Midland States Bancorp, Inc. (MSBI)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is Management's discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of March 31, 2026, as compared to December 31, 2025, and unaudited consolidated operating results for the three months ended March 31, 2026 and 2025. This disclosure should be read in conjunction with the Company's unaudited consolidated financial statements and accompanying notes appearing elsewhere herein and the audited financial statements and accompanying notes provided in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 2, 2026.

In addition to the historical information contained herein, this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of such term under the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including interest rates and other general economic, business and political conditions; the impact of federal trade policy, inflation, deposit volatility and potential regulatory developments; the performance of our loan portfolio and our ability to manage credit risk; changes in the financial markets; the effects of armed conflict, including the scope and duration of disruptions in global energy markets relating to war in Iran; changes in the business environment resulting from the adoption of artificial intelligence, including fraud and cybersecurity risk; operational risks, including with respect to fraud and information technology; changes in business plans as circumstances warrant; risks related to legal proceedings; risks related to mergers and acquisitions and the integration of acquired businesses; changes to U.S. and state tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the SEC. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “will,” “propose,” “may,” “plan,” “seek,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” or “continue,” or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements requires Management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under current circumstances. These estimates form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes have the greatest effect on the Company’s reported financial position and results of operations are set forth in “Note 1 – Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2025.

For additional information regarding critical accounting estimates, see the section titled “Critical Accounting Estimates” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 2025.

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 certain loan balances be charged-off or downgraded into criticized loan categories when their credit evaluations differ from

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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.

Factors Affecting Comparability

Each factor listed below affects the comparability of our results of operations for the three months ended March 31, 2026 and 2025, and our financial condition as of March 31, 2026 and December 31, 2025, and may affect the comparability of financial information we report in future fiscal periods.

Sale of equipment finance portfolio. During the fourth quarter of 2025, we sold substantially all of our equipment finance portfolio 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.

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.

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.

Results of Operations

Overview. The following table sets forth condensed income statement information of the Company for the three months ended March 31, 2026 and 2025:

During the three months ended March 31, 2026, we generated net income of $18.5 million, or diluted earnings per common share of $0.74, compared to a net loss of $141.0 million, or diluted loss per common share of $6.58, in the three months ended March 31, 2025. Earnings for the first quarter of 2026 compared to the first quarter of 2025 increased primarily due to a $152.6 million decrease in noninterest expense (which included the prior year goodwill impairment charge), a $5.8

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million decrease in provision for credit losses and a $4.4 million increase in noninterest income. These results were partially offset by a $0.9 million decrease in net interest income and a $2.5 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 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 both 2026 and 2025.

The FOMC concluded its April 2026 meeting by leaving interest rates unchanged, citing low average job gains, elevated inflation, and a high level of uncertainty about the economic outlook stemming from developments in the Middle East. Federal Reserve policymakers voted to leave the benchmark federal funds rate unchanged at its current range of 3.50% to 3.75%. The move follows the central bank's decision to hold rates steady in January and March 2026 after three successive 25-basis-point rate cuts in September, October and December 2025. Economic data showing a slowdown in the labor market, inflation continuing to run higher than the Federal Reserve's 2% target and the unrest in Iran prompted policymakers to continue to pause rate cuts.

During the three months ended March 31, 2026, net interest income, on a tax-equivalent basis, decreased to $57.6 million compared to $58.5 million for the three months ended March 31, 2025. The tax-equivalent net interest margin increased to 3.91% for the first quarter of 2026 compared to 3.4

[Excerpt truncated for page length; source filing is linked above.]

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:

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.

(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.

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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:

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:

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 represents servicing 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:

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:

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:

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:

(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:

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:

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:

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.

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.

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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.

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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.

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.

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

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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: