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ITEM 7 –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 our consolidated financial statements and related notes thereto, included in Item 8 - "Financial Statements and Supplementary Data", and other financial data appearing elsewhere in this report. 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 “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995,” Item 1A – "Risk Factors” and elsewhere in this report, 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. Readers of our Annual Report on Form 10-K should therefore consider these risks and uncertainties in evaluating forward-looking statements and should not place undue reliance on forward-looking statements.

Overview

Midland States Bancorp, Inc. is a diversified financial holding company headquartered in Effingham, Illinois. Its wholly owned banking subsidiary, Midland States Bank, has branches across Illinois and in Missouri, and provides a full range of commercial and consumer banking products and services, merchant credit card services, trust and investment management services and insurance and financial planning services. As of December 31, 2025, we had assets of $6.51 billion, deposits of $5.42 billion and shareholders’ equity of $565.5 million.

Our strategic plan focuses on delivering a superior customer experience through a high-tech, high-touch approach, while remaining committed to core community banking and relationship-driven growth. We continue to enhance our regional franchise approach that serves our core customers with a consistent, high-performance culture rooted in our One Midland values and with a strong foundation in Enterprise Risk Management.

Our principal lines of business include community banking and wealth management. Our community banking business primarily consists of commercial and retail lending and deposit taking. Our wealth management group provides a comprehensive suite of trust and wealth management products and services and had $4.48 billion of assets under administration as of December 31, 2025.

Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest charged on loans and leases and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; residential mortgage loan originations and sales; and, from time to time, gains on sales of 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 costs, professional fees, provisions for credit losses, income tax expense, and other noninterest expenses.

Factors Affecting Comparability

Each factor listed below affects the comparability of our results of operations and financial condition in 2025 and 2024, and may affect the comparability of financial information we report in future fiscal periods.

Sale of non-core consumer loan portfolios. During the fourth quarter of 2024, we sold our LendingPoint portfolio of $87.1 million, recognizing net charge-offs of $17.3 million on the sale. As of December 31, 2024, we also had committed to a plan to sell our GreenSky consumer loan portfolio and recognized net charge-offs of $35.0 million when these loans were transferred to held for sale. On April 9, 2025, we sold participation interests in $317.5 million of our GreenSky consumer loan portfolio, while retaining the remaining $53.6 million of the portfolio.

Sale of equipment finance portfolio. As a continuation of steps taken to address credit quality issues, including the sales of non-core loan portfolios, we sold substantially all of our equipment finance portfolio during the fourth quarter of 2025 resulting in a loss on sale of $21.4 million. As previously disclosed, we ceased originating new equipment finance loans and leases effective as of September 30, 2025. As a result of that decision, we recognized $1.0 million of severance expense in the third quarter of 2025.

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Goodwill impairment. During the first quarter of 2025, we determined that a triggering event had occurred at our Banking reporting unit as a result of further deteriorated credit quality coupled with trends in our stock price. We performed a quantitative impairment test on our Banking reporting unit as of March 31, 2025, and engaged a third-party service provider to assist Management with the determination of the fair value. The resulting calculation indicated that the carrying amount exceeded the fair value of our Banking reporting unit. As a result of the assessment, we recognized $154.0 million of goodwill impairment expense. The impairment expense did not impact our regulatory capital ratios, tangible common equity ratio or our liquidity position.

Redemption of Subordinated Notes.On September 30, 2025, we redeemed all of our outstanding Fixed-to-Floating Rate Subordinated Notes due September 30, 2029, with an interest rate of 7.91%, which had an aggregate principal amount of $50.8 million. The aggregate redemption price was 100% of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest.

In 2024, we redeemed $16.0 million of outstanding subordinated notes. The weighted average redemption price was 98.5% of the aggregate principal amount of the subordinated notes, plus accrued and unpaid interest. We recorded net gains totaling $0.2 million on these redemptions.

Results of Operations

Overview. The following table sets forth condensed income statement information of the Company for the years ended 2025, 2024, and 2023:

Years Ended December 31,

Income Statement Data:

Per Share Data:

Basic earnings (loss) per common share $ (6.12) $ 1.32 $ 2.33

Diluted earnings (loss) per common share $ (6.12) $ 1.32 $ 2.33

Performance Metrics:

Return on average assets (1.76) % 0.49 % 0.77 %

Return on average shareholders' equity (20.33) % 4.79 % 7.94 %

During the year ended December 31, 2025, we generated a net loss of $124.3 million, or diluted loss per common share of $6.12, compared to net income of $38.0 million, or diluted earnings per common share of $1.32, in the year ended December 31, 2024. The results in 2025 included a $21.4 million loss on the sale of substantially all of our equipment finance portfolio during the fourth quarter of 2025. Earnings for the year ended December 31, 2025 compared to the year ended December 31, 2024 included a $0.5 million increase in net interest income, a $60.5 million decrease in provision for credit losses, a $50.6 million decrease in noninterest income, a $172.1 million increase in noninterest expense (primarily as a result of $154.0 million of goodwill impairment in the first quarter of 2025) and a $0.6 million increase in income tax expense.

Net Interest Income and Margin. Our primary source of revenue is net interest income, which is the difference between interest income from interest-earning assets (primarily loans and securities) and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Net interest income is influenced by many factors, primarily the volume and mix of interest-earning assets, funding sources and interest rate fluctuations. Noninterest-bearing sources of funds, such as

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demand deposits and shareholders’ equity, also support interest-earning assets. Net interest margin is calculated as net interest income divided by average interest-earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pretax-equivalent income, assuming a federal income tax rate of 21% for 2025 and 2024.

At its December 2025 meeting, the Federal Open Market Committee (FOMC) cut its benchmark interest rate by 0.25 percentage points, marking the third such reduction in 2025. Following the rate cut, the borrowing rate was in a range between 3.50%-3.75%.

The FOMC concluded its January 2026 meeting by maintaining the federal funds target range at 3.50%-3.75%. FOMC upgraded its assessment of the economy, noting that activity is expanding at a solid pace, aided by resilient consumer spending and growing business investment. The assessment further reflected the committee's view that, while job gains remain low, the labor market has improved, showing signs of stabilization, though inflation remains elevated. This suggests the Federal Reserve is shifting toward a more patient stance after three consecutive rate cuts in late 2025.

The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditure (PCE) price index, has moderated, aided by cooling services inflation. Partially offsetting that progress, goods inflation has risen, in part due to tariffs. Overall, inflation remains above the 2% target, and the pace of disinflation has slowed.

In 2024, the Federal Reserve cut its benchmark interest rate three times by a total of 1.00 percentage point, marking the first reductions in four years. These rate cuts lowered the federal funds rate into a range of 4.25% to 4.50%.

In 2025, net interest income, on a tax-equivalent basis, totaled $237.7 million with a tax-equivalent net interest margin of 3.64% compared to net interest income, on a tax-equivalent basis, of $237.2 million and a tax-equivalent net interest margin of 3.35% in 2024.

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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, 2025, 2024 and 2023. 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.

Years Ended December 31,

Interest-earning assets:

Investment securities:

Loans:

Interest-bearing liabilities:

Noninterest-bearing liabilities:

(1)Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.9 million, $0.8 million and $0.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(2)Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3)Net interest margin during the periods presented represents: (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

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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 period’s volume. Changes which are not due solely to volume or rate have been allocated proportionally to the change due to volume and the change due to rate.

Change due to: InterestVariance Change due to: InterestVariance

(tax-equivalent basis, dollars in thousands) Volume Rate Volume Rate

Earning assets:

Federal funds sold and cash investments $ (127) $ (746) $ (873) $ (19) $ 55 $ 36

Investment securities:

Loans:

Interest-bearing liabilities:

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Interest Income. For the year ended December 31, 2025, interest income, on a tax-equivalent basis, decreased $38.2 million to $388.8 million as compared to the same period in 2024, primarily due to a decline in earning assets. The yield on earning assets decreased seven basis points to 5.96% from 6.03%.

Average earning assets decreased to $6.53 billion in 2025 from $7.08 billion in 2024. Average loans decreased $891.3 million. This decrease was partially offset by increases in investment securities and loans held for sale of $253.1 million and $89.6 million, respectively.

