Midland States Bancorp, Inc.

Previous wording

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 September 30, 2025, as compared to December 31, 2024, and unaudited consolidated operating results for the three and nine months ended September 30, 2025 and 2024. 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, 2024, filed with the SEC on July 1, 2025.

Current wording

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.

Previous wording

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, including the rate of inflation; changes in the financial markets; 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. 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.

Current wording

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.

Previous wording

Goodwill impairment. During the first quarter of 2025, Management determined that a triggering event had occurred at its Banking reporting unit as a result of further deteriorated credit quality coupled with the trends in the 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 Management 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 $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.

Current wording

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.

Previous wording

Overview. The following table sets forth condensed income statement information of the Company for the three and nine months ended September 30, 2025 and 2024:

Current wording

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

Previous wording

During thethree months ended September 30, 2025, we generated net income of $7.6 million, or diluted earnings per common share of $0.24 compared to net income of $20.4 million, or diluted earnings per common share of $0.83, in thethree months ended September 30, 2024. Earnings for the third quarter of 2025 compared to the third quarter of 2024 decreased primarily due to a $2.1 million increase in provision for credit losses, a $13.5 million decrease in noninterest income, and a $0.1 million increase in noninterest expense. These results were partially offset by a $2.0 million increase in net interest income, and a $0.8 million decrease in income tax expense.

Current wording

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 thefirst quarter of 2026 compared to thefirst 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 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.

Previous wording

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 2025 and 2024.

Current wording

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.

Previous wording

During the three months ended September 30, 2025, net interest income, on a tax-equivalent basis, totaled $61.3 million compared to $59.3 million for the three months ended September 30, 2024. The tax-equivalent net interest margin increased to 3.79% for the third quarter of 2025 compared to 3.34% in the third quarter of 2024.

Current wording

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 3.49% in the first quarter of 2025.

Previous wording

Average Balance Sheet, Interest and Yield/Rate Analysis. The following tables present the average balance sheets, interest income, interest expense and the corresponding average yields earned and rates paid for the three and nine months ended September 30, 2025 and 2024. 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.

Current wording

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 thethree months ended March 31, 2026 and 2025. 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.

Previous wording

For the nine months ended September 30, 2025, interest income, on a tax-equivalent basis, decreased $25.8 million to $296.5 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 5.99% from 6.06%.

Current wording

Interest Income. For the three months ended March 31, 2026, interest income, on a tax-equivalent basis, decreased $13.3 million to $86.2 million as compared to the same period in 2025, primarily due to a decline in earning assets as described below. The yield on earning assets decreased nine basis points to 5.85% from 5.94%.

Previous wording

Average earning assets decreased to $6.62 billion in the first nine months of 2025 from $7.10 billion in the same period in 2024. Average loans decreased $860.9 million. This decrease was partially offset by increases in investment securities and loans held for sale of $255.9 million and $120.4 million, respectively.

Current wording

Average earning assets decreased to $5.97 billion in the first quarter of 2026 from $6.80 billion in the same quarter of 2025. Average loans and average loans held for sale decreased $803.1 million and $319.5 million, respectively. These decreases were partially offset by an increase in investment securities of $280.5 million.

Previous wording

Average loans held for sale for the first three quarters of 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.

Current wording

The $326.3 million of average loans held for sale in the first quarter of 2025 included $320.9 million of GreenSky consumer loans. The Company completed the sale of this portfolio in the second quarter of 2025.

Previous wording

Interest Expense. Interest expense decreased$12.5 million to$37.4 million for thethree months ended September 30, 2025 from the comparable period in 2024. The cost of interest-bearing liabilities decreased to 2.84% for the third quarter of 2025, compared to 3.45% for the third quarter of 2024, due to the decrease in deposit costs as a result of the rate decreases announced by the Federal Reserve in late 2024.

Current wording

Interest Expense. Interest expense decreased$12.5 million to$28.6 million for the three months ended March 31, 2026 compared to the same period in 2025. The cost of interest-bearing liabilities decreased to 2.41% for the first quarter of 2026, compared to 2.99% for the first quarter of 2025 due to a decrease in both the rates paid on deposits and a decrease in average balances.

Previous wording

The provision for credit losses on loans recognized during the three and nine months ended September 30, 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.

Current wording

The provision for credit losses on loans recognized during the three months ended March 31, 2026 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.

Previous wording

Noninterest Income. The following table sets forth the major components of our noninterest income for the three and nine months ended September 30, 2025 and 2024:

Current wording

Noninterest Income. The following table presents the major components of our noninterest income for the three months ended March 31, 2026 and 2025:

Previous wording

Wealth management revenue. Wealth management revenue increased $0.9 million and $1.7 million for the three and nine months ended September 30, 2025 respectively, as compared to the same periods in 2024. Assets under administration increased to $4.36 billion at September 30, 2025 from $4.27 billion at September 30, 2024.

