Exhibit 10.1

 

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Midland States Bancorp, Inc. Management Incentive Program

 

Compensation Philosophy

 

It is the desire of the Compensation Committee of Midland States Bancorp, Inc.
(the “Company”) to provide the Executive Management Team of the Company and
Midland States Bank (the “Bank”) a compensation plan that aligns with the
overall performance and health of the Company and the Bank.  The Compensation
Committee has developed an overall compensation plan based on a total reward
strategy including base salaries and short term and long term rewards that it
believes are in the best interests of the shareholders.  That plan is designed
using independent third party compensation information, is Compensation
Committee driven and includes relevant risk management metrics.     This
Management Incentive Plan is designed to specify certain aspects of that overall
compensation plan.

 

Total Rewards Strategy

 

Base Salary is established using a third party Executive Compensation Survey of
selected peer group companies representative of the Company’s and the Bank’s
size, complexity and growth.  The Compensation Committee believes that upper
market performance should translate into upper market base salary.

 

Short Term and Long Term Bonus plans are built using qualifying metrics that
incentivize the Executives for managing the Company’s and 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 based on
specific performance measures subject to achievement of certain risk based
metrics.

 

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 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 most applicable metric for increasing
shareholder value , and such metric(s) will be the major driver in the annual
bonus payments for that year.  Each year, the Company’s Compensation Committee
will also establish a target level of performance with respect to such
performance metric(s) which takes into consideration: previous performance,
budgeted 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 (the “Board”) and may incorporate metrics and
adjustments different from those used by the Board for

 

 

Management Incentive Program Amended and Approved November 8, 2017

 

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planning purposes.  At such times as the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, 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 having appropriate risk metrics within the bonus plan
encourages 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 Tier 1 Leverage Capital Ratio of
7.25%. Partial bonuses will be paid if the Capital Ratio is between 7.25% and
6.75%. No bonus will be paid if the Tier 1 Leverage Ratio is below 6.75%. The
foregoing notwithstanding, in any case the Compensation Committee shall be
entitled to take into consideration strategic or other events which, while
believed to be in the long term interests of the Company and shareholder value,
had a short term downward effect on the Tier 1 Leverage Capital Ratio as of the
end of any fiscal year, and to partially or fully restore bonuses based on such
factors.

 

Asset Quality.  Maintaining Asset Quality is critical to the health of the Bank
and the shareholders’ investment in the Company.  The Company will benchmark its
performance with respect to Non-Performing Assets to Total Assets against the
selected peer group as part of the Executive Compensation Survey. The Company
must either achieve (i) a ratio of Non-Performing Assets to Total Assets not
greater than 120% of Peer performance, or (ii) a ratio below 2% for full bonuses
to be paid, as set forth below:

 

↑. . . . . . . . . . . . . . . . progressive reduction in earned bonus;

 

120% of Peer. . . . . . . full bonus earned (but in any event , at or below 2%
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, subject to any provision in an
employment or other written agreement between the Executive and the Company or
Bank.  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.

 

 

Management Incentive Program Amended and Approved November 8, 2017

 

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Restoration Bonuses

 

To the extent either the Qualifying Capital or Asset Quality Metric results in a
reduction or an elimination of the bonus that would have been earned for a given
year (Year 1), each Executive affected by such reduction or elimination shall be
eligible to earn a Restoration Bonus payment with respect to Year 1, which would
be paid following fiscal year (Year 2) if at the end of Year 2 the Bank’s
capital and/or the Company’s 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 for Year
1 shall be equal to (i) the amount the Year 1 bonus which would have been earned
if the Qualifying Capital or Asset Quality Metric had been measured at the end
of 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 Restoration Bonus is earned (Year 2).  Earned Restoration Bonuses
shall be paid within 2½ months following the end of the year in which they are
earned (Year 2).

 

Form of Payment

 

The Compensation Committee believes it is appropriate for the amount of maximum
annual bonuses payable above a certain level to be limited to a specific
multiple of the respective Executive’s annual salary for the applicable year,
and to be paid in the form of cash in light of the additional equity awards
available to each Executive under the Company’s LTIP.   Based on the foregoing 
the Compensation Committee believes that the following serve as the appropriate
maximum amount to be paid in cash with respect to annual performance based
bonuses until such time as it shall determine otherwise:

 

Title

 

Bonus Target

 

Maximum

 

 

 

 

 

CEO

 

50% of Base Salary

 

150% of Bonus Target Amount

 

 

 

 

 

 

 

 

 

 

CFO

 

40% of Base Salary

 

150% of Bonus Target Amount

 

 

 

 

 

 

 

 

 

 

Others

 

The% of Base Salary

 

150% of Bonus Target Amount

 

 

per Empl. Agrmt.

 

 

 

The Compensation Committee reserves the discretion to include other of the
Company’s or the Bank’s senior Executives in this Program.

 

The selected performance metric (if not reduced by the Qualifying Metrics of
Capital Quality or Asset Quality) will provide for a potential maximum annual
incentive payout of up to 75% of the Executive’s annual salary.  The
Compensation Committee maintains discretionary authority for reducing or
eliminating the payment of bonuses as deemed appropriate for underperformance in
any area that would place the Bank, the Company or its shareholders at risk.

 

 

Management Incentive Program Amended and Approved November 8, 2017

 

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2010 Long-Term Incentive Plan

 

All 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.

 

Officers Hired Pursuant to Acquisitions

 

The Compensation Committee shall have the right, on a case by case basis
following a recommendation to the Compensation Committee by the Company’s CEO,
to exempt any officer whose employment with the Company or the Bank (or any
subsidiary of either entity) arises as a result of an acquisition transaction
(whether by merger, stock purchase, asset purchase or otherwise) from any
portion of this plan, including the applicability of any qualifying metric, for
such period as the Compensation Committee in its sole discretion shall
determine.

 

 

Management Incentive Program Amended and Approved November 8, 2017

 

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