I haven't tried it for a library book sideloaded via ADE, but, I would have expected the annotations to still be there. The reading status would have been lost, but, not the annotations.
The reason for this is that for epubs, the annotations are stored in two places. One is in the database, the other is in the directory "Digital Editions/Annotations". The database entries would have been removed when the book was replaced. But, the file with the annotations is kept. My experience is that when I replace a book manually, the annotations are loaded from the file when the book is next opened. The file path for the book is what is used to find the annotations file. That means that the replacement book has to be in the same place and the same file name.
The behaviour might be different for library books. It is possible the annotations are being deleted when the lending period expires. Or when the book is removed or replaced. You would need to look at the directory above to see what is there at each step. I rarely use the library books or ADE, so I'm not sure what happens.
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