FIRST MID BANCSHARES, INC.

Net Interest Income

The largest source of operating revenue for the Company is net interest income. Net interest income represents the difference between total interest income earned on earning assets and total interest expense paid on interest-bearing liabilities. The amount of interest income is dependent upon many factors, including the volume and mix of earning assets, the general level of interest rates and the dynamics of changes in interest rates. The cost of funds necessary to support earning assets varies with the volume and mix of interest-bearing liabilities and the rates paid to attract and retain such funds.

For analytical purposes, net interest income is presented on a full tax equivalent (TE) basis in the table that follows. The federal statutory rate in effect of 21% for 2026 and 2025 was used. The TE analysis portrays the income tax benefits associated with the tax-exempt assets. The year-to-date net yield on interest-earning assets excluding the TE adjustments of $796,000 and $753,000 for 2026 and 2025, respectively, were 3.74% and 3.56% at March 31, 2026 and 2025, respectively.

The Company’s average balances, fully tax equivalent interest income and interest expense, and rates earned or paid for major balance sheet categories are set forth for the three months ended March 31, 2026 and 2025 in the following table (dollars in thousands):

(1)

Tax-exempt income is shown on a fully tax equivalent basis.

(2)

Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discounts related to loans acquired.

(3)

Includes loans held for sale.

Changes in net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table summarizes the approximate relative contribution of changes in average volume and interest rates to changes in net interest income for the three months ended March 31, 2026 and 2025 (in thousands):

(1)

Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate.

(2)

Nonaccrual loans have been included in the average balances. Balances are net of unaccreted discounts related to loans acquired.

Net interest income on a tax equivalent basis increased $11.4 million, or 18.98%, to $71.6 million for the three months ended March 31, 2026, from $60.2 million for the same period in 2025. Net interest income on a tax equivalent basis and tax equivalent net interest margin increased primarily due to an increase in earning asset yields and a decrease in deposit rates.

For the three months ended March 31, 2026, average earning assets increased $900.9 million, or 13.31%, and average interest-bearing liabilities increased $661.0 million or 12.69% compared with average balances for the same period in 2025.

Provision for Credit Losses

The provision for credit losses for the three months ended March 31, 2026 and 2025 was $2.6 million and $1.7 million, respectively. Nonperforming loans were $44.1 million and $26.6 million as of March 31, 2026 and 2025, respectively. Net charge offs were $1.5 million for the three months ended March 31, 2026, compared to net charge offs of $1.8 million for March 31, 2025. For information on credit loss experience and nonperforming loans, see “Nonperforming Loans and Nonperforming Other Assets” and “Loan Quality and Allowance for Credit Losses” herein.

Other Income

An important source of the Company’s revenue is derived from other income. The following table sets forth the major components of other income for the three months ended March 31, 2026 and 2025 (in thousands):

The primary reasons for the more significant changes in other income components for the three months ended March 31, 2026 compared to the same period in 2025 are as follows:

•

Wealth management revenues increased due to the acquisition of Two Rivers on February 28, 2026, including their trust and brokerage portfolio.

•

Insurance commissions increased primarily due to the acquisition of a portion of AAIG's customer list in July 2025 and the customer list of Downs Insurance Agency, Inc. in January 2026 as well as organic growth.

•

ATM / debit card revenue increased primarily due to the acquisition of Two Rivers Bank in the quarter ended March 31, 2026.

Other Expense

The major categories of other expense include salaries and employee benefits, occupancy and equipment expenses and other operating expenses associated with day-to-day operations. The following table sets forth the major components of other expense for the three months ended March 31, 2026 and 2025 (dollars in thousands):

The primary reasons for the more significant changes in other expense components for the three months ended March 31, 2026 compared to the same period in 2025 are as follows:

•

The increase in salaries and employee benefits, the largest component of other expense, is primarily due to the increase in full-time equivalent employees from 1,194 to 1,335 at March 31, 2025 and 2026, respectively, due to the acquisition of Two Rivers.

•

The increase in occupancy and equipment expense is primarily due to the acquisition of Two Rivers and the related expanded real estate footprint.

•

The increase in all other operating expenses during the quarter ended March 31, 2026, were due to integration and acquisition related expenses for Two Rivers Bank on February 28, 2026.

Income Taxes

Total income tax expense amounted to $7.6 million for the three months ended March 31, 2026, compared to $6.0 million for the same period in 2025. Effective tax rates were 22.3% for the three months ended March 31, 2026, compared to 21.2% for the same period in 2025. The Company files U.S. federal and state of Florida, Illinois, Indiana, Iowa, Missouri, Texas, and Wisconsin income tax returns.