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 $2.4 million and $2.3 million for 2026 and 2025, respectively, were 3.74% and 3.66% at September 30, 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 and nine months ended September 30, 2026 and 2025 in the following table (dollars in thousands):

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 and nine months ended September 30, 2026, compared to the same periods in 2025 (in thousands):

Net interest income on a tax equivalent basis increased $40.3 million, or 21.01%, to $232.3 million for the nine months ended September 30, 2026, from $191.9 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 investment security and loan yields and a decrease in interest bearing deposit costs.

For the nine months ended September 30, 2026, average earning assets increased $1.3 billion, or 18.80%, and average interest-bearing liabilities increased $1.0 billion or 18.77% compared with average balances for the same period in 2025.

Provision for Credit Losses

The provision for credit losses for the nine months ended September 30, 2026 and 2025 was $3.8 million and $7.6 million, respectively. Nonperforming loans were $43.1 million and $22.2 million as of September 30, 2026 and 2025, respectively. Net charge offs were $3.1 million for the nine months ended September 30, 2026, compared to net charge offs of $4.8 million for the nine months ended September 30, 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 and nine months ended September 30, 2026 and 2025 (in thousands):

The primary reasons for the more significant changes in other income components for the three and nine months ended September 30, 2026 compared to the same period in 2025 are as follows:

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Wealth management revenues increased for the three and nine month periods due to the acquisition of Two Rivers on February 28, 2026, including their trust and brokerage portfolio, the acquisition of RFMS in December of 2025, and organic growth.

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Insurance commissions increased for the three and nine month periods primarily due to the acquisition of the customer list of DIA in January 2026 as well as organic growth.

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Service charges and ATM / debit card revenue increased for the three and nine month periods primarily due to the acquisition of Two Rivers and the related increase in customers.

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Investment securities gains (losses), net increased for the three and nine month periods due to strategic sale opportunities that occurred in 2025 and generated a loss.

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Other income decreased for the three and nine month periods due to gains recognized on the sale of real estate as part of the Company's branch optimization project in 2025.

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 and nine months ended September 30, 2026 and 2025 (dollars in thousands):

The primary reasons for the more significant changes in other expense components for the three and nine months ended September 30, 2026 compared to the same period in 2025 are as follows:

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The increase for the three and nine month periods in salaries and employee benefits, the largest component of other expense, is primarily due to the increase in full-time equivalent employees from 1,178 to 1,313 at September 30, 2025 and 2026, respectively, due to the acquisition of Two Rivers and the Company's annual merit and promotional cycle that occurs in April.

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The increase for the three and nine month periods in occupancy and equipment expense is primarily due to the acquisition of Two Rivers and the related expanded real estate footprint and increase in full-time equivalent employees.

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The increase for the nine month period in amortization of other intangible assets is primarily due to the acquisition of Two Rivers and the related core deposit intangible and customer list intangible.

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The increase for the nine month period in ATM / debit card expense is primarily due to the acquisition of Two Rivers and the related increase in the volume of transactions.

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The increase for the nine month period in all other operating expenses is primarily due to integration and acquisition expenses related to the acquisition of Two Rivers Bank on February 28, 2026.

Income Taxes

Total income tax expense amounted to $24.7 million for the nine months ended September 30, 2026, compared to $19.0 million for the same period in 2025. Effective tax rates were 22.06% for the nine months ended September 30, 2026, compared to 21.80% 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.