FIRST MID BANCSHARES, INC.

Securities

The Company’s overall investment objectives are to insulate the investment portfolio from undue credit risk, maintain adequate liquidity, insulate capital against changes in market value and control excessive changes in earnings while optimizing investment performance. The types and maturities of securities purchased are primarily based on the Company’s current and projected liquidity and interest rate sensitivity positions.

The following table sets forth the amortized cost of the available-for-sale and held-to-maturity securities as of September 30, 2026 and December 31, 2025 (dollars in thousands):

At September 30, 2026, the amortized cost of the Company’s investment portfolio increased by $301.6 million from December 31, 2025 primarily due to the acquisition of Two Rivers Bank, subsequent sale of their entire portfolio, reinvestment of a portion of the proceeds, and the redeployment of some of the proceeds to other areas of the balance sheet. When purchasing investment securities, the Company considers its overall liquidity and interest rate risk profile, as well as the adequacy of expected returns relative to the risks assumed.

The table below presents the credit ratings as of September 30, 2026 for investment securities (in thousands):

The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, and held-to-maturity presented at amortized cost, at September 30, 2026, and the weighted average yield for each range of maturities (dollars in thousands):

The weighted average yields are calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax equivalent yields have been calculated using a 21% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer for which the book value exceeded 10% of stockholders' equity at September 30, 2026.

Loans

The loan portfolio (net of unearned interest) is the largest category of the Company’s earning assets. The following table summarizes the composition of the loan portfolio, including loans held for sale, as of September 30, 2026, and December 31, 2025 (dollars in thousands):

Loan balances increased $837.2 million, or 13.93%. The increase was primarily due to the acquisition of Two Rivers. The balance of real estate loans held for sale, included in the balances shown above, amounted to $6.8 million and $5.2 million as of September 30, 2026 and December 31, 2025, respectively.

Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans. Because payments on loans secured by commercial real estate or equipment are often dependent upon the successful operation and management of the underlying assets, repayment of such loans may be influenced to a great extent by conditions in the market or the economy. The Company does not have any sub-prime mortgages or credit card loans outstanding which are also generally considered to be higher credit risk.

First Mid Bank does not have a concentration, as defined by the regulatory agencies and land development loans or commercial real estate loans as a percentage of the total amount of the Company's total capital for the periods shown above. At September 30, 2026 and December 31, 2025, First Mid Bank did have industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss in the following industries (dollars in thousands):

First Mid Bank had no further industry loan concentrations in excess of 25% of the sum of Tier 1 Capital and allowance for loan loss.

The following table presents the balance of loans outstanding as of September 30, 2026, by contractual maturities (in thousands):

As of September 30, 2026, loans with maturities over one year consisted of approximately $2.9 billion in fixed rate loans and approximately $2.3 billion in variable rate loans. The loan maturities noted above are based on the contractual provisions of the individual loans. The Company has no general policy regarding renewals and borrower requests, which are handled on a case-by-case basis.

Nonperforming Loans and Nonperforming Other Assets

Nonperforming loans include: (a) loans accounted for on a nonaccrual basis; (b) accruing loans contractually past due ninety days or more as to interest or principal payments; and (c) loans not included in (a) and (b) above which are defined as “modified.” Repossessed assets include primarily repossessed real estate and automobiles.

The Company’s policy is to discontinue the accrual of interest income on any loan for which principal or interest is 90 days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.

Restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven. Repossessed assets represent property acquired as the result of borrower defaults on loans. These assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure or repossession. Write-downs occurring at foreclosure are charged against the allowance for credit losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs for subsequent declines in value are recorded in non-interest expense in other real estate owned along with other expenses related to maintaining the properties.

The following table presents information concerning the aggregate amount of nonperforming loans and repossessed assets at September 30, 2026 and December 31, 2025 (dollars in thousands):

The $10.5 million increase in nonaccrual loans during 2026 resulted from the net of $11.0 million of loans acquired from Two Rivers Bank, $8.0 million of loans put on nonaccrual status, offset by $2.1 million of loans becoming current or paid-off, $2.5 million of loans transferred to other real estate owned, and $3.9 million of loans charged off.

