First Mid Bancshares, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis is intended to provide a better understanding of the consolidated financial condition and results of operations of the Company and its subsidiaries as of, and for the three and nine months ended September 30, 2025 and 2024. This discussion and analysis should be read in conjunction with the consolidated financial statements, related notes and selected financial data appearing elsewhere in this report.

Forward-Looking Statements

This document may contain certain forward-looking statements about First Mid, such as discussions of First Mid’s pricing and fee trends, credit quality and outlook, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. First Mid intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of First Mid, are identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Actual results could differ materially from the results indicated by these statements because the realization of those results is subject to many risks and uncertainties, including, among other things; changes in interest rates; general economic conditions and those in the market areas of First Mid; legislative and/or regulatory changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of First Mid’s loan or investment portfolios and the valuation of those investment portfolios; demand for loan products; deposit flows; competition, demand for financial services in the market areas of First Mid; accounting principles, policies and guidelines. Additional information concerning First Mid, including additional factors and risks that could materially affect First Mid’s financial results, are included in First Mid’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Overview

This overview of management’s discussion and analysis highlights selected information in this document and may not contain all the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates which have an impact on the Company’s financial condition and results of operations you should carefully read this entire document.

Net income was $68.1 million and $59.7 million for the nine months ended September 30, 2025 and 2024, respectively. Diluted net income per common share was $2.84 and $2.49 for the nine months ended September 30, 2025 and 2024, respectively.

The following table shows the Company’s annualized performance ratios for nine months ended September 30, 2025 and 2024, compared to the performance ratios for the year ended December 31, 2024:

Total assets were $7.8 billion at September 30, 2025, compared to $7.5 billion as of December 31, 2024. From December 31, 2024 to September 30, 2025, cash and cash equivalents increased $155.9 million, net loan balances increased $149.9 million and investment securities increased $27.0 million. Net loan balances were $5.7 billion at September 30, 2025 compared to $5.6 billion at December 31, 2024.

Net interest margin, on a tax equivalent basis, defined as net interest income divided by average interest-earning assets, was 3.71% for the nine months ended September 30, 2025, up from 3.32% for the same period in 2024. This increase was primarily due to an increase in earning asset yields and by decreased rates on interest-bearing deposits and borrowings. Net interest income before the provision for credit losses was $189.6 million compared to net interest income of $169.8 million for the same period in 2024. The increase in net interest income was primarily due to the increased net interest margin as mentioned above.

Total non-interest income of $71.4 million increased $1.4 million or 2.1% from $69.9 million for the same period last year. The increase in non-interest income resulted primarily from an increase in insurance commissions, partially offset by an increase in losses on the sale of securities.

Total non-interest expense of $166.4 million increased $7.7 million or 4.8% from $158.7 million for the same period last year. The increase was primarily due to the routine annual increases in salaries and employee benefits and an increase in expense accrued for incentive compensation based on overperformance compared to the 2025 budget, partially offset by the decrease in integration expenses compared to the first three quarters of 2024 related to Blackhawk Bank.

Following is a summary of the factors that contributed to the changes in net income (in thousands):

Credit quality is an area of importance to the Company. Total nonperforming loans were $22.2 million at September 30, 2025, compared to $18.2 million at September 30, 2024 and $29.8 million at December 31, 2024. See the discussion under the heading “Loan Quality and Allowance for Credit Losses” for a detailed explanation of these balances. Repossessed asset balances totaled $1.5 million at September 30, 2025 compared to $1.8 million at September 30, 2024 and $2.2 million at December 31, 2024.

The Company’s provision for credit losses for the nine months ended September 30, 2025 and 2024 was $7.6 million and $2.0 million, respectively. Total loans past due 30 days or more were 0.50% of loans at September 30, 2025 compared to 0.39% at September 30, 2024, and 0.19% of loans at December 31, 2024. Loans secured by both commercial and residential real estate comprised approximately 68.2% of the loan portfolio as of September 30, 2025 and 68.4% as of December 31, 2024.

The Company’s capital position remains strong, and the Company has consistently maintained regulatory capital ratios above the “well-capitalized” standards. The Company’s Tier 1 capital to risk weighted assets ratio calculated under the regulatory risk-based capital requirements at September 30, 2025 and 2024 and December 31, 2024 was 13.53%, 12.70% and 12.82%, respectively. The Company’s total capital to risk weighted assets ratio calculated under the regulatory risk-based capital requirements at September 30, 2025 and 2024, and December 31, 2024 was 15.99%, 15.24% and 15.37%, respectively.

The Company’s liquidity position remains sufficient to fund operations and meet the requirements of borrowers, depositors, and creditors. The Company maintains various sources of liquidity to fund its cash needs. See the discussion under the heading “Liquidity” for a full listing of sources and anticipated significant contractual obligations.

The Company enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. The total outstanding commitments at September 30, 2025 and 2024, were $1.5 billion and $1.4 billion, respectively.

Federal Deposit Insurance Corporation Insurance Coverage. As FDIC-insured institutions, First Mid Bank is required to pay deposit insurance premium assessments to the FDIC. Several requirements with respect to the FDIC insurance system have affected results, including insurance assessment rates.

The Company expensed $2.6 million and $2.6 million for the assessment during the first nine months of 2025 and 2024, respectively.

Critical Accounting Policies and Use of Significant Estimates

The Company has established various accounting policies that govern the application of U.S. generally accepted accounting principles in the preparation of the Company’s consolidated financial statements. The significant accounting policies and use of significant estimates of the Company are described in the footnotes to the consolidated financial statements included in the Company’s 2024 Annual Report on Form 10-K.

Results of Consolidated Operations

Net Interest Income

The largest source of 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.

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. 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 2025 and 2024 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 $2.3 million and $2.3 million for 2025 and 2024, respectively were 3.66% and 3.26% at September 30, 2025 and 2024, 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, 2025 and 2024 in the following table (dollars in thousands):

40

1. The tax-exempt income is shown on a tax equivalent basis.

2. Nonaccrual loans and loans held for sale are included in the average balances. Balances are net of unaccreted discount related to loans acquired.

3. During the first quarter 2025, the Company changed the methodology utilized for the calculation of net interest margin to be more consistent with what is typically used by peer banks and research analysts. The calculation now is the annualized net interest income on a tax equivalent basis divided by average interest earning assets.

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, 2025, compared to the same period in 2024 (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. The tax-exempt income is shown on a tax-equivalent basis.

3. Nonaccrual loans have been included in the average balances.

Tax equivalent net interest income increased $19.9 million, or 11.5%, to $191.9 million for the nine months ended September 30, 2025, from $172.1 million for the same period in 2024. Net interest income and net interest margin increased primarily due to an increase in earning asset yields and a decrease in deposit and borrowing rates.

For the nine months ended September 30, 2025, average earning assets increased $68.4 million, or 1.0%, and average interest-bearing liabilities increased $4.7 million or 0.1% compared with average balances for the same period in 2024.

The changes in average balances for these periods are shown below:

• Average interest-bearing deposits with other financial institutions decreased $40.0 million or 26.0%.
• Average federal funds sold decreased $305,000 or 80.3%.
• Average certificates of deposits investments decreased $345,000 or 11.9%.
• Average loans increased by $170.0 million or 3.1%.
• Average securities decreased by $61.0 million or 5.2%.
• Average interest-bearing customer deposits increased by $86.6 million or 1.8%.
• Average securities sold under agreements to repurchase decreased by $26.6 million or 11.9%.
• Average borrowings and other debt decreased by $55.3 million or 14.7%.
• Net interest margin increased to 3.71% for the first nine months of 2025 from 3.32% for the first nine months of 2024.

Provision for Credit Losses

The provision for credit losses for the nine months ended September 30, 2025 and 2024 was $7.6 million and $2.0 million, respectively. Net charge offs were $4.8 million for the nine months ended September 30, 2025, compared to net charge offs of $1.9 million for September 30, 2024. Nonperforming loans were $22.2 million and $18.2 million as of September 30, 2025 and 2024, respectively. For information on loan loss experience and nonperforming loans, see discussion under the “Nonperforming Loans” and “Loan Quality and Allowance for Credit Losses” sections below.

