Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

After completion of the third quarter, the Company is well-positioned to finish the year strong, resulting from disciplined execution of our strategic plan. The largest benefit evident is the improvement in overall profitability, driven by increases in interest and non-interest income and a decrease in interest expense. Additionally, non-interest expense was up year-over year, but to a comparatively smaller extent than increases in income. These factors have all contributed to an increase in net income of $9.4 million, or 40.0% year-to-date compared to the same period in 2025. On a quarterly basis, net income is up $2.7 million or 30.3% compared to the same quarter last year. In comparing year-to-date September 30, 2026, to September 30, 2025, both aspects of net interest income have improved due to our pricing discipline - interest income is up nearly $7.0 million and interest expense decreased by $2.8 million. Interest income from loans benefited by higher average balances and higher yields in comparing both the third quarters and the nine months of 2026 to 2025.

Another strong benefit of the Company's performance in relation to the strategic plan, the Company has been able to increase what it returns to shareholders. The Company returns capital to its shareholders through its normal quarterly dividend, declaring dividends of $3.4 million and $3.1 million in the third quarters of 2026 and 2025, respectively, and $9.7 million and $9.1 million for the comparative year-to-date periods. Furthermore, the Company can also repurchase its own shares outstanding. Through approval from the Board of Directors this year, the Company has been able to further expand on its stock repurchase program. During the quarter, the Company repurchased 41,500 shares totaling $1.4 million, which is more than the Company has repurchased in the last three years. These increases in dividends, as well as share repurchases, are a testament to Company performance and confidence of the Board and senior management. Furthermore, these repurchases are intended to partially offset dilution associated with equity-based management compensation while supporting the Company's broader objective of managing capital in a manner that enhances long-term shareholder value.

Total deposits also grew in comparisons of the two periods, mainly in money market and certificate of deposit balances. Interest expense decreased in comparing 2026 to 2025 in both third quarter and year-to-date performances. Deposit growth enabled FHLB borrowings to be paid down. This all culminated with net interest margin for the third quarter 2026 at 3.57% compared to 3.40% for the same period a year ago and year-to-date at 3.50% compared to 3.22% a year ago. We expect the net interest margin to continue to improve with the percentage of favorable repricing in the loan portfolio in the next 18 months, although the extent of that improvement will depend on market interest rates, funding costs, and other factors.

A portion of our strategic plan focuses on improvement in noninterest income while controlling noninterest expense. From a year-to-date perspective, the Company generated noninterest income of $15.3 million in 2026, up $2.8 million compared to $12.5 million for the same period in 2025. The largest contributors to this success are increases in cash surrender value of our Bank Owned Life Insurance "BOLI" portfolio and gains on sale of loans, followed up by contributions from service fees and other charges, as well as loan servicing income.

Operating expenses were $59.3 million in the first nine months of 2026, up $1.5 million, from $57.8 million. This is a 2.6% increase compared to 13.7% increase in net interest income after provision for credit losses. Furthermore, this increase is primarily attributable to employee expenses, as we recognize additional expenses with higher performance payouts. Furniture and equipment costs were comparatively higher in 2026 after adding a new office in the second half of 2025 and closure of the Custar office in the third quarter of 2026. We had increases in loan expense and mortgage servicing rights amortization, which were substantially offset by decreases in consulting and professional fees among others. Consulting fees are considerably lower in 2026 versus 2025 which included one-time fees associated with data processing, but we will also be incurring additional consulting fees in the remainder of the year with a couple of projects currently in process.

Overall, we have seen improvement in our past due loans and nonaccrual/nonperforming loan balances in the first half of the year which were sustained through the third quarter. In the last two quarters past-due loan levels remained below the elevated levels experienced in preceding quarters. Consumer, Consumer Real Estate and Commercial loan past due percentages are all well below prior year averages. Agricultural Real Estate past due loans includes one loan of $3.0 million as of September 2026. Year-to-date, the Company has net charge offs of $257 thousand compared to $380 thousand in the prior year period combined, as well as combined provision for credit losses of $1.0 million versus $1.5 million in the prior year.