The following table summarizes the composition of nonaccrual loans (dollars in thousands):

Interest income that would have been reported if nonaccrual and restructured loans had been performing totaled $2.8 million and $981,000 for the nine months ended September 30, 2026 and 2025, respectively.

The $2.2 million increase in repossessed assets during 2026 resulted from $3.4 million of additional assets repossessed and $551,000 of repossessed assets sold, $608,000 of write-downs on existing assets, and no deferred fair value marks were recognized. The following table summarizes the composition of repossessed assets (dollars in thousands):

Repossessed assets sold during the first nine months of 2026 resulted in net gains of $10,000 related to real estate asset sales and no net gains / losses related to other assets sales.

Loan Quality and Allowance for Credit Losses

The allowance for credit losses represents management’s estimate of the reserve necessary to adequately account for probable losses existing in the current portfolio. The provision for credit losses is the charge against current earnings that is determined by management as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, management relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Once identified, the magnitude of exposure to individual borrowers is quantified in the form of specific allocations of the allowance for credit losses. Management considers collateral values and guarantees in the determination of such specific allocations. Additional factors considered by management in evaluating the overall adequacy of the allowance include historical net credit losses, the level and composition of nonaccrual, past due and renegotiated loans, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.

Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, the uncertainty regarding grain prices, increased operating costs for farmers, and increased levels of unemployment impacting consumers’ ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve. Management considers the allowance for credit losses a critical accounting policy.

Management recognizes there are risk factors that are inherent in the Company’s loan portfolio. All financial institutions face risk factors in their loan portfolios because risk exposure is a function of the business. A portion of the Company’s operations (and therefore its loans) are concentrated in Illinois, where agriculture is the dominant industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At September 30, 2026, the Company’s loan portfolio included $794.4 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $670.3 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $113.0 million from $681.4 million at December 31, 2025 while loans concentrated in other grain farming increased $92.4 million from $577.9 million at December 31, 2025. While the Company adheres to sound underwriting practices, including collateralization of loans, any extended period of low commodity prices, drought conditions, significantly reduced yields on crops and/or reduced levels of government assistance to the agricultural industry could result in an increase in the level of problem agriculture loans and potentially result in credit losses within the agricultural portfolio. The Company also has $1.2 billion loans to lessors of non-residential buildings and $744.6 million of loans to lessors of residential buildings and dwellings.

The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the Board of Directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. Most of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch network. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.

The Company minimizes credit risk by adhering to sound underwriting and credit review policies. Management and the Board of Directors of the Company review these policies at least annually. Senior management is actively involved in business development efforts and the maintenance and monitoring of credit underwriting and approval. The loan review system and controls are designed to identify, monitor, and address asset quality problems in an accurate and timely manner. On a quarterly basis, the Board of Directors and management review the status of problem loans and determine the best estimate of the allowance. In addition to internal policies and controls, regulatory authorities periodically review asset quality and the overall adequacy of the allowance for credit losses.

Analysis of the allowance for credit losses as of September 30, 2026 and 2025, and of changes in the allowance for the three and nine months ended September 30, 2026 and 2025, is summarized as follows (dollars in thousands):

The allowance for credit losses to nonperforming loans ratio has decreased due to the acquired nonperforming loans from Two Rivers Bank. Management believes that the overall estimate of the allowance for credit losses appropriately accounts for probable losses attributable to current exposures.

During the first nine months of 2026, the Company had net charge offs of $3.1 million compared to net charge offs of $4.8 million during the same period of 2025. During the first nine months of 2026, the Company had the following significant charge offs, three commercial real estate loans to two borrowers totaling $1.2 million, one commercial loan to one borrower totaling $290,000, and ten agricultural loans to nine borrowers totaling $1.8 million. During the first nine months of 2025, the Company had the following significant charge offs, two commercial real estate loans to two borrowers totaling $1.0 million, nine agricultural loans to eight borrowers totaling $1.8 million, seven commercial operating loans to six borrowers totaling $1.5 million, and one construction and land development loan to one borrower totaling $107,000.