Other Income

An important source of the Company’s revenue is other income. The following table sets forth the major components of other income for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Following are explanations of the significant changes in these other income categories for the three and nine months ended September 30, 2025 compared to the same period in 2024:

• Wealth management revenues decreased due to agricultural services fee income decreasing as a result of lower commodity prices.
• Insurance commissions increased primarily due to the acquisition of MRIG during the third quarter of 2024 and the acquisition of a portion of AAIG's customer list in July 2025.
• Security losses, net increased due to strategic sales of securities during the period that allowed the Company to invest the resulting cash at a higher yield.
• Other income increased for the three month period due to gains recognized on the sale of real estate assets as part of the Company's branch optimization project.

Other Expense

The following table sets forth the major components of other expense for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Following are explanations for the significant changes in these other expense categories for the three and nine months ended September 30, 2025 compared to the same period in 2024:

• The increase in salaries and employee benefits, the largest component of other expense, is primarily due to regularly scheduled annual raises and increase in expense accrued for incentive compensation to be paid in 2026 based on overperformance compared to the 2025 budgeted net income. There were 1,178 and 1,207 full-time equivalent employees at September 30, 2025 and 2024, respectively.
• The increase in occupancy and equipment and legal and professional fees expenses are primarily due to nonrecurring technology project expenses in the first three quarters of 2025.
• The decrease in all other operating expenses during the first nine months of 2025 was primarily due to integration related expenses for Blackhawk Bank occurring during the first quarter of 2024.

Income Taxes

Total income tax expense amounted to $19.0 million (21.8% effective tax rate) for the nine months ended September 30, 2025, compared to $19.3 million (24.4% effective tax rate) for the same period in 2024. The decrease in effective rate is primarily related to a true-up of the Company's tax accrual and the state of Illinois law change that became effective during the second quarter of 2024 that required a one-time revalue of deferred taxes and resulted in a decrease Illinois apportionment percentage for all of 2025.

On July 4, 2025, The One Big Beautiful Bill Act, was signed into law. The Company has completed its evaluation of the provisions of the bill and does not expect it to have a material impact on its financial statements.

The Company files U.S. federal and state of Florida, Illinois, Indiana, Missouri, Texas, and Wisconsin income tax returns. As of September 30, 2025, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2021.

Analysis of Consolidated Balance Sheets

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, 2025 and December 31, 2024 (dollars in thousands):

At September 30, 2025, the Company’s investment portfolio decreased by $16.5 million from December 31, 2024 primarily due to the sale of fifteen securities, paydowns, calls and maturities of various securities mostly offset by the purchase of twenty-three securities. 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, 2025 for investment securities (in thousands):

1. Credit ratings reflect the lowest current rating assigned by a nationally recognized credit rating agency.

2. Mortgage-backed securities include mortgage-backed securities (MBS) and collateralized mortgage obligation (CMO) issues from the following government sponsored enterprises: FHLMC, FNMA, GNMA and FHLB. While MBS and CMOs are no longer explicitly rated by credit rating agencies, the industry recognizes that they are backed by agencies which have an implied government guarantee.

Loans

The loan portfolio is the largest category of the Company’s earning assets. The following table summarizes the composition of the loan portfolio at amortized cost, including loans held for sale, as of September 30, 2025 and December 31, 2024 (in thousands):

Loan balances increased $151.6 million, or 2.7%. The increase was primarily due to construction and land development loans increasing and increased seasonal demand for agricultural operating loans. The balance of real estate loans held for sale, included in the balances shown above, amounted to $5.5 million and $6.6 million as of September 30, 2025 and December 31, 2024, respectively.

Loans are geographically dispersed primarily throughout Illinois, the St. Louis Metro area, central Missouri, Texas, and southern Wisconsin. While these regions have experienced some economic stress during 2024 and 2025, the Company does not consider these locations high risk areas for quick and material economic shifts.

First Mid Bank does not have a concentration, as defined by the regulatory agencies and in Note 4, in construction and land development loans or commercial real estate loans as a percentage of the Company's total capital. At September 30, 2025 and December 31, 2024, First Mid Bank did have industry loan concentrations that exceeded 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, 2025, by contractual maturities (in thousands):

1. Based upon remaining contractual maturity.

2. Includes demand loans, past due loans and overdrafts.

As of September 30, 2025, loans with maturities over one year consisted of approximately $2.5 billion in fixed rate loans and approximately $2.1 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 90 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 non-accrual 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, 2025 and December 31, 2024 (dollars in thousands):

47

The $8.0 million decrease in nonaccrual loans during 2025 resulted from the net of $8.6 million of loans put on nonaccrual status offset by $12.2 million of loans becoming current or paid-off and $4.4 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 $981,000 and $516,000 for the nine months ended September 30, 2025 and 2024, respectively.

