FIRST MID BANCSHARES, INC.

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to require additional disclosures within the notes to the financial statements about certain expense items. Specifically, disaggregation of income statement captions that contain expenses within the following five categories is required: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) costs recognized as part of oil- and gas-producing activities or other amounts of depletion expense. Further, this update requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. This update provides a practical expedient for banks and bank holding companies to continue presenting salaries and employee benefits in conformity with SEC Rule 210.9-04 instead of requiring those entities to apply the employee compensation definition included in Subtopic 220-40. The amendments in this update may be applied on either a prospective or retrospective basis and will be effective for the Company beginning with the annual reporting period ending December 31, 2027, and interim reporting periods beginning January 1, 2028. The Company does not expect adoption of this ASU to have any impact on its financial position or results of operations because it only results in additional disclosures.

In November 2025, the FASB published ASU 2025-08, Financial Instruments Credit Losses (Topic 326): Purchased Loans (ASU 2025-08). The update was published with the intent to eliminate the current expected credit loss (CECL) “double count” on non-Purchase Credit Deteriorated (PCD) Loans. The update accomplishes this through using “gross up” methodology that is similar to the methodology used on PCD Loans. In the new method all “purchased seasoned loans” are grossed up for the Allowance for Credit Losses (ACL) expected on the loans. Purchased seasoned loans are defined as either:

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a loan that is obtained through a business combination accounted for using the acquisition method (most common for the Company); or

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a loan obtained through a transfer that is not a business combination accounted for using the acquisition method or initially recognized through the consolidation of a variable interest entity and these loans must meet both of the following criteria:

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the loan is obtained more than 90 days after its origination date; and

o

the acquirer was not involved in the loan’s origination.

The Company adopted this standard as of January 1, 2026.

Note 2 -- Earnings Per Share

Basic net income per common share available to common stockholders is calculated as net income less preferred stock dividends divided by the weighted average number of common shares outstanding. Diluted net income per common share available to common stockholders is computed using the weighted average number of common shares outstanding, increased by the assumed conversion of the Company’s convertible preferred stock and the Company’s stock options and restricted stock awarded, unless anti-dilutive.

The components of basic and diluted net income per common share available to common stockholders for thethree and nine months ended September 30, 2026 and 2025 were as follows:

There wereno shares not considered in computing diluted earnings per share for thethree and nine months ended September 30, 2026 and 2025.

Note 3 -- Investment Securities

The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at September 30, 2026 and December 31, 2025 were as follows (in thousands):

The Company also had$2.7 million and$4.6 million of equity securities, at fair value, as of September 30, 2026 and December 31, 2025, respectively. Investment securities carried at approximately$554.3 million and$473.8 million at September 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law. All the Company's held-to-maturity securities are government agency-backed securities for which the risk of loss is minimal. As such, as of September 30, 2026, the Company did not record an allowance for credit losses on its held-to-maturity securities.

Proceeds from sales of available-for-sale investment securities, realized gains and losses from calls and sales of investment securities and income tax expense were as follows during thethree and nine months ended September 30, 2026 and 2025 (in thousands):

The following table presents the aging of gross unrealized losses and fair value by investment category as of September 30, 2026 and December 31, 2025 (in thousands):

At September 30, 2026, there were four hundred sixty-four available-for-sale securities with a fair value of$828.9 million and unrealized losses of$168.8 million in a continuous unrealized loss position for twelve months or more. At December 31, 2025, there were four hundred eighty-eight available-for-sale securities with a fair value of$888.7 million and unrealized losses of$141.6 million in a continuous unrealized loss position for twelve months or more.

At September 30, 2026 and December 31, 2025, there wereno held-to-maturity securities in a continuous unrealized loss position for twelve months or more.