Current wording

Wealth management revenue. Wealth management revenue increased$0.9 million, or 12.2%, for three months ended March 31, 2026 as compared to the same period in 2025, driven by growth in assets under administration. Assets under administration increased 9.1% to $4.47 billion at March 31, 2026 from $4.10 billion at March 31, 2025.

Previous wording

Noninterest Expense. The following table sets forth the major components of noninterest expense for the three and nine months ended September 30, 2025 and 2024:

Current wording

Noninterest Expense. The following table sets forth the major components of noninterest expense for thethree months ended March 31, 2026 and 2025:

Previous wording

Marketing expense. The $0.4 million and $1.0 million increases in marketing expense for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, were primarily the result of increased brand marketing and program expenses related to the acquisition of deposit accounts.

Current wording

Marketing expense. The increase in marketing expense for the three months ended March 31, 2026, as compared to the same period of 2025, was primarily the result of increased brand marketing and program expenses related to deposit account acquisition.

Previous wording

Income Tax Expense. The Company's effective tax rates were 33.2% and 18.2% for the three nine months ended September 30, 2025 and 2024, respectively. The Company recognized a $1.3 million return to provision adjustment in the third quarter of 2025. The effective tax rates were 23.1% and 19.8% for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate calculation for the nine months ended September 30, 2025, also excludes the goodwill impairment charge of $154.0 million, as this item is not deductible for tax purposes.

Current wording

Income Tax Expense. Income tax expense was$5.6 million for the three months ended March 31, 2026, as compared to$3.2 million for the three months ended March 31, 2025. The resulting effective tax rates were 23.4% and 19.6% for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate calculation for the three months ended March 31, 2025, excludes the goodwill impairment charge of $154.0 million, as this item is not deductible for tax purposes.

Previous wording

Assets. Total assets were $6.91 billion at September 30, 2025, as compared to $7.51 billion at December 31, 2024.

Current wording

Assets. Total assets were $6.55 billion at March 31, 2026, as compared to $6.51 billion at December 31, 2025.

Previous wording

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.

Current wording

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.

Previous wording

Lease financing. Our equipment leasing business provided 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.

Current wording

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. As previously disclosed, we ceased originating new equipment finance loans and leases effective as of September 30, 2025.

Previous wording

The following tables present our outstanding loans by business sector at September 30, 2025 and December 31, 2024:

Current wording

The following tables present our outstanding loans by business sector at March 31, 2026 and December 31, 2025. The Company's loan portfolio is assigned to the following internal business sectors:

Previous wording

•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.

Current wording

•Non-core and other includes our third-party origination and servicing programs, our equipment finance portfolio of loans and leases originated to varying types of businesses throughout the United States for purchases of business equipment and software and capital market credits, including loans to finance the sale of the GreenSky portfolio.

Previous wording

Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $100.9 million, or 2.07% of total loans, at September 30, 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:

Current wording

Analysis of the Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $67.9 million, or 1.56% of total loans, at March 31, 2026, compared to $69.2 million, or 1.59% of total loans, at December 31, 2025. The following table allocates the allowance for credit losses on loans by loan category:

Previous wording

In estimating expected credit losses as of September 30, 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 1.6% to 2.2% over the next four quarters; (ii) the 10-year treasury rate averaging 4.3% over the next four quarters; and (iii) Illinois unemployment rate averaging 5.0% through the third quarter of 2026.

Current wording

In estimating expected credit losses as of March 31, 2026, 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 1.9% to 2.4% 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 4.7% through the first quarter of 2027.

Previous wording

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 September 30, 2025, was approximately 59 basis points of total loans, decreasing slightly from 62 basis points at December 31, 2024.

Current wording

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 March 31, 2026, was approximately 55 basis points of total loans, decreasing slightly from 57 basis points at December 31, 2025.

Previous wording

The allowance allocated to commercial real estate loans totaled $26.8 million, or 1.15% of total commercial real estate loans, at September 30, 2025, decreasing $10.0 million, from $36.8 million, or 1.42% of total commercial real estate loans, at December 31, 2024. Outstanding loan balances decreased $255.0 million, or 9.8%, during the first nine months of 2025. Specific allocations for loans that were individually evaluated decreased $10.4 million as three relationships totaling $10.9 million were charged-off in the second quarter of 2025. The commercial real estate portfolio does not include significant exposure to urban office properties.

Current wording

The allowance allocated to commercial real estate loans totaled $27.7 million, or 1.19% of total commercial real estate loans, at March 31, 2026, decreasing $0.6 million, from $28.3 million, or 1.21% of total commercial real estate loans, at December 31, 2025. Outstanding loan balances decreased $20.5 million, or 0.9%, during the first three months of 2026. Specific allocations for loans that were individually evaluated decreased $0.7 million. Modeled expected credit losses increased $0.7 million and qualitative factor adjustments decreased $0.6 million. The commercial real estate portfolio does not include significant exposure to urban office properties.

Previous wording

The allowance allocated to construction and land development loans totaled $2.6 million, or 0.99% of total construction and land development loans, at September 30, 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 $0.1 million and qualitative factor adjustments related to construction loans decreased $0.9 million. There were no specific allocations for construction loans that were evaluated for expected credit losses on an individual basis at September 30, 2025 or December 31, 2024.