The $1.3 million decrease in repossessed assets during the 2025 resulted from $184,000 of additional assets repossessed and $1.2 million repossessed assets sold, $257,000 write-downs, and no change in fair value premiums and discounts. The following table summarizes the composition of repossessed assets (dollars in thousands):

Repossessed assets sold during the first nine months of 2025 resulted in $29,000 net gain related to real estate asset sales and net losses of $10,000 related to other asset sales. The Company also recognized no deferred losses and recorded $257,000 write-downs on real estate properties owned. Repossessed assets sold during the same period in 2024 resulted in net gains of $17,000 related to real estate asset sales and net gains of $6,000 related to other asset sales. The Company also recognized no deferred losses and recorded $47,000 write-downs on real estate properties owned.

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. Factors considered by management in evaluating the overall adequacy of the allowance include a migration analysis of the historical net loan losses by loan segment, 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, reduced levels of home sales for commercial land developments, the uncertainty regarding grain prices, increased operating costs for farmers, and increased levels of unemployment and bankruptcy impacting consumer’s 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, Missouri, Texas, and Wisconsin areas, where agriculture is a major industry. Accordingly, lending and other business relationships with agriculture-based businesses are critical to the Company’s success. At September 30, 2025, the Company’s loan portfolio included $678.7 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $579.6 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $48.1 million from $630.6 million at December 31, 2024 while loans concentrated in other grain farming increased $72.0 million from $507.6 million at December 31, 2024. 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 loan losses within the agricultural portfolio. In addition, the Company has $222.4 million of loans to motels and hotels. The performance of these loans is dependent on borrower specific issues as well as the general level of business and personal travel within the region. While the Company adheres to sound underwriting standards, a prolonged period of reduced business or personal travel could result in an increase in nonperforming loans to this business segment and potentially in loan losses. The Company also has $1.0 billion of loans to lessors of non-residential buildings, and $604.8 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 bank system. 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. The board of directors and management review the status of problem loans each month and formally determine a best estimate of the allowance for credit losses on a quarterly basis. 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, 2025 and 2024, and of changes in the allowance for the three and nine months ended September 30, 2025 and 2024, is as follows (dollars in thousands):

The allowance for credit losses to nonperforming loans ratio has remained consistent due to the amount of nonperforming loans changing at a similar rate as the loan portfolio.

During the first nine months of 2025, the Company had net charge offs of $4.8 million compared to net charge offs of $1.9 million in 2024. 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. During the first nine months of 2024, the Company had the following significant charge offs, two commercial real estate loans to two borrowers totaling $0.5 million.

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 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, 2025 and 2024 and for the year ended December 31, 2024 (dollars in thousands):

During the first nine months of 2025, the average balance of deposits increased by $40.4 million from the average balance for the year ended December 31, 2024. Average non-interest-bearing deposits decreased by $39.6 million, average interest-bearing balances increased by $81.2 million, average savings account balances decreased $41.0 million, and average balances of time deposits increased $39.8 million. Approximately 99% of the Company’s deposit accounts are less than $250,000. The average account balance for all deposit customers is approximately $23,000.

The following table sets forth the high and low month-end balances for the nine months ended September 30, 2025 and 2024 and for the year ended December 31, 2024 (in thousands):

Balances of time deposits, including brokered time deposits of $100,000 or more include time deposits maintained for public fund entities and consumer time deposits. The following table sets forth the maturity of time deposits, including brokered time deposits of $100,000 or more at September 30, 2025 and December 31, 2024 (in thousands):

51

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 offered as a cash management service to its 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 and junior subordinated debentures. Information relating to securities sold under agreements to repurchase and other borrowings as of September 30, 2025 and December 31, 2024 is presented below (dollars in thousands):

52

Securities sold under agreements to repurchase decreased $3.6 million during the first nine months of 2025 primarily due to the seasonal demands in balances. FHLB advances represent borrowings by First Mid Bank to economically fund loan demand. At September 30, 2025 the advances, consisted of $245.0 million as follows:

The Company is party to a revolving credit agreement with The Northern Trust Company in the amount of $15.0 million. There was no balance on this line of credit as of September 30, 2025. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement. The interest rate is floating at 2.25% over the federal funds rate. The Company and First Mid Bank, as applicable, were in compliance with the existing covenants at September 30, 2025 and 2024, and December 31, 2024.

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 will bear 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. 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. As a result, as of September 30, 2025, $76 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 3.5% Fixed-to-Floating Rate Subordinated Notes due 2031 (the “Blackhawk Subordinated Debt I Notes”). The Blackhawk Subordinated Debt I was issued pursuant to the Indenture (the "Blackhawk Subordinated Debt I Indenture") between the Company and UMB Bank, as trustee. The Blackhawk Subordinated Debt I Indenture governs the terms of Blackhawk Subordinated Debt I Notes and provides that the Blackhawk Subordinated Debt I 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, Blackhawk Subordinated Debt I Notes will bear interest at an initial rate of 3.5% per annum. From and including May 14, 2026 to, but excluding the maturity date, Blackhawk Subordinated Debt I Notes will bear interest at a floating rate equal to three-month Term SOFR plus a spread of 285 basis points. 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, 2025, $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 (the “Blackhawk Subordinated Debt II Notes”). The Blackhawk Subordinated Debt II was issued pursuant to the Indenture (the "Blackhawk Subordinated Debt II Indenture") between the Company and UMB Bank, as trustee. The Blackhawk Subordinated Debt II Indenture governs the terms of Blackhawk Subordinated Debt II Notes and provides that the Blackhawk Subordinated Debt II 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, Blackhawk Subordinated Debt II Notes will bear interest at an initial rate of 3.875% per annum. From and including May 14, 2031 to, but excluding the maturity date, Blackhawk Subordinated Debt II 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, 2025, $500,000 in aggregate principal amount of Blackhawk Subordinated Debt II Notes remain issued and outstanding.

On April 26, 2006, the Company completed the issuance and sale of $10.0 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, 5.90% and 6.81% at September 30, 2025 and December 31, 2024, respectively).

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 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 (6.15% and 7.06% at September 30, 2025 and December 31, 2024, respectively) and resets 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 (6.00% and 6.91% at September 30, 2025 and December 31, 2024, respectively) and resets 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 of 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 (7.51% and 8.17% at September 30, 2025 and December 31, 2024, respectively) and resets 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 (6.34% and 7.25% at September 30, 2025 and December 31, 2024, respectively) and resets quarterly.

The trust preferred securities issued by Trust II, CLST I, FBTCST I, BHST I, and BHST II 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 $15.0 billion in consolidated assets, existing issues of trust preferred securities are grandfathered and not subject to this new restriction.

Similarly, the final rule implementing the Basel III reforms allows holding companies with less than $15.0 billion in consolidated assets as of December 31, 2009 to continue to count toward Tier 1 capital any trust preferred securities issued before May 19, 2010. 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 certain 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.” The rules permit the retention of an interest in or sponsorship of covered funds by banking entities under $15.0 billion in assets (such as the Company) 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 was acquired on or prior to December 10, 2013. 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.

Interest Rate Sensitivity

The Company seeks to maximize its net interest margin while maintaining an acceptable level of interest rate risk. Interest rate risk can be defined as the amount of forecasted net interest income that may be gained or lost due to changes in the interest rate environment, a variable over which management has no control. Interest rate risk, or sensitivity, arises when the maturity or repricing characteristics of interest-bearing assets differ significantly from the maturity or repricing characteristics of interest- bearing liabilities. The Company monitors its interest rate sensitivity position to maintain a balance between rate sensitive assets and rate sensitive liabilities. This balance serves to limit the adverse effects of changes in interest rates. The Company’s asset liability management committee (ALCO) oversees the interest rate sensitivity position and directs the overall allocation of funds.