Deposits

Funding of the Company’s earning assets is substantially provided by a combination of consumer, commercial and public fund deposits. The Company continues to focus its strategies and emphasis on commercial and retail core deposits, the major component of funding sources. The following table sets forth the average deposits and weighted average rates for the nine months ended September 30, 2026 and for the year-ended December 31, 2025 (dollars in thousands):

During the first nine months of 2026, the average balance of deposits increased by $1.1 billion from the average balance for the year-ended December 31, 2025. The increase in the first nine months of 2026 was primarily due to the acquisition of Two Rivers.

Balances of time deposits of more than $250,000 include time deposits maintained for public fund entities and consumer time deposits. The following table sets forth the maturity of time deposits of more than $250,000 at September 30, 2026 and December 31, 2025 (in thousands):

Repurchase Agreements and Other Borrowings

Securities sold under agreements to repurchase are short-term obligations of First Mid Bank. These obligations are collateralized with certain government securities that are direct obligations of the United States or one of its agencies. These retail repurchase agreements are a cash management service to corporate customers. Other borrowings consist of Federal Home Loan Bank (“FHLB”) advances, federal funds purchased, loans (short-term or long-term debt) that the Company has outstanding, subordinated debt and junior subordinated debentures.

Information relating to securities sold under agreements to repurchase and other borrowings as of September 30, 2026 and December 31, 2025 is presented below (dollars in thousands):

Securities sold under agreement to repurchase decreased $9.0 million during the nine months ended September 30, 2026 primarily due to the seasonal demands in balances and changes in cash flow needs of various customers. FHLB advances represent borrowings by First Mid Bank to economically fund loan demand. At September 30, 2026, the advances consisted of $320.0 million with a weighted-average interest rate of 3.69% and maturities from October 2026 to August 2036.

The Company is party to a revolving credit agreement in the amount of $15.0 million with Bankers' Bank with an outstanding balance of $0 as of September 30, 2026 and $15.0 million in available funds. This loan was entered into on April 10, 2026 for one year as a revolving credit agreement. The interest rate is floating at 0.75% under the Wall Street Journal Prime Rate as published in the Midwest edition. The Company and First Mid Bank were in compliance with the existing covenants at September 30, 2026 and 2025, and December 31, 2025.

On October 6, 2020, the Company issued and sold $96.0 million in aggregate principal amount of its 3.95% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”). The Notes were issued pursuant to the Indenture, dated as of October 6, 2020 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of October 6, 2020 (the “Supplemental Indenture”), between the Company and the Trustee. The Base Indenture, as amended and supplemented by the Supplemental Indenture, governs the terms of the Notes and provides that the Notes are unsecured, subordinated debt obligations of the Company and will mature on October 15, 2030. From and including the date of issuance to, but excluding October 15, 2025, the Notes bore interest at an initial rate of 3.95% per annum. From and including October 15, 2025 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 383 basis points, or such other rate as determined pursuant to the Supplemental Indenture, provided that in no event shall the applicable floating interest rate be less than zero per annum (7.58% and 3.95% at September 30, 2026 and 2025, respectively). On June 7, 2024, August 27, 2024, and September 6, 2024, the Company repurchased in open market transactions and subsequently cancelled $4.0 million, $15.0 million, and $1.0 million respectively, of the outstanding Notes. On October 15, 2025, April 15, 2026, and July 15, 2026, the Company paid down $20 million, $27.5 million, and $10 million, respectively, of the outstanding Notes. As a result, as of September 30, 2026, $18.5 million in aggregate principal amount of the Notes remain issued and outstanding.

The Company may, beginning with the interest payment date of October 15, 2025, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the Notes at any time, including prior to October 15, 2025, at the Company’s option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date.

