efficiency ratio represents noninterest expense, as adjusted, divided by the sum of fully taxable equivalent net interest income plus noninterest income, as adjusted. Noninterest expense adjustments exclude integration and acquisition related expenses and professional fees and other expenses for aborted stock offering. Noninterest income adjustments exclude bargain purchase gains, FDIC loss sharing income, accretion/amortization of the FDIC indemnification asset, realized gains or losses from the sale of investment securities, and other than temporary impairment. 5) Common stock dividend payout ratio represents dividends per share divided by basic earnings per share. 6) Beginning January 1, 2015, calculated in accordance with Basel III. 10 MIDLAND STATES BANCORP, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014 (dollars expressed in thousands, except for share and per share data) Assets Cash and due from banks Federal funds sold Cash and cash equivalents Investment securities available for sale, at fair value ($75,979 and $92,319 covered by FDIC loss-share at December 31, 2015 and 2014, respectively) Investment securities held to maturity, at amortized cost (fair value of $92,816 and $106,891 at December 31, 2015 and 2014, respectively) Loans Allowance for loan losses Total loans, net Loans held for sale, at fair value Premises and equipment, net Other real estate owned Nonmarketable equity securities Accrued interest receivable Mortgage servicing rights, at lower of cost or market Intangible assets Goodwill Cash surrender value of life insurance policies Accrued income taxes receivable Deferred tax assets, net Other assets Total assets Liabilities and Shareholders’ Equity Liabilities: Deposits: Noninterest-bearing Interest-bearing Total deposits Short-term borrowings FHLB advances and other borrowings Subordinated debt Trust preferred debentures Accrued interest payable Other liabilities Total liabilities Shareholders’ Equity: Common stock, $0.01 par value; 40,000,000 shares authorized; 11,797,404 and 11,725,158 shares issued and outstanding at December 31, 2015 and 2014, respectively Capital surplus Retained earnings Accumulated other comprehensive income Total Midland States Bancorp, Inc. shareholders’ equity Noncontrolling interest in subsidiaries Total shareholders’ equity Total liabilities and shareholders’ equity 11 2015 2014 $ $ 211,976 499 212,475 159,769 134 159,903 236,627 253,768 87,521 1,995,589 (15,988) 1,979,601 54,413 73,133 5,472 15,472 7,697 66,651 7,004 46,519 52,729 8,754 1,496 29,260 $ 2,884,824 $ 543,401 1,824,247 2,367,648 107,538 40,178 61,859 37,057 979 36,509 2,651,768 118 135,822 90,911 6,029 232,880 176 233,056 $ 2,884,824 101,763 1,798,015 (12,300) 1,785,715 96,407 72,331 8,291 12,194 8,642 62,781 9,464 47,946 31,255 3,426 3,683 19,045 2,676,614 507,188 1,643,445 2,150,633 129,714 74,349 7,370 36,930 1,067 56,622 2,456,685 117 134,423 74,279 10,637 219,456 473 219,929 2,676,614 $ $ $ MIDLAND STATES BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (dollars expressed in thousands, except for share and per share data) Interest income: Loans: Taxable Tax exempt Investment securities: Taxable Tax exempt Federal funds sold and cash investments Total interest income Interest expense: Deposits Short-term borrowings FHLB advances and other borrowings Subordinated debt Trust preferred debentures Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income: Commercial mortgage banking revenue Residential mortgage banking revenue Wealth management revenue Merchant services revenue Service charges on deposit accounts Interchange revenue Gain on bargain purchase FDIC loss-sharing expense Amortization of FDIC indemnification asset Gain on sales of investment securities, net Other-than-temporary impairment on investment securities Gain (loss) on sales of other real estate owned Gain on sales of other assets Other income Total noninterest income Noninterest expense: Salaries and employee benefits Occupancy and equipment Data processing FDIC insurance Professional Marketing Communications Loan expense Other real estate owned Intangible assets amortization FHLB advances prepayment fee Other Total noninterest expense Income before income taxes Income taxes Net income Less: net income attributable to noncontrolling interest in subsidiaries Net income attributable to Midland States Bancorp, Inc. Preferred stock dividends Net income available to common shareholders Per common share data: Basic earnings per common share Diluted earnings per common share Weighted average common shares outstanding Weighted average diluted common shares outstanding 12 2015 2014 2013 $ 100,814 1,175 $ 55,514 782 $ 55,598 1,260 11,502 3,916 389 117,796 7,511 237 741 2,731 1,669 12,889 104,907 11,127 93,780 20,175 17,634 7,292 1,529 3,969 3,562 12,063 4,604 178 73,141 5,198 179 1,682 728 756 8,543 64,598 92 64,506 — 3,000 7,098 1,083 3,036 2,613 — — (566) (397) 193 (461) 600 — 5,952 59,482 63,313 13,151 10,197 2,051 8,687 2,891 2,354 2,960 945 2,460 — 8,755 117,764 35,498 11,091 24,407 83 24,324 — $ 24,324 (3,491) (954) 77 (190) 761 3,224 4,184 20,441 32,503 7,587 6,402 1,328 5,677 2,530 1,541 1,204 2,189 2,115 1,746 4,658 69,480 15,467 4,651 10,816 — 10,816 7,601 3,215 2.03 2.00 11,902,455 12,112,403 $ $ 0.53 0.53 5,945,615 6,025,454 $ $ $ $ $ $ 12,801 5,137 193 74,989 5,713 161 1,766 755 674 9,069 65,920 173 65,747 — 3,366 6,149 742 2,741 2,260 2,154 (1,149) (2,705) 321 (190) (26) — 2,567 16,230 30,537 6,999 5,593 1,121 4,794 1,470 1,100 1,577 2,247 2,257 — 3,754 61,449 20,528 6,023 14,505 — 14,505 4,718 9,787 2.12 1.70 4,558,549 7,151,471 RECONCILIATION OF ADJUSTED EARNINGS TO INCOME BEFORE TAXES (dollars expressed in thousands) Income before income taxes - GAAP Adjustments to other income: Gain on sales of investment securities, net Other than-temporary-impairment on investment securities Gain on bargain purchase FDIC settlement FDIC loss-sharing (expense) income Amortization of FDIC indemnification asset, net Gain on sale of other assets Total adjusted other income Adjustments to other expense: Foundation contribution Professional fees and other expenses for aborted stock offering Integration and acquisition expenses Total adjusted other expense Adjusted earnings pre tax Adjusted earnings tax Adjusted earnings - non-GAAP 2015 2014 2013 2012 2011 $ 35,498 $ 15,467 $ 20,528 $ 18,499 $ 15,347 193 (461) - - (566) (397) 12 (1,219) - - 6,101 6,101 42,818 13,625 29,193 77 321 953 466 (190) - 1,709 (3,491) (954) 2,972 123 900 - 6,229 7,129 22,473 6,758 15,715 $ (190) 2,154 - (1,149) (2,705) - (1,569) (319) - - 1,477 (5,172) - (3,061) (742) - - 4,455 (8,047) - (3,868) - - - - 2,727 2,727 24,824 7,283 17,541 $ - 1,424 1,424 22,984 6,015 16,969 $ 3,413 1,807 5,220 24,435 6,326 18,109 $ $ 13 MIDLAND STATES BANCORP, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (dollars expressed in thousands, except for share and per share data) Balances, December 31, 2012 Net income Compensation expense for stock option grants Amortization of restricted stock awards Common dividends declared ($0.53 per share) Preferred dividends declared Issuance of common stock warrants to an investor Purchase of treasury stock Sale of treasury stock to an investor Issuance of treasury stock for an acquisition Issuance of common stock under employee benefit plans Other comprehensive income Balances, December 31, 2013 Net income Compensation expense for stock option grants Amortization of restricted stock awards Common dividends declared ($0.59 per share) Preferred dividends declared Conversion of Series C preferred stock into 2,008,543 shares of common stock Conversion of Series D preferred stock into 1,039,823 shares of