In the banking industry, a traditional way to measure potential net interest income exposure to changes in interest rates is through a technique known as “static GAP” analysis which measures the cumulative differences between the amounts of assets and liabilities maturing or repricing at various intervals. By comparing the volumes of interest-bearing assets and liabilities that have contractual maturities and repricing points at various times in the future, management can gain insight into the amount of interest rate risk embedded in the balance sheet. The following table sets forth the Company’s interest rate repricing GAP for selected maturity periods at September 30, 2025 (dollars in thousands):

The static GAP analysis shows that at September 30, 2025, the Company was liability sensitive, on a cumulative basis, through the twelve-month time horizon. This indicates that future increases in interest rates could have an adverse effect on net interest income. There are several ways the Company measures and manages the exposure to interest rate sensitivity, including static GAP analysis. The Company’s ALCO also uses other financial models to project interest income under various rate scenarios and prepayment/extension assumptions consistent with First Mid Bank’s historical experience and with known industry trends. ALCO meets at least monthly to review the Company’s exposure to interest rate changes as indicated by the various techniques and to make necessary changes in the composition terms and/or rates of the assets and liabilities.

Capital Resources

At September 30, 2025, the Company’s stockholders' equity increased $85.8 million or 10.1%, to $932.2 million from $846.4 million as of December 31, 2024. During the first nine months of 2025, net income contributed $68.1 million to equity before the payment of dividends to stockholders. The change in market value of available-for-sale investment securities increased stockholders' equity by $32.4 million, net of tax. Dividends of $17.4 million were paid during the first nine months of 2025.

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Bank holding companies follow minimum regulatory requirements established by the Board of Governors of the Federal Reserve System (“Federal Reserve System”), First Mid Bank follows similar minimum regulatory requirements established for banks by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation, as applicable. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and its subsidiary bank to maintain minimum capital amounts and ratios. Management believes that, as of September 30, 2025 and December 31, 2024, the Company and First Mid Bank, as applicable, met all capital adequacy requirements, as further detailed in Note 10 of our consolidated financial statements.

Stock Plans

Stock Incentive Plan. At the Annual Meeting of Stockholders held April 26, 2017, the stockholders approved the 2017 Stock Incentive Plan ("SI Plan"). The SI Plan was implemented to succeed the Company’s 2007 Stock Incentive Plan, which had a ten-year term. The SI Plan is intended to provide a means whereby directors, employees, consultants and advisors of the Company and its Subsidiaries may sustain a sense of proprietorship and personal involvement in the continued development and financial success of the Company and its Subsidiaries, thereby advancing the interests of the Company and its stockholders. Accordingly, directors and selected employees, consultants and advisors may be provided the opportunity to acquire shares of Common Stock of the Company on the terms and conditions established in the SI Plan.

Following the stockholders’ approval at the 2025 annual meeting of the Company, a maximum of 1,000,000 shares of common stock may be issued under the SI Plan. The Company awarded 79,635 and 53,766 restricted stock awards during 2025 and 2024, respectively, and 53,130 and 39,150 as stock unit awards during 2025 and 2024, respectively.

Employee Stock Purchase Plan. At the Annual Meeting of Stockholders held April 25, 2018, the stockholders approved the First Mid-Illinois Bancshares, Inc. Employee Stock Purchase Plan (“ESPP”). The ESPP is intended to promote the interests of the Company by providing eligible employees with the opportunity to purchase shares of common stock of the Company at a 15% discount through payroll deductions. The ESPP is also intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A maximum of 600,000 shares of common stock may be issued under the ESPP. As of September 30, 2025, 149,156 shares have been issued pursuant to the ESPP. During the nine months ended September 30, 2025 and 2024, 22,492 shares and 25,319 shares, respectively, were issued pursuant to the ESPP.

Stock Repurchase Program. On June 24, 2025, the Board of Directors approved a repurchase program (the "2025 Repurchase Program"), which became effective on July 1, 2025. The 2025 Repurchase Program supersedes all previous repurchase plans and authorizes the Company to repurchase up to 1.2 million shares of the Company’s common stock. During 2025, the Company did not repurchase any shares. As of September 30, 2025, the Company had approximately 1.2 million shares or approximately $45.5 million in remaining capacity under the 2025 Repurchase Program.

Although the Company adopted the repurchase plan, the Company may make discretionary repurchases in the open market or in privately negotiated transactions from time to time. The timing, manner, price and amount of any such repurchases will be determined by the Company at its discretion and will depend upon a variety of factors including economic and market conditions, price, applicable legal requirements and other factors.