On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2031 (“Blackhawk Subordinated Debt I”). Blackhawk Subordinated Debt I was issued pursuant to an Indenture between the Company and UMB Bank, as trustee. This Indenture governs the terms of the Blackhawk Subordinated Debt I and provides that such notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2031. From and including the date of issuance to, but excluding May 14, 2026, the notes bore interest at an initial rate of 3.50% per annum. From and including May 14, 2026 to, but excluding the maturity date, the notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 285 basis points (6.60% and 3.50% at September 30, 2026 and 2025, respectively). On February 5, 2025, the Company repurchased in open market transactions and subsequently cancelled $3.0 million of the outstanding Blackhawk Subordinated Debt I Notes. As a result, as of September 30, 2026, $4.5 million in aggregate principal amount of Blackhawk Subordinated Debt I Notes remain issued and outstanding.

On August 15, 2023, the Company assumed, as part of the Blackhawk Bancorp, Inc. acquisition, $7.5 million principal amount of 3.875% Fixed-to-Floating Rate Subordinated Notes due 2036 (“Blackhawk Subordinated Debt II”). Blackhawk Subordinated Debt II was issued pursuant to an Indenture between the Company and UMB Bank, as trustee. This Indenture governs the terms of the Blackhawk Subordinated Debt II and provides that such notes are unsecured, subordinated debt obligations of the Company and will mature on May 14, 2036. From and including the date of issuance to, but excluding May 14, 2031, the notes bore interest at an initial rate of 3.875% per annum. From and including May 14, 2031 to, but excluding the maturity date, the notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 255 basis points. On February 5, 2025, the Company repurchased in open market transactions and subsequently cancelled $7.0 million of the outstanding Blackhawk Subordinated Debt II Notes. As a result, as of September 30, 2026, $500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain issued and outstanding.

On February 28, 2026, the Company assumed, as part of the Two Rivers acquisition, $20.0 million principal amount of 3.75% Fixed-to-Floating Rate Note Payable due 2029 (“Two Rivers Note Payable”). The Two Rivers Note Payable was issued pursuant to an Indenture between the Company and Bankers Bank, as trustee. This Indenture governs the terms of the Two Rivers Note Payable and provides that such note will mature on September 30, 2029. From and including the date of issuance to, but excluding the date of July 1, 2026, the notes will bear interest at an initial rate of 3.75% per annum. From and including July 1, 2026 to, but excluding the maturity date, the notes will bear interest at a fixed rate of 6.125% per annum. As of September 30, 2026, $19.5 million in aggregate principal amount of the Two Rivers Note Payable remains issued and outstanding.

On April 10, 2026, the Company issued $20.0 million principal amount of a Floating Rate Note Payable due 2029 (“First Mid Note Payable”) for the purpose of paying down $20.0 million of Notes issued on October 6, 2020 on April 15, 2026, as mentioned above. The First Mid Note Payable was issued pursuant to an Indenture between the Company and Bankers Bank, as trustee. This Indenture governs the terms of the First Mid Note Payable and provides that such note will mature on April 10, 2029. The notes will bear interest at a floating rate equal to thirty-day Term SOFR plus a spread of 275 basis points (6.40% at September 30, 2026). As of September 30, 2026, $19.7 million in aggregate principal amount of the First Mid Note Payable remains issued and outstanding.

On April 26, 2006, the Company completed the issuance and sale of $10 million of fixed/floating rate trust preferred securities through First Mid-Illinois Statutory Trust II (“Trust II”), a statutory business trust and wholly owned unconsolidated subsidiary of the Company, as part of a pooled offering. The Company established Trust II for the purpose of issuing the trust preferred securities. The $10.0 million in proceeds from the trust preferred issuance and an additional $310,000 for the Company’s investment in common equity of Trust II, a total of $10.3 million, was invested in junior subordinated debentures of the Company. The underlying junior subordinated debentures issued by the Company to Trust II mature in 2036, bore interest at a fixed rate of 6.98% paid quarterly until June 15, 2011 and then converted to floating rate (SOFR plus 160 basis points) after June 15, 2011 (5.76% and 5.59% at September 30, 2026 and December 31, 2025, respectively). The net proceeds to the Company were used for general corporate purposes, including the Company’s acquisition of Mansfield Bancorp, Inc. in 2006.