In looking at the current economy in our market areas, a great deal of attention remains on the agricultural section. For our grain farmers, the planting season was relatively timely and overall crop conditions were good in our market area as we head into harvest season at the end of the third quarter. Projected margins are tight for 2026 but government subsidies have provided some support. Land values remain stable showing continued demand for land with financially able buyers. The livestock market continues to be profitable. The agricultural and grain elevator lines of credit saw increased usage in the first quarter of 2026, and we have seen some reductions in line usage area for the second and third quarters. Our agricultural equipment dealers continue to endure lower sales, but the overall performance of agricultural businesses has been acceptable. Agricultural

borrowers in the Bank's Ohio, Michigan, and Indiana markets remain exposed to changes in export demand. Tariffs and uncertainty surrounding trade with China, particularly for soybeans, could adversely affect crop marketing opportunities, farm income, and borrowers' repayment capacity. Management continues to monitor these conditions and their potential effects on agricultural credit quality and the allowance for credit losses.

The Commercial banking division realized modest growth in the third quarter after being flat the first half of 2026. Loan volume in the first half was consistent with previous quarters; however, the expected payoffs and normal amortization outweighed the overall production. Lending rates moved higher in the third quarter and overall terms remained consistent. However, there were competitive pressures as we finished the third quarter. The Iran conflict's impact on the economy, oil and overall inflation remained the largest concerns to commercial business in the F&M footprint year-to-date 2026. The commercial team continues to monitor the portfolio and borrowing bases closely for the impact of credit and inflationary pressures. Credit quality and past due pressures exist but remained sound in the third quarter. Collateral values and auction values are still consistent with previous quarters.

The Bank made the decision to discontinue the Indirect Lending Department as of March 2026 and directed that business to our direct consumer lending department. This contributed to a decrease in the consumer loan portfolio of 19.7% or $11.6 million as compared to year-end 2025 and 21.9% or $13.2 million as compared to September 30, 2025.

Fixed home loan originations to be sold to the secondary market experienced the highest dollar volume by quarter of the last two years at $16.8 million and $13.3 for the second and third quarters, respectively. Similarly, the same is true for the actual dollar volume of sold loans during the quarter at $15.4 million and $14.9 million. We continue to see home equities being the driver to higher balances in the consumer real estate portfolio segment. Home equities account for increased balances of $17.1 million since year-end 2025 and $8.0 million over second quarter of 2026, while the overall consumer real estate portfolio segment shows a smaller gain in comparison to the same time periods of $22.5 million and higher by $15.5 million, respectively.

Overall the Company has had strong performance thus far in 2026, net income continues to expand in 2026 at a greater percentage than our asset growth, and income generation exceeding growth or reduction in certain expenses. When comparing September 30, 2026, to September 30, 2025, assets grew 6.1% while net income grew 40.0%. Our continued attention on maximizing revenues while limiting expenses is serving us well. The Company remains well capitalized with sound liquidity levels and strong asset quality.

NATURE OF ACTIVITIES

Farmers & Merchants Bancorp, Inc. (the "Company") is a financial holding company incorporated under the laws of Ohio in 1985. Our subsidiary is The Farmers & Merchants State Bank (the "Bank"), a local independent community bank that has been primarily serving Northwest Ohio, Northeast Indiana and Southeast Michigan since 1897. The Bank includes F&M Insurance Agency, LLC, a subsidiary offering insurance products, which was formed in November of 2023. We report our financial condition and net income on a consolidated basis and we have only one segment.

Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501. The Bank operates thirty-seven full-service banking offices throughout Northwest Ohio, Northeast Indiana and Southeast Michigan along with a drive-up facility in Archbold. The Bank also operates three Loan Production Offices (LPOs), two in Ohio and one in Indiana.

The Farmers & Merchants State Bank engages in general commercial banking and savings business including commercial, agricultural and residential mortgage as well as consumer lending activities. The largest segment of the lending business relates to commercial, both real estate and non-real estate. The type of commercial business ranges from small business to multi-million dollar companies. The loans are a reflection of business located within the Banks' market area of Ohio, Indiana and Michigan. Because the Bank's offices are primarily located in Northwest Ohio, Northeast Indiana and Southeast Michigan, a substantial amount of the loan portfolio is comprised of loans made to customers in the agricultural industry for such items as farmland, farm equipment and operating loans for seed, fertilizer, and feed. Other types of lending activities include loans for home improvements, and loans for the purchase of autos, trucks, and other consumer goods.

The Bank also provides checking account services, as well as savings and time deposit services such as certificates of deposits. In addition, Automated Teller Machines (ATMs) or Interactive Teller Machines (ITMs) are provided at most branch locations along with other independent locations in the market area. ITMs operate as an ATM. The Bank has custodial services for Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). The Bank provides on-line banking access for consumer and business customers. For consumers, this includes bill-pay, on-line statement opportunities and mobile banking. For business customers, it provides the option of electronic transaction origination such as wire and Automated Clearing House (ACH) file transmittal. In addition, the Bank offers remote deposit capture or electronic deposit processing. Mobile banking has been widely accepted and used by consumers. Upgrades to our digital products and services continue to occur in both retail

and business lines. The Bank continues to offer new suites of products as customer preferences change and the Bank adapts and adopts new technologies. The Bank continues to offer products that also meet the needs of our more traditional customers.