common stock Conversion of Series E preferred stock into 536,171 shares of common stock Conversion of Series F preferred stock into 231,375 shares of common stock Issuance of 138,239 shares of common stock for preferred dividends Private placement issuance of 887,562 shares of common stock Issuance of 2,224,091 shares of Preferred stock $ 57,370 Common stock Capital surplus $ 10,595 $ — 50 — — Retained earnings $ 67,192 14,505 Accumulated other comprehensive income $ 2,327 Treasury stock $ (6,616) Midland States Bancorp, Inc.’s Shareholders’ Equity Noncontrolling interest in subsidiaries Total $ — 130,918 14,505 $ — $ 130,918 14,505 — — — — — — — — — — — — — — — 358 349 — — — — (2,403) (4,718) 615 — 1,102 154 — — — — — — — $ — — 1,624 — — $ — $ 57,370 — — 50 — $ 14,797 $ 74,576 10,816 — — 1,110 — 282 4,685 7,012 $ (4,365) — $ — — — — — — (9) 868 358 349 (2,403) (4,718) 615 (9) 1,970 2,734 436 4,685 149,440 10,816 $ — — — — — — — — 240 468 — — — — (3,512) (4,698) — — — — 240 468 (3,512) (4,698) — — — — — — — — — — — — — (23,600) 17 19,259 — — 4,324 — — (22,470) 10 22,460 — — — — — (6,300) (5,000) — — 5 2 1 9 6,295 — — — — — 4,998 — — — — — 2,902 (2,903) — — — — — — 358 349 — — (2,403) (4,718) — — — 615 (9) 1,970 — 2,734 436 — — 4,685 — $ 149,440 10,816 — — — 240 468 — — (3,512) (4,698) — — — — — common stock for an acquisition — 22 46,684 16,147 — — — — 16,156 — 16,156 — — 46,706 — 46,706 Fair value of noncontrolling interest recognized from business combination Issuance of common stock under employee benefit plans Other comprehensive income Balances, December 31, 2014 $ Net income Cash distributions to noncontrolling — — — — — — — 473 473 — — — $ — 1 — 173 — 117 $ 134,423 — — $ 74,279 24,324 — — $ — 3,625 10,637 $ — 41 — — $ — 215 3,625 219,456 24,324 — — 215 3,625 $ 219,929 24,407 $ 473 83 interests — — — — — — — (380) (380) Compensation expense for stock option grants Amortization of restricted stock awards Common dividends declared ($0.65 — — — — 413 517 — — — — — — 413 517 — — 413 517 per share) — — — (7,692) — — (7,692) — (7,692) Issuance of common stock under employee benefit plans Other comprehensive loss Balances, December 31, 2015 $ — — — $ 1 — 469 — 118 $ 135,822 $ 90,911 — — $ — (4,608) 6,029 $ — — — $ 470 (4,608) 232,880 — — 470 (4,608) $ 233,056 $ 176 14 2015 Actual Cash Dividend Data Quarter Record Date Payment Date Share Amount 1 2 3 4 February 2, 2015 February 9, 2015 May 1, 2015 May 7, 2015 August 3, 2015 August 10, 2015 November 2, 2015 November 9, 2015 $0.16 $0.16 $0.16 $0.17 Ten-year Dividend History and Book Value Per Share Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Cash Dividends for the Year Book Value Per Share - at End of Year Amount (a) % Increase Amount (b) % Increase $0.24 $0.27 $0.30 $0.33 $0.39 $0.43 $0.48 $0.53 $0.59 $0.65 12.5% 11.1% 10.0% 18.2% 10.3% 11.6% 10.4% 11.3% 10.2% $8.60 $8.90 $9.25 $12.40 $15.14 $15.99 $16.37 $17.81 $18.72 $19.74 3.5% 3.9% 34.1% 22.1% 5.6% 2.4% 8.8% 5.1% 5.4% (a) Restated for 10 for 1 stock split on December 31, 2010. (b) Book value per share gives effect to the conversion of all of the issued and outstanding shares of preferred stock into shares of the Company’s common stock in 2009, 2010, 2011, 2012 and 2013 15 Board of Directors John M. Schultz Midland States Bancorp, Inc. Midland States Bank Chairman Agracel, Inc. Chairman and Chief Executive Officer Leon J. Holschbach Midland States Bancorp, Inc. Midland States Bank Vice Chairman President and Chief Executive Officer Robert F. Schultz JM Schultz Investment Company Managing Partner Jeffrey C. Smith Walters Management Group Principal and Managing Partner Richard T. Ramos Maritz Holdings, Inc. Executive Vice President Chief Financial Officer and Board Member Thomas D. Shaw Shaw Media Chief Executive Officer Jerry L. McDaniel Superior Fuels, Inc. Encore Transportation, LLC