Average loans decreased $891.3 million in 2025 compared to 2024. Average consumer loans decreased $633.4 million due to the sale of non-core consumer loan portfolios in 2025. During the fourth quarter of 2025, the Company sold substantially all of its equipment finance portfolio. As a result, equipment finance loan and lease average balances decreased $249.7 million to $650.0 million by the end of 2025. Proceeds from the sale of the loan portfolios were used to purchase investment securities and reduce higher-cost funding for the Company.

Average loans held for sale in 2025 primarily reflected the GreenSky consumer loans, which were transferred to held for sale in December 2024. The Company completed the sale of this portfolio in April 2025.

Interest Expense. Interest expense decreased $38.7 million to $151.1 million in 2025 compared to 2024. The cost of interest-bearing liabilities decreased to 2.85% compared to 3.31% for the prior year primarily due to decreases in interest rates on deposits. Interest expense on deposits was $124.3 million in 2025 compared to $160.7 million in 2024, as a result of the rate cuts enacted by the Federal Reserve Bank beginning in late 2024.

Average balances of interest-bearing deposit accounts decreased $402.7 million, or 7.79%, to $4.77 billion for 2025 compared to the same period one year earlier. Servicing deposits decreased $433.7 million to $665.3 million due to the loss of a customer in July 2025. In addition, brokered deposits decreased $76.5 million.

Interest expense on FHLB advances and other borrowings decreased $1.9 million for the year ended December 31, 2025 from the prior year, due to decreases in both average balances and interest rates. The average balances decreased $29.0 million in 2025 compared to 2024, while the average borrowing rates decreased to 4.15% in 2025 compared to 4.32% in 2024.

Interest expense on subordinated debt decreased $0.7 million for the year ended December 31, 2025, from the prior year, due to a decrease in average balances. The average balance decreased $24.2 million in 2025 compared to 2024, due the redemption of $50.8 million of debt at September 30, 2025 and $16.0 million in 2024.

Provision for Credit Losses.The Company's provision for credit losses on loans totaled $60.5 million and $119.3 million in 2025 and 2024, respectively. The Company charged off $29.8 million of the allowance for credit losses related to its equipment finance portfolio in connection with the loan and lease sale during the fourth quarter of 2025. The provision for credit losses in 2025 was driven by the replenishment of reserve balances following higher charge offs and a modest reserve build related to loan growth in the community banking portfolio during the fourth quarter of 2025. The Company recognized charge-offs in its specialty finance and equipment financing units of $25.3 million and $28.8 million, respectively in 2024. These charge-offs, recognized to reduce future credit risk, resulted in the increase in provision expense in 2024. In addition, the Company recognized $0.7 million recapture of credit losses related to unfunded commitments in 2025 compared to provision expense of $1.1 million in 2024.

The provision for credit losses on loans recognized during the year ended December 31, 2025 was made at a level deemed necessary by Management to absorb estimated losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by Management, the results of which are used to determine provision for credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.

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Noninterest Income. The following table sets forth the major components of our noninterest income for the years ended December 31, 2025, 2024 and 2023:

(dollars in thousands) 2025 2024 2023 Increase (decrease) Increase (decrease)

Noninterest income:

Wealth management revenue. Wealth management revenue increased $2.3 million, or 8.09%, in 2025 as compared to 2024, driven by the growth in assets under management. Assets under administration increased 7.85% to $4.48 billion at December 31, 2025 from $4.15 billion at December 31, 2024.

Credit enhancement income. Prior to 2025, the Company was party to three third-party loan origination programs. As part of these programs, the third-party providers offered various credit enhancements with respect to loans originated under the programs, including contributions to reserve accounts, yield maintenance and certain other payments. In 2025, the Company operated only one such program due to the previous sales of the LendingPoint and GreenSky portfolios. Effective December 31, 2025, the Company modified its third-party lending and servicing arrangements with its sole partner. The new agreements provide a credit enhancement by the partner which protects the Company by indemnifying or reimbursing incurred losses. We estimate and record a provision for expected losses and a corresponding credit enhancement asset on the balance sheet through credit enhancement income.

Credit enhancement income declined $51.1 million for the year ended December 31, 2025 compared to the same period of 2024 as a result of loan payoffs and a cessation in loans originated through the LendingPoint and GreenSky programs. The Company recognized $6.6 million of additional credit enhancement income during the fourth quarter of 2025, resulting from the contractual changes with its sole partner referenced above.

Other noninterest income.Other income decreased $3.6 million for the year ended December 31, 2025, as compared to the same period in 2024. The Company recognized incremental servicing revenues related to the GreenSky portfolio of $0.3 million in the 2025 compared to $3.7 million in 2024.

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Noninterest Expense. The following table sets forth the major components of noninterest expense for the years ended December 31, 2025, 2024 and 2023:

(dollars in thousands) 2025 2024 2023 Increase (decrease) Increase (decrease)

Noninterest expense:

Salaries and employee benefits. Salaries and employee benefits expense increased $10.8 million in 2025 as compared to 2024, primarily due to increases of $3.2 million in severance expense, and $4.8 million in variable compensation expense, including commissions and annual bonuses. The Company employed 861 employees at December 31, 2025 compared to 896 employees at December 31, 2024.

FDIC insurance expense. The Company recognized $1.7 million in additional FDIC assessments in 2025 related to prior years’ amended call reports due to the restatements of prior years’ financial statements.

Professional services expense. The increase in professional services expense for the year ended December 31, 2025, as compared to 2024, was primarily the result of increased audit and consulting fees related to restatements of prior years' financial statements and the evaluation of the accounting and reporting of the Company's third-party lending and servicing programs.

Marketing expense. The increase in marketing expense for the year ended December 31, 2025, as compared to 2024, was primarily the result of increased brand marketing and program expenses related to deposit account acquisition.

Loan servicing fees. Loan servicing fees expense representsservicing fees paid to third parties associated with our third party lending programs. The decline in servicing fees was a result of loan payoffs and a cessation in loans originated through the GreenSky and LendingPoint programs.

Impairment on goodwill. As mentioned previously, the Company recognized $154.0 million of goodwill impairment expense during the first quarter of 2025 in its Banking reporting unit.

Other real estate owned.The Company recorded impairment expense of $4.9 million in 2024 related to a single assisted living facility. This asset was sold in 2025.

Loss on sale of loan portfolios.The Company recognized losses of $23.1 million on the sale of loan portfolios, including $21.4 million related to the sale of substantially all of its equipment finance portfolio.

Impairment on leased assets and surrendered assets. Impairment on leased assets and surrendered assets totaled $7.9 million in 2024, primarily related to assets associated with the trucking industry.

Other expense. The Company recognized $3.1 million in expenses related to various legal actions in 2024.

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Income Tax Expense. The Company recognized income tax expense of $9.4 million in 2025 compared to $8.9 million in 2024. Effective tax rates for 2025 and 2024 were 24.1% and 18.9%, respectively. The effective tax rate calculation for the year ended December 31, 2025, excludes the goodwill impairment charge of $154.0 million, as this item is not deductible for tax purposes.

Financial Condition

Assets. Total assets were $6.51 billion at December 31, 2025, as compared to $7.51 billion at December 31, 2024.

Loans. The loan portfolio is the largest category of our assets. The principal segments 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 and equipment, and generally include personal guarantees. The commercial loan category also includes loans originated by the equipment financing business that are secured by the underlying equipment, of which we sold substantially all of our equipment finance portfolio during the fourth quarter of 2025.

Commercial real estate loans. Our commercial real estate loans consist of both real estate occupied by the borrower for ongoing operations and non-owner occupied real estate properties. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial facilities, retail centers, multifamily properties, skilled nursing and assisted living facilities. Our commercial real estate loan portfolio also includes farmland loans. Farmland loans are generally made to a borrower actively involved in farming rather than to passive investors.

Construction and land development loans. Our construction and land development loans are comprised of residential construction, commercial construction and land acquisition and development loans. Interest reserves are generally established on real estate construction loans.