Current wording

The allowance allocated to construction and land development loans totaled $2.6 million, or 0.93% of total construction and land development loans, at March 31, 2026, compared to $2.6 million, or 0.92% of total constructions loans, at December 31, 2025. Modeled expected credit losses increased $0.1 million and qualitative factor adjustments related to construction loans decreased $0.1 million. There were no specific allocations for construction loans that were evaluated for expected credit losses on an individual basis at March 31, 2026, or December 31, 2025.

Previous wording

The allowance allocated to residential real estate loans totaled $6.4 million, or 1.81% of total residential real estate loans, at September 30, 2025, decreasing $1.6 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 $1.1 million and $0.6 million, respectively. There were no specific allocations for residential real estate loans that were evaluated for expected credit losses on an individual basis at September 30, 2025, or December 31, 2024.

Current wording

The allowance allocated to residential real estate loans totaled $6.2 million, or 1.80% of total residential real estate loans, at March 31, 2026, decreasing $0.5 million, from $6.7 million, or 1.90% of total residential real estate loans, at December 31, 2025. Modeled expected credit losses decreased $0.6 million and qualitative factor adjustments increased $0.1 million. There were no specific allocations for residential real estate loans that were evaluated for expected credit losses on an individual basis at March 31, 2026, or December 31, 2025.

Previous wording

The allowance allocated to consumer loans totaled $5.0 million, or 3.87% of total consumer loans, at September 30, 2025, compared to $5.4 million, or 3.74%, at December 31, 2024. Qualitative factor adjustments increased $1.7 million and specific allocation reserves decreased $2.0 million.

Current wording

The allowance allocated to consumer loans totaled $4.2 million, or 3.11% of total consumer loans, at March 31, 2026, compared to $4.8 million, or 3.33%, at December 31, 2025. Modeled expected credit losses decreased $0.6 million.

Previous wording

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 three and nine months ended September 30, 2025 and 2024:

Current wording

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 three months ended March 31, 2026 and 2025:

Previous wording

The following table sets forth our nonperforming assets by asset categories as of the dates indicated. 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.

Current wording

Nonperforming Loans. 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.

Previous wording

Nonperforming loans were $68.7 million, or 1.41% of total loans, at September 30, 2025, compared to $150.9 million, or 2.92% of total loans at December 31, 2024. The Company continues to prioritize improving its credit quality by tightening its loan underwriting standards and pursuing opportunities to resolve nonperforming loans.

Current wording

In 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 included in our Specialty finance portfolio 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. These actions are reflected in the continued reduction of nonperforming loans. Nonperforming loans decreased to $58.8 million, or 1.36% of total loans, at March 31, 2026, compared to $65.5 million, or 1.50% of total loans at December 31, 2025.

Previous wording

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2025 and 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 $2.5 million and $9.3 million for the three and nine months ended September 30, 2025, respectively, and $2.7 million and $6.3 million for the three and nine months ended September 30, 2024, respectively.

Current wording

We did not recognize interest income on nonaccrual loans during the three months ended March 31, 2026 or 2025 while the loans were in nonaccrual status.

Previous wording

Liabilities. At September 30, 2025, liabilities totaled $6.33 billion compared to $6.80 billion at December 31, 2024.

Current wording

Liabilities. At March 31, 2026, liabilities totaled $5.99 billion compared to $5.95 billion at December 31, 2025.

Previous wording

The following table sets forth the maturity of uninsured time deposits as of September 30, 2025:

Current wording

The following table presents the maturity of uninsured time deposits as of March 31, 2026:

Previous wording

Shareholders’ equity decreased $126.8 million to $584.0 million at September 30, 2025, as compared to December 31, 2024. The change in shareholders’ equity was the result of the net loss of $121.4 million, dividends to common shareholders of $20.6 million, dividends to preferred shareholders of $6.7 million, and decrease in accumulated other comprehensive losses of $19.0 million.

Current wording

Shareholders’ equity decreased $6.5 million to $559.0 million at March 31, 2026, compared to December 31, 2025. The change in shareholders’ equity was the result of dividends to common shareholders of $6.9 million, dividends to preferred shareholders of $2.2 million, repurchases of common stock of $7.9 million, and an increase in accumulated other comprehensive losses of $9.2 million, partially offset by net income of $18.5 million.

Previous wording

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 $17.7 million and $15.0 million at September 30, 2025 and December 31, 2024, respectively, were pledged for securities sold under agreements to repurchase.

Current wording

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 $10.1 million and $12.2 million at March 31, 2026 and December 31, 2025, respectively, were pledged for securities sold under agreements to repurchase.

Previous wording

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).

Current wording

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 repricing 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).

Previous wording

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 September 30, 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.

Current wording

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 March 31, 2026 projects that our earnings exhibit increasing profitability in all of our first year rate shock scenarios. 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 changes in rates through deposit pricing, securities purchase selection and hedging.