President Dwight A. Miller Dash Management, Inc. Chief Executive Officer For press releases, financial information and more, visit midlandsb.com/investors. Jeffrey M. McDonnell J&J Management Services, Inc. Chief Executive Officer Laurence A. Schiffer Hallmark Investment Corporation President and Co-Chief Executive Officer Deborah A. Golden Executive Vice President, General Counsel and Secretary of GATX 16 Management Team Executive Management Leon J. Holschbach Midland States Bancorp, Inc. Vice Chairman, President and Chief Executive Officer Jeffrey G. Ludwig Midland States Bancorp, Inc. Executive Vice President and Chief Financial Officer Douglas J. Tucker Midland States Bancorp, Inc. Senior Vice President, Corporate Counsel and Secretary Midland States Bank Vice Chairman and Chief Executive Officer Midland States Bank President and Chief Financial Officer Midland States Bank Senior Vice President, Corporate Counsel Jeffrey S. Mefford Midland States Bank Executive Vice President, Banking Jeffrey A. Brunoehler Midland States Bank Senior Vice President, Chief Credit Officer Sharon A. Schaubert Midland States Bank Senior Vice President, Banking Services James R. Stewart Midland States Bank Senior Vice President, Chief Risk Officer Senior Management Corporate Jeffrey Culp Director - Financial Planning & Analysis Aaron Rios Director - Operations Donald Spring Controller Steve Erickson Director - Mergers & Acquisitions Michael Karibian Corporate Treasurer Kyle Mooney Chief Information Officer Gregory Pence Director - Marketing Willie Wierman Senior Credit Officer and Manager of Retail and Business Banking Banking Jeffrey Lovett Regional Market President Northern Region Timothy Spitz Regional Market President Southern and St. Louis Regions Dan Stevenson Regional Market President Eastern Region Chuck Frederick Director - Retail Banking Residential Mortgage Cory Mackwood President - Residential Mortgage Wealth Management Eric Chojnicki President - Wealth Management Heartland Business Credit Larry White President Chief Executive Officer Love Funding Mark Dellonte President Chief Executive Officer 17 Strategic Footprint With more than 70 locations in 13 states plus the District of Columbia, and a highly diversified revenue model, Midland is now in the top 5% of all banks in the U.S., out of more than 6,000 banks. Midland States Bancorp, Inc. Headquarters Corporate Office: 1201 Network Centre Drive Midland Mortgage Banking Midland Wealth Management Love Funding Corporate Office: 14125 Clayton Road Chesterfield, MO 63017 Mortgage Offices: Richmond Heights, MO St. Louis, MO Colorado Springs, CO Cortez, CO Denver, CO Durango, CO Cary, NC Heartland Business Credit Corporate Office: 390 Union Blvd. Suite 600 Lakewood, CO 80228 Corporate Office: 1201 Network Centre Drive Effingham, IL 62401 Offices: Bloomington, IL Centralia, IL Champaign, IL Decatur, IL Dixon, IL Effingham, IL Joliet, IL Rockford, IL Sterling, IL Milwaukee, WI 18 Corporate Office: 1250 Connecticut Avenue NW Suite 310 Washington, D.C. 20036 Offices: Boston, MA Chicago, IL Cleveland, OH Columbus, OH Dallas, TX Denver, CO Kansas City, MO Knoxville, TN Los Angeles, CA New York, NY Norfolk, VA Palm Beach, FL St. Louis, MO Tampa, FL Banking Center Locations Banking Center Lending Office Freeport Sterling Oregon Dixon (3) Rock Falls 88 Mendota (2) Yorkville Joliet (2) Princeton (2) Peru (2) Beecher Grant Park Bourbonnais 55 Illinois O’Fallon St. Charles Chesterfield Town & Country Jennings Ladue Clayton St. Louis Area Champaign St. Clair Arnold 70 Missouri The Gatesworth Rock Hill Sunset Hills Freeburg Columbia Smithton Waterloo (2) 55 57 Effingham (2) 70 Greenville Vandalia Farina 65 Centralia Marion 64 This map does not show our Banking Center in Denver, Colorado. 19 55 1201 Network Centre Drive, Effingham, IL 62401 • midlandsb.com • 1-855-MY-MIDLAND