The following table presents the balance and associated percentage of the major property types within our commercial real estate and construction and land development loan portfolios at December 31, 2025 and December 31, 2024:

(dollars in thousands) Balance Percent Balance Percent

Loans secured by office space totaled $140.1 million and $146.3 million at December 31, 2025 and December 31, 2024, respectively, are primarily located in suburban locations in Illinois and Missouri.

Residential real estate loans. Our residential real estate loans are loans secured by residential properties that generally do not qualify for secondary market sale.

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

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Lease financing. Our equipment leasing business provides financing leases to varying types of businesses nationwide for purchases of business equipment and software. The financing is secured by a first priority interest in the financed asset and generally requires monthly payments. The Company sold substantially all of our equipment finance portfolio during the fourth quarter of 2025.

The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2025 and December 31, 2024:

(dollars in thousands) Book Value % Book Value %

Loans:

Total loans decreased $815.6 million, or 15.8%, to $4.35 billion at December 31, 2025, as compared to December 31, 2024. In 2025, the Company sold participation interests of $317.5 million related to our GreenSky consumer loan portfolio, and we also completed the sale of substantially all of our equipment finance portfolio, which included $316.1 million of commercial loans and $239.7 million of leases.

The Company's loan portfolio is assigned to the following internal business sectors:

•Community bank represents predominately in-market loans originated through our banking center network.

•Specialty finance provides bridge loan financing for commercial real estate projects, primarily multi-family and healthcare. These projects can include construction and short term financing in anticipation of obtaining permanent secondary market financing. The loans are typically outside of the Company’s primary market areas.

•Equipment finance portfolio includes loans and leases originated to varying types of businesses throughout the United States for purchases of business equipment and software. The Company sold substantially all of our equipment finance portfolio during the fourth quarter of 2025.

•Non-core and other includes our third-party origination and servicing programs, and capital market credits, including loans to finance the sale of the GreenSky portfolio.

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The following tables present our outstanding loans by business sector at December 31, 2025 and December 31, 2024:

Total loans decreased $815.6 million, or 15.8%, to $4.35 billion at December 31, 2025, as compared to December 31, 2024. Community bank portfolio increased $150.3 million, or 4.7%, in 2025. This growth partially offset the strategic declines in the Specialty finance and Equipment finance sectors of $358.3 million and $748.6 million, respectively, as of December 31, 2025. The increase in our Non-core and other business sector is primarily due to the financing we provided related to the sale of the GreenSky portfolio.

The following table shows the contractual maturities of our loan portfolio and the distribution between fixed and adjustable interest rate loans at December 31, 2025:

Within One Year One Year to Five Years Five Years to 15 Years After 15 Years

Loan Quality

We use what we believe is 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, 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.

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Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $69.2 million, or 1.59% of total loans, at December 31, 2025, compared to $111.2 million, or 2.15% of total loans, at December 31, 2024. The following table allocates the allowance for credit losses on loans by loan category:

(dollars in thousands) Allowance Percent (1) Allowance Percent (1)

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

We measure expected credit losses over the life of each loan utilizing a combination of models which measure probability of default and loss given default, among other things. The measurement of expected credit losses is impacted by loan and borrower attributes and certain macroeconomic variables. Models are adjusted to reflect the impact of certain current macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period.

In estimating expected credit losses as of December 31, 2025, we utilized certain forecasted macroeconomic variables from Oxford Economics in our models. The forecasted projections included, among other things, (i) U.S. gross domestic product ranging from 1.7% to 2.3% over the next four quarters; (ii) the 10-year treasury rate averaging 4.2% over the next four quarters; and (iii) Illinois unemployment rate averaging 4.9% through the fourth quarter of 2026.

We qualitatively adjust the model results based on this scenario for various risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factor adjustments are based upon management judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already fully captured within the modeling inputs, assumptions and other processes. Management assesses the potential impact of such items within a range of severely negative impact to positive impact and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment. The qualitative factor adjustment at December 31, 2025, was approximately 57 basis points of total loans, decreasing slightly from 67 basis points at December 31, 2024.

The allowance allocated to commercial loans totaled $23.7 million, or 2.01% of total commercial loans, at December 31, 2025, compared to $42.8 million, or 3.15%, at December 31, 2024. Outstanding loan balances decreased $181.3 million, or 13.3%, during 2025, primarily as a result of the sale of substantially all of our equipment finance portfolio. Charge-offs related to the non-core loan program of $11.1 million during the first quarter of 2025 coupled with charge-offs related to the sale of the equipment finance portfolio of $14.2 million during the fourth quarter of 2025 resulted in a significant decrease in the allowance allocated to commercial loans. Excluding these charge-offs, modeled expected credit losses increased $8.5 million. Qualitative factor adjustments decreased $2.3 million. There were no specific allocations for commercial loans that were evaluated for expected credit losses on an individual basis at December 31, 2025 or December 31, 2024.

The allowance allocated to commercial real estate loans totaled $28.3 million, or 1.21% of total commercial real estate loans, at December 31, 2025, decreasing $8.5 million, from $36.8 million, or 1.42% of total commercial real estate loans, at December 31, 2024. Outstanding loan balances decreased $249.0 million, or 9.6%, during 2025. Specific allocations for loans that were individually evaluated decreased $9.1 million as three relationships totaling $10.9 million were charged-off in the second quarter of 2025. Modeled expected credit losses increased $0.8 million and qualitative factor adjustments decreased $0.3 million. The commercial real estate portfolio does not include significant exposure to urban office properties.

The allowance allocated to construction and land development loans totaled $2.6 million, or 0.92% of total construction and land development loans, at December 31, 2025, decreasing $1.0 million from $3.6 million, or 1.18% of total constructions loans, at December 31, 2024. Modeled expected credit losses decreased $0.3 million and qualitative factor adjustments related to construction loans decreased $0.6 million. There were no specific allocations for construction loans that were evaluated for expected credit losses on an individual basis at December 31, 2025 or December 31, 2024.

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The allowance allocated to residential real estate loans totaled $6.7 million, or 1.90% of total residential real estate loans, at December 31, 2025, decreasing $1.3 million, from $8.0 million, or 2.10% of total residential real estate loans, at December 31, 2024. Modeled expected credit losses and qualitative factor adjustments decreased $1.2 million and $0.1 million, respectively. There were no specific allocations for residential real estate loans that were evaluated for expected credit losses on an individual basis at December 31, 2025, or December 31, 2024.

The allowance allocated to consumer loans totaled $4.8 million, or 3.33% of total consumer loans, at December 31, 2025, compared to $5.4 million, or 3.74%, at December 31, 2024. Modeled expected credit losses increased $1.4 million while qualitative factor adjustments decreased $2.0 million.

The allowance allocated to the lease portfolio totaled $3.2 million, or 6.25% of total commercial leases, at December 31, 2025, decreasing $11.4 million, from $14.6 million, or 3.74% of total commercial leases at December 31, 2024. Outstanding lease balances decreased $340.4 million, or 87.0%, during 2025 due to the sale of substantially all of our equipment finance portfolio.

The following table provides an analysis of the allowance for credit losses on loans, provision for credit losses on loans and net charge-offs for the years ended 2025, 2024, and 2023:

Years Ended December 31,

Charge-offs:

Recoveries:

Construction and land development 2,197 3 33

Net charge-offs to average loans 2.07 % 2.87 % 0.83 %

Allowance for credit losses to total loans 1.59 % 2.15 % 2.61 %

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 when the collectability of a loan balance is unlikely. Recoveries on loans previously charged-off are added to the allowance.

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The following tables present charge-offs by business sector for the years ended 2025 and 2024:

Construction and land development 36 3,307 — — 3,343

Residential real estate 287 — — — 287

Construction and land development — 17,991 — — 17,991

Residential real estate 817 — — — 817

Charge-offs in 2025 were $110.9 million compared to $171.6 million in 2024. Charge-offs in the equipment finance sector increased $23.8 million to $52.6 million in 2025 compared to 2024. The Company recognized charge-offs of $29.8 million as a result of the sale of substantially all of the portfolio in 2025. Consumer loan charge-offs totaled $3.1 million in 2025 compared to $98.1 million in 2024. In 2024, the Company recognized charge-offs of $17.3 million in connection with the sale of our LendingPoint portfolio and $35.0 million in connection with the planned sale and transfer of the GreenSky portfolio to held for sale. As of December 31, 2025, we had one active non-core loan program.