The Company does not consider available-for-sale securities with unrealized losses at September 30, 2026, to be experiencing credit lossesand recognized no resulting allowance for credit losses. The Company does not intend to sell a significant amount of the investments in the normal course of operations unless they are acquired and subsequently marked to fair value, and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. The unrealized losses occurred as a result of changes in interest rates, market spreads, and market conditions after purchase.

Note 4 -- Loans and Allowance for Credit Losses

Loans are stated at the principal amount outstanding net of unearned discounts, unearned income, and allowance for credit losses. Unearned income includes deferred loan origination fees reduced by loan origination costs and is amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding.

A summary of loans at September 30, 2026 and December 31, 2025 follows (in thousands):

Net loans increased$824.0 million as of September 30, 2026 compared to December 31, 2025. The increase was primarily due to the acquisition of $860.5 million of net loans that were acquired in the Two Rivers acquisition. Loans expected to be sold are classified as held for sale in the consolidated financial statements and are recorded at the lower of aggregate cost or fair value, taking into consideration future commitments to sell the loans. These loans are primarily for 1-4 family residential properties. Accrued interest on loans, which is excluded from the amortized cost of the balances above, totaled$39.9 million and$35.1 million at September 30, 2026 and December 31, 2025, respectively.

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. The vast majority 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’s lending can be summarized into the following primary areas:

Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel and motel operators, and loans to owners of multifamily residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the Company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan-to-value ratios range from 65% to 85% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x to 1.35x. Amortization periods for commercial real estate loans are generally limited totwenty tothirty years, depending on the collateral typeand loan-to-value. The Company’s commercial real estate portfolio is below the threshold of 300 percent of the Company's total capital that would designate a concentration in commercial real estate lending, as established by the federal banking regulators.

The following table represents the gross commercial real estate loans by property type as of September 30, 2026 (in thousands):

Commercial and Industrial Loans. Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written forone year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited toseven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required to be determined by the size of the relationship. Measures employed by the Company for businesses with higher risk profiles include the use of government-assisted lending programs through the Small Business Administration and U.S. Department of Agriculture.

Agricultural and Agricultural Real Estate Loans. Agricultural loans are generally comprised of seasonal operating lines to grain farmers to plant and harvest corn and soybeans, term loans to fund the purchase of equipment, and the Company's Direct Merchant Finance product to fund crop inputs, primarily seed. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written forone year and secured by the crop. The Direct Merchant Finance loans are typically written for one year and are generally unsecured. Loan-to-value ratios on loans secured by farmland generally do not exceed 80% and have amortization periods ranging from twenty-five tothirty years depending on the loan-to-value. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate.

Residential Real Estate Loans. Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The Company sells most of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods oftwenty-five years or less. The Company does not originate subprime mortgage loans.

Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.

Construction and land development loans. Constructionand land development loans are generally comprised of loans of all sizes, across many different industries, and can include properties for commercial businesses or land development or for residential use such as multifamily properties. Commercial and land development loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. Construction and land development loans include unique risks that require enhanced diligence by lending personnel. For these loans, documentation requirements have been established within policy, and a specific checklist is followed. Additionally, based on the type of construction loan, the policy is also followed to designate the construction and land development loans as high-volatility commercial real estate if the loan meets the criteria. To ensure consistent construction loan monitoring, loans greater than $2 million must be monitored by the Bank’s construction monitoring staff.

The policy also establishes maximum loan-to-value/amortizations, terms, construction periods, cash investments, pre-sale/lease, and other requirements and are specific to the type of property including non-farm, non-residential secured loans as well as multifamily, 1-4 family non-owner occupied, land acquisition/development/vacant lot acquisition, and raw land. Maximum loan-to-value ratios range from 65% to 80% depending upon the type of real estate collateral. Amortization periods for construction and land development loans are generally limited totwenty tothirty years, depending on the collateral type and loan-to-value. The Company’s construction and land development portfolio is below the threshold of 100 percent of the Company's total capital that would designate a concentration in construction and land development lending, as established by the federal banking regulators.

Other Loans. Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality.