Business Description

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. The following table summarizes supplemental cash flow information: Years Ended December 31, (dollars in thousands) 2025 2024 2023 Supplemental disclosures of cash flow information: Cash payments for: Interest paid on deposits and borrowed funds $ 156,581 $ 189,599 $ 159,139 Income tax paid (net of refunds) 1,580 22,543 25,120 Supplemental disclosures of noncash investing and financing activities: Transfer of loans to loans held for sale 492,770 406,561 — 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 — — Transfer of loan servicing rights, at lower of cost or market to loan servicing rights held for sale 3,661 — — Transfer of loan servicing rights held for sale to loan servicing rights, at lower of cost or market — — 20,745 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.…