Nonperforming Loans. The following table presents the change in our nonperforming loans for the year ended December 31, 2025:

(dollars in thousands) Year Ended December 31, 2025

Balance, beginning of period $ 150,907

New nonperforming loans 39,788

Return to performing status (813)

Payments received (40,815)

Transfer to OREO and other repossessed assets (12)

Transfer to loans held for sale (29,400)

Balance, end of period $ 65,483

Beginning in 2024 and continuing throughout 2025, the Company prioritized improving its credit quality by tightening its loan underwriting standards and pursuing opportunities to resolve nonperforming loans, which included the sale of specific loans or portfolios.

The Company ceased originations of new construction loans in the Specialty Finance Group in the fourth quarter of 2024. In the third quarter of 2025, the Company ceased originations in the equipment finance portfolio, selling substantially all of the portfolio during the fourth quarter of 2025.

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Loan portfolios originated through our FinTech partners, LendingPoint and GreenSky, were sold in the fourth quarter of 2024 and in the second quarter of 2025, respectively.

These actions resulted in nonperforming loans decreasing to $65.5 million, or 1.50% of total loans, at December 31, 2025, compared to $150.9 million, or 2.92% of total loans at December 31, 2024.

The following table sets forth our nonperforming assets by asset category as of the dates presented. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. The balance of nonperforming loans reflect the net investment in these assets.

Nonperforming loans:

Construction and land development 155 8,438 39

Other real estate owned and other repossessed assets 606 6,502 11,350

Nonperforming loans to total loans 1.50 % 2.92 % 0.92 %

Nonperforming assets to total assets 1.01 % 2.10 % 0.87 %

Allowance for credit losses to nonperforming loans 105.71 % 73.69 % 282.73 %

We did not recognize interest income on nonaccrual loans during the years ended December 31, 2025 or 2024 while the loans were in nonaccrual status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $11.3 million and $9.6 million for the years ended December 31, 2025 and 2024, respectively.

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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. In the periods presented, all investment securities of the Company are classified as available for sale and, therefore, the book value of investment securities is equal to the fair market value.

The following table sets forth the book value and percentage of each category of investment securities at December 31, 2025, 2024 and 2023.

(dollars in thousands) Balance Percent Balance Percent Balance Percent

Investment securities available for sale:

U.S. Treasury securities $ — — % $ — — % $ 1,097 0.1 %

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The following table sets forth the book value, maturities and weighted average yields for our investment portfolio at December 31, 2025.

(dollars in thousands) Balance Percent Weighted average yield

Investment securities available for sale:

U.S. government sponsored entities and U.S. agency securities:

Maturing within one year $ — — % — %

Mortgage-backed securities - agency:

Maturing within one year $ — — % — %

Total mortgage-backed securities - agency $ 1,193,750 78.4 % 4.38 %

Mortgage-backed securities - non-agency:

Maturing within one year $ — — % — %

Total mortgage-backed securities - non-agency $ 97,089 6.4 % 4.94 %

Asset-backed student loans:

Maturing within one year $ — — % — %

Maturing in one to five years — — —

Maturing in five to ten years 684 — 4.74

Total asset-backed student loans $ 34,215 2.2 % 4.65 %

State and municipal securities (1):

Maturing within one year $ 978 0.1 % 2.59 %

Total state and municipal securities $ 73,458 4.8 % 3.68 %

Collateralized loan obligations:

Maturing within one year $ — — % — %

Maturing in one to five years — — —

Total collateralized loan obligations $ 46,854 3.1 % 5.66 %

Corporate securities:

Maturing within one year $ — — % — %

Total investment securities, available for sale $ 1,523,001 100.0 % 4.42 %

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(1)Weighted average yield for tax-exempt securities are presented on a tax-equivalent basis assuming a federal income tax rate of 21%.

The table below presents the credit ratings for our investment securities classified as available for sale, at fair value, at December 31, 2025.

Amortized Fair Average credit rating

(dollars in thousands) cost Value AAA AA+/- A+/- BBB+/- <BBB- Not Rated

Investment securities available for sale:

Loans Held for Sale. Loans held for sale totaled $7.8 million at December 31, 2025, comprised entirely of residential real estate loans. Loans held for sale totaled $344.9 million at December 31, 2024, comprised of $336.7 million of consumer loans and $8.2 million of residential real estate loans. At December 31, 2024, we committed to a plan to sell our GreenSky consumer loan portfolio and transferred these loans to held for sale. The sale was completed in the second quarter of 2025.

Liabilities. At December 31, 2025, liabilities totaled $5.95 billion compared to $6.80 billion at December 31, 2024.

Deposits. We emphasize developing total client relationships with our customers in order to increase our retail and commercial core deposit bases, which are our primary funding sources. Our deposits consist of noninterest-bearing and interest-bearing demand, savings and time deposit accounts.

Total deposits decreased $772.9 million to $5.42 billion at December 31, 2025, as compared to December 31, 2024. Interest-bearing checking account and time deposit account balances decreased $523.0 million and $290.4 million, respectively, during this period. Brokered time deposit account balances decreased to $43.1 million at December 31, 2025 from $259.5 million at December 31, 2024, accounting for the decrease in time deposit account balances.

Balance Percent Balance Percent Balance Percent

Interest-bearing:

The following table sets forth the maturity of uninsured time deposits as of December 31, 2025:

(dollars in thousands) Amount

Three months or less $ 19,080

Three to six months 26,010

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Subordinated Debt. Subordinated debt totaled $27.0 million and $77.7 million as of December 31, 2025 and December 31, 2024, respectively. On September 30, 2025, the Company redeemed the outstanding Fixed-to-Floating Rate Subordinated Notes due September 30, 2029, having an aggregate principal amount of $50.8 million. The interest rate on the subordinated notes was 7.91%, equating to approximately $4.0 million of annual interest expense.

Capital Resources and Liquidity Management

Capital Resources. Shareholders’ equity is influenced primarily by earnings, dividends, issuances and redemptions of common and preferred stock and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on available-for-sale investment securities, fair value hedges and cash flow hedges.

Shareholders’ equity decreased $145.3 million to $565.5 million at December 31, 2025, as compared to December 31, 2024. The change in shareholders’ equity was the result of the net loss of $124.3 million, dividends to common shareholders of $27.7 million, dividends to preferred shareholders of $8.9 million and repurchases of common stock of $9.7 million, partially offset by an increase in accumulated other comprehensive losses of $21.6 million.

On November 3, 2025, the Company’s board of directors authorized a new share repurchase program, pursuant to which the Company is authorized to repurchase up to $25.0 million of common stock through November 2, 2026. The new stock repurchase program became effective on November 3, 2025. The Company’s previous stock repurchase program expired on December 31, 2024. As of December 31, 2025, $9.6 million, or 457,222 shares of the Company’s common stock, had been repurchased under the current program.

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.

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 or other borrowings 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, which represents the amount of the Bank’s obligation. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. Investment securities with a carrying amount of $12.2 million and $15.0 million at December 31, 2025 and December 31, 2024, respectively, were pledged for securities sold under agreements to repurchase.

The table below presents our sources of liquidity as of December 31, 2025 and December 31, 2024:

Conditional Funding Based on Market Conditions

ICS One Way Buy (additional capacity) 600,000 —

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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 it 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 believed at December 31, 2025, that these limitations will not impact our ability to meet our ongoing short-term cash obligations.