The Bank has established underwriting policies and procedures which facilitate operating in a safe and sound manner in accordance with supervisory and regulatory laws and guidance. Within this sphere of safety and soundness, the Bank's practice has been to not promote innovative, unproven credit products which may not be in the best interest of the Bank or its customers. The Bank does offer a hybrid mortgage loan. Hybrid mortgage loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable-rate mortgage. The Bank offers a seven and ten year fixed rate mortgage and a seven year jumbo fixed rate mortgage after which the interest rate will adjust annually for all. In order to offer longer-term fixed rate mortgages, the Bank does participate in the Freddie Mac secondary mortgage market, Farm Service Agency (FSA) guaranteed secondary agricultural market and Small Business Lending programs. The Bank also normally retains the servicing rights on these partially or 100% sold loans. In order for the customer to participate in these programs they must meet the requirements established by those agencies. In addition, the Bank does sell some of its longer-term fixed-rate agricultural mortgages into the secondary market with the aid of brokers. The Bank currently participates in four State of Ohio programs: Ag-Link, Grow Now, Ohio Homebuyers Plus and Buckeye Business Advantage. These four programs allow the Bank to offer a more competitive interest rate to customers. With the acquisition of Perpetual Federal Savings Bank in the fourth quarter of 2021 and the addition of Peoples Federal Savings in the fourth quarter of 2022, the Bank saw an increase in fixed-rate, long-term mortgage loans to our portfolio from that banking service area. In November 2023, the Bank began offering a home buyer mortgage program, Hometown Advantage Mortgage Program, which is available to low- and moderate-income home buyers as well as on properties located in low- and moderate-income census tracts. In the first quarter of 2026, the Bank rolled out a CD/Savings secured loan product for credit building or credit repair to be secured by a time deposit or savings account with a minimum $1,000 loan amount, no origination costs, and no minimum credit score or debt-to-income requirements. This loan product is also intended to assist low- and moderate-income individuals with strengthening their credit.

The Bank does not have a program to fund sub-prime loans. Sub-prime loans are characterized as a lending program or strategy that targets borrowers who pose a significantly higher risk of default than traditional retail banking customers.

All loan requests are reviewed as to credit worthiness and are subject to the Bank's underwriting guidelines as to secured versus unsecured credit. Secured loans are in turn subject to loan-to-value (LTV) requirements based on collateral types as set forth in the Bank's Loan Policy. In addition, credit scores of those seeking consumer credit are reviewed and if they do not meet the Bank's Loan Policy guidelines, additional officer approval is required.

Consumer Loans:

Commercial/Agriculture:

Accounts Receivable:

Inventory:

Equipment:

Real Estate:

FM Investment Services, the brokerage department of the Bank, opened for business in April 1999. Securities are offered through Raymond James Financial Services, Inc. In November of 2020, FM Investment Services purchased the assets and

clients of Adams County Financial Resources (ACFR) which is discussed in further detail in Note 2 to the Company's financial statements.

In December of 2014, the Company became a financial holding company within the meaning of the Bank Holding Company Act of 1956 as amended (the "Act"), in order to provide the flexibility to take advantage of the expanded powers available to a financial holding company under the Act. Our holding company is regulated and examined by the Federal Reserve. Our subsidiary bank is in turn regulated and examined by the Ohio Division of Financial Institutions and the Federal Deposit Insurance Corporation. The activities of our bank subsidiary are also subject to other federal and state laws and regulations.

The Bank formed an insurance agency, F&M Insurance Agency, LLC, in November 2023 to offer insurance products to our customers. The insurance agency is organized in Ohio and regulated by the State of Ohio, Division of Insurance.

The Bank's primary market includes communities located in the Ohio counties of Butler, Champaign, Defiance, Fulton, Hancock, Henry, Lucas, Shelby, Williams, Wood and in the Indiana counties of Adams, Allen, DeKalb, Jay, Steuben and Wells. The Michigan footprint includes Oakland County. In our banking activities, we compete directly with other commercial banks, credit unions, farm credit services, and savings and loan institutions in each of our operating localities. In a number of our locations, we compete against entities which are much larger than us. The primary factors in competing for loans and deposits are the rates charged as well as location and quality of the services provided.