On September 8, 2016, the Company assumed the trust preferred securities of Clover Leaf Statutory Trust I (“CLST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First Clover Financial. The $4.0 million of trust preferred securities and an additional $124,000 additional investment in common equity of CLST I, is invested in junior subordinated debentures issued to CLST I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 185 basis points (6.01% and 5.84% at September 30, 2026 and December 31, 2025, respectively) and reset quarterly.

On May 1, 2018, the Company assumed the trust preferred securities of FBTC Statutory Trust I (“FBTCST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of First BancTrust Corporation. The $6.0 million of trust preferred securities and an additional $186,000 investment in common equity of FBTCST I is invested in junior subordinated debentures issued to FBTCST I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 170 basis points (5.86% and 5.69% at September 30, 2026 and December 31, 2025, respectively) and reset quarterly.

On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust I (“BHST I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $1.0 million trust preferred securities and an additional $31,000 investment in common equity of BHST I is invested in junior subordinated debentures issued to BHST I. The subordinated debentures mature in 2032, bear interest at three-month SOFR plus 325 basis points (7.59% and 7.20% at September 30, 2026 and December 31, 2025, respectively) and reset quarterly.

On August 15, 2023, the Company assumed the trust preferred securities of Blackhawk Statutory Trust II (“BHST II”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Blackhawk Bancorp, Inc. The $4.0 million of trust preferred securities and an additional $124,000 investment in common equity of BHST II is invested in junior subordinated debentures issued to BHST II. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 205 basis points (6.29% and 6.02% at September 30, 2026 and December 31, 2025, respectively) and reset quarterly.

On February 28, 2026, the Company assumed the trust preferred securities of Great River Capital Trust I (“GRCT I”), a statutory business trust that was a wholly owned unconsolidated subsidiary of Two Rivers. The $10.0 million of trust preferred securities and an additional $310,000 investment in common equity of GRCT I is invested in junior subordinated debentures issued to GRCT I. The subordinated debentures mature in 2035, bear interest at three-month SOFR plus 175 basis points (5.91% at September 30, 2026) and reset quarterly.

The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, BHST II, and GRCT I are included as Tier 1 capital of the Company for regulatory capital purposes. On March 1, 2005, the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust preferred securities in the calculation of Tier 1 capital for regulatory purposes. The final rule provided a five-year transition period, ending September 30, 2010, for application of the revised quantitative limits. On March 17, 2009, the Federal Reserve Board adopted an additional final rule that delayed the effective date of the new limits on inclusion of trust preferred securities in the calculation of Tier 1 capital until March 31, 2012. The application of the revised quantitative limits did not and is not expected to have a significant impact on its calculation of Tier 1 capital for regulatory purposes or its classification as well-capitalized. The Dodd-Frank Act, signed into law July 21, 2010, removes trust preferred securities as a permitted component of a holding company’s Tier 1 capital after a three-year phase-in period beginning January 1, 2013, for larger holding companies. For holding companies with less than $15 billion in consolidated assets, existing issues of trust preferred securities are grandfathered and not subject to this new restriction. New issuances of trust preferred securities, however, would not count as Tier 1 regulatory capital.

In addition to requirements of the Dodd-Frank Act discussed above, the act also required the federal banking agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (defined as hedge funds and private equity funds). This rule is generally referred to as the “Volcker Rule.” On December 10, 2013, the federal banking agencies issued final rules to implement the prohibitions required by the Volcker Rule. Following the publication of the final rule, and in reaction to concerns in the banking industry regarding the adverse impact the final rule’s treatment of certain collateralized debt instruments has on community banks, the federal banking agencies approved a final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities. Under the final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities under $15 billion in assets if (1) the collateralized debt obligation was established and issued prior to May 19, 2010, (2) the banking entity reasonably believes that the offering proceeds received by the collateralized debt obligation were invested primarily in qualifying trust preferred collateral, and (3) the banking entity’s interests in the collateralized debt obligation were acquired on or prior to December 10, 2013. Although the Volcker Rule impacts many large banking entities, the Company does not currently anticipate that the Volcker Rule will have a material effect on the operations of the Company or First Mid Bank.