Regulatory Capital Requirements

We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible 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 our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

At December 31, 2025, the Company and the Bank exceeded the regulatory minimums and met the regulatory definition of well capitalized. The following table presents the Company's and the Bank’s capital ratios and the minimum requirements at December 31, 2025:

Ratio Actual MinimumRegulatoryRequirements (1) WellCapitalized

Total risk-based capital ratio

Midland States Bancorp, Inc. 15.16 % 10.50 % N/A

Tier 1 risk-based capital ratio

Midland States Bancorp, Inc. 13.37 8.50 N/A

Common equity tier 1 risk-based capital ratio

Midland States Bancorp, Inc. 9.89 7.00 N/A

Tier 1 leverage ratio

Midland States Bancorp, Inc. 9.90 4.00 N/A

(1)Total risk-based capital ratio, Tier 1 risk-based capital ratio and Common equity tier 1 risk-based capital ratio include the capital conservation buffer of 2.5%.

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

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recovery from the customer. Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

We guarantee the distributions and payments for redemption or liquidation of the trust preferred securities issued by our wholly owned subsidiary business trusts 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.

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 are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk from investments in securities.

Interest Rate Risk. Interest rate risk is the risk to earnings 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 SOFR (basis risk).

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment, funding and hedging 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.

Changes in market interest rates may result in changes in the fair market value of our financial instruments, cash flows, and net interest income. We seek to achieve a stable net interest income profile while managing volatility arising from shifts in market interest rates. Our Board of Directors’ Risk Policy and Compliance Committee oversees interest rate risk, as well as the establishment of risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income. The Committee meets quarterly to monitor the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk limits.

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.

Interest rate risk measurement is calculated and reported to the Risk Policy and Compliance Committee at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

We use NII at Risk to model interest rate risk utilizing various assumptions for assets, liabilities, and derivatives. NII at Risk uses net interest income simulation analysis which involves forecasting net interest earnings under a variety of scenarios including changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates. The sensitivity of net interest income to changes in interest rates is measured using numerous interest rate scenarios including shocks, gradual ramps, curve flattening, curve steepening as well as forecasts of likely interest rates scenarios. Modeling the sensitivity of net interest earnings to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. To the extent that actual performance is different than what was assumed, actual net interest earnings sensitivity may be different than projected. We use various ad-hoc reports to continuously refine, stress and validate these assumptions. Assumptions and methodologies regarding administered rate liabilities (e.g., savings accounts, money market accounts and interest-bearing checking accounts), balance trends, and repricing relationships reflect our best estimate of expected behavior and these assumptions are reviewed periodically.

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The following table shows NII at Risk at the dates indicated:

Net interest income sensitivity (Shocks)

Immediate change in rates

Percent change 1.1 % 0.6 % (1.2) % (2.5) %

We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The NII at Risk results included in the table above reflect the analysis used quarterly by management. It models -200, −100, +100 and +200 basis point parallel shifts in market interest rates. We were within board policy limits for all scenarios at December 31, 2025.

Tolerance levels for risk management require the continuing development of remedial plans to maintain residual risk within approved levels as we adjust the balance sheet. NII at Risk reported at December 31, 2025 projects that our earnings exhibit increasing profitability in a declining rate environment, consistent with our modeling at December 31, 2024. Throughout the course of 2025, the Bank has been holding to its non-maturity beta assumptions and lowering rates along with the industry overall. Coupled with market expectations, the Bank continued its strategy of layering on protection to lower short-term rates through deposit pricing, securities purchase selection and hedging. These aspects are reflective of the Bank becoming more biased to lower rates year over year.

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 are subject to fair value accounting. We have price risk from investment securities, derivative instruments, and equity investments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our most significant accounting policies are described in Note 1 to the consolidated financial statements. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities, and we consider these policies to be our critical accounting estimates. The judgment and assumptions made are based upon historical experience, future forecasts, or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations.

The following accounting estimates materially affect our reported earnings and financial condition and requires significant judgments and assumptions. Management has reviewed these critical accounting estimates and related disclosures with our Audit Committee.

Allowance for Credit Losses on Loans

Management’s evaluation process used to determine the appropriateness of the allowance for credit losses on loans is subject to the use of estimates, assumptions, and judgments. The evaluation process combines many factors: Management’s ongoing review and grading of the loan portfolio leveraging probability of default and loss given default, consideration of historical loan loss and delinquency experience, trends in past due and nonaccrual loans, risk characteristics of the various classifications of loans, concentrations of loans to specific borrowers or industries, existing economic conditions and forecasts, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect future credit losses. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the allowance for credit losses on loans, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. As an integral part of their examination process, various regulatory agencies also review the allowance for credit losses on loans. Such agencies may require additions to the allowance for credit losses on loans or may require that

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certain loan balances be charged-off or downgraded into criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination. The Company believes the level of the allowance for credit losses on loans is appropriate.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk are included under “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures about Market Risk”.

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ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm (PCAOB ID 173) 55

Consolidated Balance Sheets 56

Consolidated Statements of Income 57

Consolidated Statements of Comprehensive Income 58

Consolidated Statements of Shareholders' Equity 59

Consolidated Statements of Cash Flows 60

Note 1. Summary of Significant Accounting Policies 61

Note 2. Investment Securities 71

Note 3. Loans 73

Note 4. Premises, Equipment and Leases 90

Note 5: Operating Leases - Lessor 91

Note 6. Loan Servicing Rights 91

Note 7. Goodwill and Intangible Assets 92

Note 8. Derivative Instruments 93

Note 9. Deposits 96

Note 10. FHLB Advances 96

Note 11. Subordinated Debt 97

Note 12. Trust Preferred Debentures 98

Note 13. Accumulated Other Comprehensive Income (Loss) 99

Note 15. Retirement Plans 102

Note 16. Share-Based Compensation 104

Note 17. Preferred Stock 106

Note 18. Earnings Per Common Share 107

Note 19. Capital Requirements 107

Note 20. Fair Value of Financial Instruments 108

Note 21. Commitments, Contingencies and Credit Risk 114

Note 22. Segment Information 114

Note 23. Revenue from Contracts with Customers 117

Note 24. Parent Company Only Financial Information 118

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Shareholders and the Board of Directors of Midland States Bancorp, Inc.

Effingham, Illinois

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Midland States Bancorp, Inc. (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses on Loans

As described in Notes 1 and 3 to the consolidated financial statements, the Allowance for Credit Losses on Loans (“ACL”) represents the Company’s estimate of expected credit losses over the contractual life of loans held for investment. The estimate is based on historical loss experience, current conditions, and reasonable and supportable forecasts. As of December 31, 2025, the Company’s ACL was $69.2 million, and the provision for credit losses on loans was $60.5 million for the year then ended.

The Company estimates expected credit losses using a quantitative model and qualitative adjustments. The quantitative component is based on a probability of default, loss given default, and exposure at default framework that incorporates historical default experience, loan-level risk characteristics, and forecasted macroeconomic variables over a reasonable and supportable forecast period, with losses reverting to long-term historical averages thereafter. The macroeconomic variables used in the model are selected based on statistical relevancy and correlation to historical credit losses by performing regression analyses. Management then applies qualitative factor adjustments to the modeled results for risks not fully captured in the model, including changes in economic and business conditions, portfolio credit quality, delinquency and nonaccrual trends, collateral values, and other internal and external factors.

We identified auditing the allowance for credit losses on loans, including the selection and application of forecasted macroeconomic variables and qualitative factor adjustments, as a critical audit matter. Auditing these judgments involved a high degree of auditor judgment and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the application processes for the forecasted macroeconomic variables and qualitative factor adjustments, including the need to involve our valuation services specialists.

The primary audit procedures we performed to address this critical audit matter included:

•Testing the operating effectiveness of the Company’s controls over the:

◦Selection and application of forecasted macroeconomic variables and related forecast scenarios.

◦Review of the reasonableness of the calculation output and tested the completeness and accuracy of inputs used in the quantitative model and qualitative factor adjustments.

◦Review over the relevance and reliability of external data used in the analysis to select the forecasted macroeconomic variables and qualitative factor adjustments.

◦Review over the appropriateness of the framework for the qualitative factor adjustments.

◦Mathematical accuracy of the qualitative factor adjustments.

•Substantive tests included:

◦Evaluating the relevance and reliability of the external data used in the selection of forecasted macroeconomic variables.

◦Evaluating the reasonableness of the selection and application of the forecasted macroeconomic variables and scenarios used in the reasonable and supportable forecast period.