Liquidity

Liquidity represents the ability of the Company and its subsidiaries to meet all present and future financial obligations arising in the daily operations of the business. Financial obligations consist of the need for funds to meet extensions of credit, deposit withdrawals and debt servicing. The Company’s liquidity management focuses on the ability to obtain funds economically through assets that may be converted into cash at minimal costs or through other sources. The Company’s other sources of cash include overnight federal fund lines, Federal Home Loan Bank advances, deposits of the State of Illinois, the ability to borrow at the Federal Reserve Bank of Chicago, Federal Reserve Bank's Discount Window, and the Company’s operating line of credit with The Northern Trust Company.

Details of the Company's liquidity sources include:

• First Mid Bank has $130 million available in overnight federal fund lines, including $30 million from First Horizon Bank, N.A., $20 million from U.S. Bank, N.A., $20 million from Bankers' Bank, $15 million from The Northern Trust Company, $25 million from Zions Bank, and $20 million from BMO Bank, N.A. Availability of the funds is subject to First Mid Bank meeting minimum regulatory capital requirements for total capital to risk-weighted assets and Tier 1 capital to total average assets. As of September 30, 2025, First Mid Bank met these regulatory requirements.
• First Mid Bank can borrow from the Federal Home Loan Bank as a source of liquidity. Availability of the funds is subject to the pledging of collateral to the Federal Home Loan Bank. Collateral that can be pledged includes one-to-four family residential real estate loans and securities. At September 30, 2025, the excess collateral at the FHLB would support approximately $1.6 billion of additional advances for First Mid Bank.
• First Mid Bank is a member of the Federal Reserve System and can borrow funds provided that sufficient collateral is pledged.
• First Mid Bank has received formal approval from the Federal Reserve Bank and can participate in the Borrower-in-Custody (BIC) program. As a result, the Bank can pledge loans as collateral at the Federal Reserve Bank's Discount Window while retaining custody of the pledged loans. The program enhanced our contingent liquidity position by approximately $331.1 million as of September 30, 2025.
• In addition, as of September 30, 2025, the Company had a revolving credit agreement in the amount of $15.0 million with The Northern Trust Company with an outstanding balance of $0 and $15.0 million in available funds. This loan was renewed on April 4, 2025 for one year as a revolving credit agreement. The interest rate is floating at 2.25% over the federal funds rate. The loan is unsecured. The Company and its subsidiary bank were in compliance with the existing covenants at September 30, 2025 and 2024 and December 31, 2024.

Management continues to monitor its expected liquidity requirements carefully, focusing primarily on cash flows from:

• lending activities, including loan commitments, letters of credit and mortgage prepayment assumptions;
• deposit activities, including seasonal demand of private and public funds;
• investing activities, including prepayments of mortgage-backed securities and call provisions on U.S. Treasury and government agency securities; and
• operating activities, including scheduled debt repayments and dividends to stockholders.

The following table summarizes significant contractual obligations and other commitments at September 30, 2025 (in thousands):

For the nine months ended September 30, 2025, net cash of $88.7 million was provided by operating activities, $139.3 million was used in investing activities, and $206.5 million was provided by financing activities. In total, cash and cash equivalents increased by $155.9 million since year-end 2024.

Off-Balance Sheet Arrangements

First Mid Bank enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include lines of credit, letters of credit and other commitments to extend credit. Each of these instruments involves, to varying degrees, elements of credit, interest rate and liquidity risk in excess of the amounts recognized in the consolidated balance sheets. The Company uses the same credit policies and requires similar collateral in approving lines of credit and commitments and issuing letters of credit as it does in making loans. The exposure to credit losses on financial instruments is represented by the contractual amount of these instruments. However, the Company does not anticipate any losses from these instruments. Off-balance sheet arrangements are further detailed in Note 11 of our consolidated financial statements.

There has been no material change in the market risk faced by the Company since December 31, 2024. For information regarding the Company’s market risk, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Further, there have been no changes in the Company’s internal control over financial reporting during the last fiscal quarter that have materially affected or that are reasonably likely to affect materially the Company’s internal control over financial reporting.

Various risks and uncertainties, some of which are difficult to predict and beyond the Company’s control, could negatively impact the Company. As a financial institution, the Company is exposed to interest rate risk, liquidity risk, credit risk, operational risk, risks from economic or market conditions, and general business risks among others. Adverse experience with these or other risks could have a material impact on the Company’s financial condition and results of operations, as well as the value of its common stock. See the risk factors and “Supervision and Regulation” described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.