◦Testing the completeness and accuracy of inputs used in the quantitative model and evaluating the reasonableness of the calculation output.

◦Assessing the appropriateness and reasonableness of the framework developed for the qualitative factor adjustments including evaluating management’s judgments as to which factors impacted the qualitative analysis for each portfolio segment.

◦Testing the completeness and accuracy of internal data and relevance and reliability of external data used in determining the qualitative factor adjustments.

◦Testing the mathematical accuracy of the calculation of the qualitative factor adjustments.

Credit Enhancements Contained Within Third-Party Agreements

The Company has an agreement with a third party to originate and service consumer and commercial loans that are included in the Company’s loan portfolio as described in Notes 1 and 3 to the consolidated financial statements. The Company recorded a credit enhancement asset of $12.6 million as of December 31, 2025 related to the agreement associated with loans recorded on the balance sheet as of December 31, 2025. The Company also recorded a $12.6 million allowance for credit losses for these consumer and commercial loans as of December 31, 2025.

We identified auditing the accounting associated with the credit enhancement contained within the third-party agreements as a critical audit matter due to the nature and extent of audit effort required, including the need for individuals with specialized knowledge.

The primary procedures we performed to address this critical audit matter included engaging our internal specialists to evaluate the third-party agreement and the related accounting treatment; and testing the operating effectiveness of the control over the evaluation of the accounting and financial reporting impact related to this third-party agreement.

Crowe LLP

We have served as the Company’s auditor since 2017.

Oakbrook Terrace, Illinois

March 2, 2026

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MIDLAND STATES BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

Assets

Investment securities available for sale, at fair value 1,523,001 1,207,574

Equity securities, at fair value 4,235 4,792

Loan servicing rights, at lower of cost or fair value 11,932 17,842

Loan servicing rights, held for sale 3,661 —

Liabilities and Shareholders’ Equity

Liabilities:

Deposits:

Accrued interest payable and other liabilities 91,485 124,266

Shareholders’ Equity:

Accumulated other comprehensive loss, net of tax (60,333) (81,960)

The accompanying notes are an integral part of the consolidated financial statements.

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MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

Years Ended December 31,

Interest income:

Loans including fees:

Investment securities:

Interest expense:

Provision for credit losses:

(Recapture of) provision for credit losses on unfunded commitments (700) 1,070 —

Noninterest income:

Gain (loss) on sales of investment securities, net 14 (230) (9,372)

Noninterest expense:

Impairment on goodwill 153,977 — —

Loss on sale of loan portfolios 23,051 — —

Impairment on leased assets and surrendered assets 684 7,858 —

Per common share data:

Basic earnings (loss) per common share $ (6.12) $ 1.32 $ 2.33

Diluted earnings (loss) per common share $ (6.12) $ 1.32 $ 2.33

The accompanying notes are an integral part of the consolidated financial statements.

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MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

Years Ended December 31,

Other comprehensive income (loss):

Investment securities available for sale:

Unrealized gains that occurred during the period 27,421 (9,278) (2,536)

Cash flow hedges:

Other comprehensive income (loss), net of tax 21,627 (5,207) 7,044

The accompanying notes are an integral part of the consolidated financial statements.

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MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands, except per share data)

Other comprehensive income — — — — 7,044 7,044

Issuance of preferred stock, net of offering costs — — — — — —

Common dividends declared ($1.20 per share) — — — (26,573) — (26,573)

Preferred dividends — — — (8,913) — (8,913)

Share-based compensation expense — — 2,489 — — 2,489

Issuance of common stock under employee benefit plans — 2 1,668 — — 1,670

Other comprehensive loss — — — — (5,207) (5,207)

Common dividends declared ($1.24 per share) — — — (27,072) — (27,072)

Preferred dividends — — — (8,913) — (8,913)

Common stock repurchased — (2) (5,473) — — (5,475)

Share-based compensation expense — — 3,031 — — 3,031

Issuance of common stock under employee benefit plans — 1 1,325 — — 1,326

Common dividends declared ($1.26 per share) — — — (27,679) — (27,679)

Preferred dividends — — — (8,913) — (8,913)

Common stock repurchased — (4) (9,654) — — (9,658)

Share-based compensation expense — — 2,913 — — 2,913

Issuance of common stock under employee benefit plans — 1 642 — — 643

The accompanying notes are an integral part of the consolidated financial statements.

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MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

Years Ended December 31,

Cash flows from operating activities:

Impairment on goodwill 153,977 — —

Amortization of operating lease right-of-use asset 1,570 1,657 1,635

Increase in cash surrender value of life insurance (8,209) (7,683) (4,439)

Gain on proceeds from company-owned life insurance (343) — —

(Gain) loss on sales of investment securities, net (14) 230 9,372

Gain on repurchase of subordinated debt — (231) (676)

Gain on sales of other real estate owned (124) (26) (819)

Impairment on other real estate owned — 4,866 —

Loss on mortgage servicing rights held for sale (18) —

Loss on sale of loan portfolios 23,051 — —

Impairment on leased assets and surrendered assets 684 7,858 —

Net change in operating assets and liabilities:

Cash flows from investing activities:

Purchases of equity securities (174) (268) (286)

Proceeds from sales of equity securities — — 5,148

Proceeds from sales of consumer loans held for sale 61,099 — —

Proceeds from sale of premises and equipment — 37 104

Proceeds from sales of other real estate owned 4,862 466 7,547

Proceeds from company-owned life insurance, net 1,166 — (48,603)

Cash flows from financing activities:

Net increase (decrease) in short-term borrowings (27,318) 52,634 (7,446)

Cash dividends paid on preferred stock (8,913) (8,913) (8,913)

Net increase (decrease) in cash and cash equivalents 13,045 (20,295) (25,570)

Cash and cash equivalents:

Theaccompanying notes are an integral part of the consolidated financial statements.

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MIDLAND STATES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Midland States Bancorp, Inc. is a diversified financial holding company headquartered in Effingham, Illinois. Our wholly owned banking subsidiary, Midland States Bank, has branches across Illinois and in Missouri, and provides a full range of commercial and consumer banking products and services, merchant credit card services, trust and investment management services, and insurance and financial planning services.

Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest charged on loans and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived 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. Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing costs, professional fees and other noninterest expenses, provisions for credit losses and income taxes.

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with GAAP and conform to predominant practices within the banking industry. Management of the Company has made a number of estimates and assumptions related to the reporting assets and liabilities to prepare the consolidated financial statement in conformity with GAAP. Actual results may differ from these estimates. Certain reclassifications of 2024 or 2023 amounts may have been made to conform to the 2025 presentation, but do not have an effect on net income in 2024 or in 2023 or shareholders' equity.

Subsequent Events

Management has evaluated subsequent events for recognition and disclosure through March 2, 2026, which is the date the financial statements were available to be issued.

Cash and Cash Equivalents and Cash Flows

For the presentation in the accompanying consolidated statement of cash flows, cash and cash equivalents are defined as 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 and federal funds sold. Generally, federal funds are sold for one-day periods, but not longer than 30 days.

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The following table summarizes supplemental cash flow information:

Years Ended December 31,

Supplemental disclosures of cash flow information:

Cash payments for:

Supplemental disclosures of noncash investing and financing activities:

Transfer of operating assets to assets held for sale 20,439 — —

Transfer of loans to other real estate owned 403 1,031 9,112

Transfer of premises and equipment, net to assets held for sale 245 — —

Loans provided for sale of consumer loans held for sale 219,212 — —

Right of use assets obtained in exchange for lease obligations 873 2,889 2,470

Investment Securities

The Company classifies its debt investment securities as available for sale or held to maturity at the time of purchase. Securities held to maturity are those debt instruments which the Company has the positive intent and ability to hold until maturity. Securities held to maturity are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. All other debt securities are classified as available for sale. As of December 31, 2025 and 2024, all investment securities were classified as available for sale. Investment securities available for sale are recorded at fair value with the unrealized gains and losses, net of the related tax effect, included in other comprehensive income. The related accumulated unrealized holding gains and losses are reported as a separate component of shareholders’ equity until realized.

Purchase premiums are amortized over the estimated life or to the earliest call date 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 investment securities available for sale are determined using the specific identification method and are included in noninterest income. Also, when applicable, realized gains and losses are reported as a reclassification adjustment, net of tax, in other comprehensive income.

Available-for-sale debt securities in an unrealized loss position are evaluated, at least quarterly, for impairment related to credit losses. The Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, and the present value of cash flows expected to be collected from the security is less than the amortized cost basis, an allowance for credit losses is recorded. Any impairment that has not been recorded through an allowance for credit losses is recorded in other comprehensive income. Accrued interest receivable on investment securities available for sale totaled $5.9 million and $5.1 million at December 31, 2025 and 2024, respectively, and was reported in accrued interest receivable on the consolidated balance sheets. The estimate of credit losses excludes this accrued interest receivable. There was no allowance for credit losses recorded on investment securities available for sale at December 31, 2025 and 2024.

Equity Securities

Investments in stock of a publicly traded company or in mutual funds are classified as equity securities. Equity securities are recorded at fair value with unrealized gains and losses recognized in noninterest income.

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Nonmarketable Equity Securities

Nonmarketable equity securities include the Bank’s required investments in the stock of the FHLB and the FRB. The Bank is a member of the FHLB system as well as its regional FRB. Members of the FHLB are required to own a certain amount of stock based on the level of borrowings and other factors. FHLB stock and FRB stock are both carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash dividends and stock dividends are reported as interest income.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as portfolio loans. Portfolio loans are carried at the principal balance outstanding, net of purchase premiums and discounts, and deferred loan fees and costs. Interest income is accrued on the unpaid principal balance. Accrued interest receivable on loans totaled $17.9 million and $20.2 million at December 31, 2025 and 2024, respectively, and was reported in accrued interest receivable on the consolidated balance sheets.

Interest income on mortgage and commercial loans is discontinued and the loan is placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans are charged-off at 180 days past due, and commercial loans are charged-off to the extent principal or interest is deemed uncollectible. Consumer loans continue to accrue interest until they are charged-off or at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cost-recovery or cash-basis method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Leases. The Company has historically provided financing leases to small businesses for purchases of business equipment. Under the direct financing method of accounting, the minimum lease payments to be received under the lease contract, together with the guaranteed residual values (which typically range from 1% to 21% of the cost of the related equipment which average 1%), are recorded as lease receivables when the lease is signed and the leased property is delivered to the customer. The excess of the minimum lease payments and residual values over the cost of the equipment is recorded as unearned lease income. Unearned lease income is recognized over the term of the lease on a basis that results in an approximately level rate of return on the unrecovered lease investment.

PCD Loans. In the past the Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. Purchased credit deteriorated loans are recorded at the amount paid. An allowance for credit losses on loans is determined using the same methodology as other loans held for investment. The initial allowance for credit losses on loans determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses on loans becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses on loans are recorded through provision expense for credit losses.

Nonperforming Loans. A loan is considered nonperforming when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Nonperforming loans include loans on nonaccrual status and loans past due 90 days or more and still accruing interest.

Allowance for Credit Losses on Loans

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate.

Management estimates the allowance balance using relevant information, from internal and external sources, relating to historical credit loss experience, current conditions, and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current loan-specific risk characteristics, environmental conditions or other relevant factors.

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The allowance for credit losses on loans is measured on a collective basis and reflects impairment in groups of loans aggregated on the basis of similar risk characteristics. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles and measured on a collective basis. Common characteristics and risk profiles may include internal credit ratings, risk ratings or classification, financial asset type, collateral type, size, industry of the borrower, historical or expected credit loss patterns, and reasonable and supportable forecast periods. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary.

The table below identifies the Company’s loan portfolio segments and classes.

Segment Class

Commercial Commercial

Commercial Other

Commercial Real Estate Commercial Real Estate Non-Owner Occupied

Commercial Real Estate Owner Occupied

Multi-Family

Farmland

Construction and Land Development Construction and Land Development

Residential Real Estate Residential First Lien

Other Residential

Consumer Consumer

Consumer Other

Lease Financing Lease Financing

For each loan pool, we measure expected credit losses over the life of each loan utilizing a combination of models which measure (i) probability of default, the likelihood that loan will stop performing or default, (ii) loss given default, the expected loss rate for loans in default, (iii) assumed prepayment speed, the likelihood that a loan will prepay or pay-off prior to maturity, and (iv) exposure at default, the estimated outstanding principal balance of the loans upon default, including the expected funding of unfunded commitments outstanding as of the measurement date.

Expected credit losses are calculated as the product of probability of default (adjusted for prepayment), loss given default and exposure at default. This methodology builds on default probabilities already incorporated into our risk grading process by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for current macroeconomic assumptions, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time we measure expected credit losses, we assess the relevancy of historical loss information and consider any necessary adjustments to address any differences in asset-specific characteristics.

The measurement of expected credit losses is impacted by loan and borrower attributes and certain macroeconomic variables. Significant loan and borrower attributes utilized in our modeling processes include, among other things, (i) origination date, (ii) maturity date, (iii) payment type, (iv) collateral type and amount, (v) current risk grade, (vi) current unpaid balance and commitment utilization rate, (vii) payment status and delinquency history and (viii) expected recoveries of previously charged-off amounts. Significant macroeconomic variables utilized in our modeling processes include, among other things, (i) Gross Domestic Product, (ii) Consumer Price Index, (iii) selected market interest rates including U.S. Treasury rates, (iv) commercial and residential property prices and unemployment rates in Illinois and the U.S. as a whole, and (v) Retail Sales for the State of Illinois.

We have determined that we are reasonably able to forecast the macroeconomic variables used in our modeling processes with an acceptable degree of confidence for a total of two years with the last twelve months of the forecast period encompassing a reversion process whereby the forecasted macroeconomic variables are reverted to their historical mean utilizing a straight line basis. The macroeconomic variables utilized as inputs in our modeling processes were subjected to a variety of analysis procedures and were selected primarily based on statistical relevancy and correlation to our historical credit

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losses. By reverting these modeling inputs to their historical mean and considering loan and borrower specific attributes, our models are intended to yield a measurement of expected credit losses that reflects our average historical loss rates for periods subsequent to the twelve-month reversion period. The LGD is based on historical recovery averages for each loan pool, adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a two-year forecast period, with the final twelve months of the forecast period encompassing a reversion process, which management considers to be both reasonable and supportable. The same forecast and reversion periods are used for all macroeconomic variables in our models.

Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factor adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, charge-offs, and recoveries, (ii) actual and expected changes in economic and business conditions and developments that affect the collectibility of the loan pools, (iii) changes in the nature and volume of the loan pools and in the terms of the underlying loans, (iv) changes in the experience, ability, and depth of our lending management and staff, (v) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit review function, (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent, (viii) the existence, growth, and effect of any concentrations of credit and (ix) other factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or health pandemics.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis.

Specific reserves reflect expected credit losses on loans identified for evaluation or individually considered nonperforming. These loans no longer have similar risk characteristics to collectively evaluated loans due to changes in credit risk, borrower circumstances, recognition of write-offs, or cash collections that have been fully applied to principal on the basis of nonaccrual policies. At a minimum, the population of loans subject to individual evaluation include individual loans where it is probable we will be unable to collect all amounts due, according to the original contractual terms. These include, nonaccrual loans with a balance greater than $500,000, accruing loans 90 days past due or greater with a balance greater than $100,000, specialty lending relationships and other loans as determined by management. Allowance for credit losses for consumer and residential loans are, primarily, determined by meaningful pools of similar loans and are evaluated on a quarterly basis.

Loans Held for Sale

At December 31, 2025, loans held for sale consisted of residential real estate loans with the intent to sell. At December 31, 2024, loans held for sale consisted of residential mortgage loans originated with the intent to sell as well as the GreenSky portfolio which the Company had committed a plan to sell. Loans held for sale are carried at fair value, determined individually, as of the balance sheet date. The Company believes the fair value method better reflects the economic risks associated with these loans. Fair value measurements on loans held for sale are based on quoted market prices for similar loans in the secondary market, market quotes from anticipated sales contracts and commitments, or contract prices from firm sales commitments. The changes in the fair value of loans held for sale are reflected in noninterest income on the consolidated statements of income.

Mortgage Repurchase Reserve

The Company sells residential mortgage loans to investors in the normal course of business. Residential mortgage loans sold to investors are predominantly conventional residential first lien mortgages originated under our usual underwriting procedures, and are sold on a nonrecourse basis. The Company’s agreements to sell residential mortgage loans usually require general representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability, which if subsequently untrue or breached, could require the Company to indemnify or repurchase certain loans affected. The balance in the repurchase reserve at the balance sheet date reflects the estimated amount of potential loss the Company could incur from repurchasing a loan, as well as loss reimbursements, indemnification, and other “make

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whole” settlement resolutions. There were no losses as a result of make-whole requests and loan repurchases for the years ended December 31, 2025, 2024 and 2023. The liability for unresolved repurchase demands totaled $0.1 million at December 31, 2025 and 2024.

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 for premises range from 10 to 40 years and for equipment range from 3 to 10 years. 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.

We periodically review the carrying value of our long-lived assets to determine if 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.

Operating Lease Right of Use Assets and Liabilities

The Company determines if a lease is present at the inception of an agreement. Operating leases are capitalized at commencement and are discounted using the Company’s FHLB borrowing rate for a similar term borrowing unless the lease defines an implicit rate within the contract. The Company assesses operating lease right-of-use assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable.

The operating lease right of use assets represent the Company’s right to use an underlying asset for the lease term, and the operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right of use assets and operating lease liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the Company’s operating lease liabilities largely represent future rental expenses associated with operating leases and the borrowing rates are based on publicly available interest rates.

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 credit losses on loans. Fair value for OREO is based on an appraisal performed upon foreclosure. Property is evaluated regularly to ensure the recorded amount is supported by its fair value less estimated costs to dispose. After the initial foreclosure appraisal, fair value is generally determined by an annual appraisal unless known events warrant adjustments to the recorded value. Revenue from the operations of OREO is included in other income in the consolidated statements of income, and expense and decreases in valuations are included in other real estate owned expense in the consolidated statements of income.

Goodwill and Intangible Assets

Goodwill resulting from a business combination is generally determined as the excess of the fair value of consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Testing of goodwill impairment comprises a two-step process. The testing is performed on each of the two reporting units, the Banking reporting unit and the Wealth Management reporting unit. First, the Company performs a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that an impairment has occurred, it proceeds to the quantitative impairment test, whereby it calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill. In its performance of impairment testing, the Company has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment. If the carrying amount of the reporting unit exceeds the fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge. If the results of the qualitative assessment indicate that it is

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not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the reporting unit that is greater than the carrying amount, then no impairment charge is recorded.

We evaluate goodwill for impairment annually as of August 31st, or earlier if conditions indicate there may be potential for impairment, such as significant adverse changes in business climate or operating results, changes in our strategy, significant declines in our stock price or other triggering events. Based on the results of our annual impairment tests, we concluded that no goodwill impairment existed as of December 31, 2025 and December 31, 2024.

During the first quarter of 2025, we determined that a triggering event had occurred in the Company's Banking reporting unit as a result of deteriorated credit quality coupled with trends in the Company's stock price. The Company performed a quantitative impairment test on its Banking reporting unit as of March 31, 2025, and engaged a third-party service provider to assist with the determination of the fair value. The resulting calculation indicated that the carrying amount exceeded the fair value of the Company's Banking reporting unit. As a result of the assessment, the Company recognized a $154.0 million goodwill impairment charge in the first quarter of 2025.

Significant judgment is necessary in the determination of the fair value of a reporting unit. The income valuation methodology requires an estimation of future cash flows, considering the after-tax results of operations, the extent and timing of credit losses, and appropriate discount and growth rates. Actual future cash flows may differ from forecasted results based on the assumptions used. In performing the discounted cash flow analysis, the Company utilized multi-year cash projections that rely on internal forecasts of loan and deposit growth, bond mix, financing composition, market pricing of securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations. The long-term growth rate used in the calculation of fair value was derived from published projections of the inflation rate, along with Management estimates. The discount rate was calculated as the cost of equity capital using the modified capital asset pricing model, which includes variables including the risk-free interest rate, beta, equity risk premium, size premium, and company-specific risk premium.

Future events could cause the Company to conclude that the Company’s goodwill has become impaired, which would result in recording an impairment charge. Management has evaluated and will continue to evaluate economic conditions in interim periods for triggering events.

Other intangible assets, which consist of core deposit and acquired customer relationship intangible assets, are typically amortized over a period ranging from 1 to 20 years using an accelerated method of amortization. On a periodic basis, we evaluate events and circumstances that may indicate a change in the recoverability of the carrying value.

Loan Servicing Rights

When loans are sold with servicing retained, a servicing rights asset is capitalized, which represents the, then current, fair value of future net cash flows expected to be realized for performing servicing activities. Loan servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value.

Loan servicing rights do not trade in an active market with readily observable prices. The fair value of loan servicing rights and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Company’s servicing portfolio consists of distinct portfolios of government-insured residential and commercial mortgages, conventional residential mortgages and SBA loans. The Company periodically evaluates its loan servicing rights asset for impairment. Impairment is assessed based on the fair value of net servicing cash flows at each reporting date using estimated prepayment speeds of the underlying loans serviced and stratifications based on the risk characteristics of the underlying loans. To the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification, the Company records an impairment expense and reduces the carrying value of the loan servicing rights.

We recognize revenue from servicing residential mortgages, commercial FHA mortgages, and SBA loans as earned based on the specific contractual terms. This revenue, along with amortization of and changes in impairment on servicing rights, is reported in residential mortgage banking revenue and other noninterest income, respectively, in the consolidated statements of income.

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Loan Servicing Rights Held For Sale

Loan servicing rights held for sale consisted of residential and commercial mortgage servicing rights with the intent to sell at December 31, 2025. Servicing rights held for sale are measured at fair value. Fair value is estimated using a market approach based on indicative pricing from third parties, including a letter of intent to purchase, corroborated by available market data for comparable transactions less estimated prepayments, paydowns, amortizations and sales in the portfolio for the projected closing period. The changes in the fair value of loan servicing rights held for sale are reflected in noninterest income on the consolidated statements of income.

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, adjusted for other charges or other amounts due that are probable at settlement, with changes in value recorded in noninterest income in the consolidated statements of income.

Credit Enhancement Asset

The Company is party to third-party loan origination programs. As part of these programs, the third-party providers offer various credit enhancements with respect to loans originated under the programs. In 2024, this included contributions to reserve accounts, yield maintenance and certain other payments. In accordance with accounting guidance, we estimate and record an allowance for expected losses for these loans. In 2024 and through December 30, 2025, when the allowance for credit losses on loans was recorded, a credit enhancement derivative was also recorded on our balance sheet with a corresponding entry to noninterest income in recognition of the partner's legal commitment to indemnify or reimburse the Company. The credit enhancement asset was relieved as credit enhancement payments and recoveries were received from the partner or taken from the partner's cash reserve account. As of December 31, 2025, based on revised contractual terms of these arrangements which were effective as of that date, when the allowance for credit losses on loans is recorded, a credit enhancement asset is also recorded on the balance sheet with a corresponding entry to noninterest income in recognition of the partner's legal commitment to reimburse losses. The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the partner.

Derivative Financial Instruments

At the inception of a derivative contract, the Company designates the derivative as one of three types based on the intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) instruments that do not meet the accounting definition of a hedge. For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during with the hedged transaction affects earnings.

All derivatives are recognized on the consolidated balance sheet as a component of other assets or other 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 or fair value of hedged items.

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

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MSBI US Equity

MSBI · 10-K · period ended 2025-12-31

ITEM 7 –MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MSBI US Equity☆

MSBI · 10-K · period ended 2025-12-31

ITEM 7 –MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MSBI US Equity