At September 30, 2026, we had 486 full-time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which is contributory. We consider our employee relations to be good.

RECENT REGULATORY DEVELOPMENTS

The Company and the Bank continue to monitor federal regulatory developments that may impact operations, capital, and strategic initiatives. Changes in laws, rules, and guidance present operational and compliance challenges and require ongoing evaluation of policies, procedures, and systems.

Truth in Lending Act - Ability to Repay / Qualified Mortgage. The Bank monitors consumer mortgage loans to ensure they meet Qualified Mortgage (QM) requirements, which provide a presumption of compliance under TILA's Ability to Repay rules. The final General QM Rule, effective October 2022, eliminated the 43% debt-to-income limit, removed Appendix Q underwriting standards, and established price-based thresholds for QM status. Loans must still meet underwriting standards, product features, and points-and-fees limits. The Bank occasionally originates Non-QM and Higher Priced Mortgage Loans, which are reviewed periodically by the Loan Committee.

Equal Credit Opportunity Act (ECOA) / Section 1071 - Small Business Lending Data Collection. The CFPB's Section 1071 rule requires covered institutions to collect and report demographic data on small business credit applications. Court injunctions originally stayed mandatory compliance for community banks, including the Bank. On May 1, 2026, the rule was finalized with an effective date of June 30, 2026 and compliance date of January 1, 2028 to begin data collection. The finalized rule revised certain provision of Regulation B, Subpart B which implements the Equal Credit Opportunity Act. Revisions included coverage of certain credit transactions and financial institutions; covered transaction thresholds for financial institutions subject to reporting; the definition of small business; and exclusion of certain data points not specifically required by Section 1071 statutory language. Initial analysis indicates the Bank may not immediately be subject to data reporting requirements as of January 1, 2028. The Bank continues to evaluate these final rules to gauge impact on small business lending operations, monitor loan volume of reportable loans, and assess these changes in connection with its fair lending program and broader compliance management system.

Equal Credit Opportunity Act / Regulation B Amendments. In April 2026, the CFPB issued final amendments to Regulation B addressing disparate impact, discouragement of applicants or prospective applicants, and special purpose credit programs. These amendments may affect fair lending compliance, credit policy administration, training, monitoring, and documentation practices. The Bank continues to evaluate these changes in connection with its fair lending program and broader consumer compliance management system. Additionally, in August 2026, rescission of an interagency statement on special purpose credit programs emphasized creditors may not use race-based or other prohibited characteristics criteria in lending programs unless tied to specific, proven instances of unlawful discrimination.

Community Reinvestment Act (CRA) Updates. The 2023 CRA rule, jointly issued by the Federal Reserve, FDIC, and OCC, is subject to ongoing litigation and its implementation is currently paused. The agencies have proposed rescinding the 2023 framework and reverting to pre-October 2023 standards. In August 2026, the FDIC, OCC, and Treasury jointly issued new

proposed CRA rules offering targeted changes and a 60-day comment period ending on October 13, 2026. The Bank continues to operate under the prior 1995 CRA framework and monitors regulatory updates.

Financial Data Transparency Act. In June 2026, multiple federal financial regulatory agencies issued final joint data standards under the Financial Data Transparency Act to promote interoperability and standardization of regulatory data. Although implementation requirements will depend on subsequent agency actions and the specific reporting obligations applicable to the Company and the Bank, these standards may affect future regulatory reporting formats, data governance, system capabilities, and internal controls over regulatory submissions. The Company and the Bank continue to monitor implementation timelines and assess potential operational impacts.

Basel III Endgame. The Basel Committee initiated the final phase of Basel III reforms in July 2025, increasing capital requirements, revising standardized approaches, and limiting internal model usage. While these rules primarily affect global banks, the Bank continues to assess potential indirect implications for capital adequacy and regulatory compliance.

Community Bank Leverage Ratio. In April 2026, the federal banking agencies finalized revisions to the Community Bank Leverage Ratio framework, lowering the minimum leverage ratio from 9% to 8% and extending the grace period for temporary noncompliance from two quarters to four quarters, effective July 1, 2026. The change may provide qualifying community banking organizations with additional flexibility to use the simplified capital framework and reduce certain regulatory reporting and capital calculation burdens. The Company and the Bank continue to evaluate eligibility, capital planning considerations, and any related Call Report or regulatory reporting impacts.

Expanded Examination Cycle for Certain Small Insured Depository Institutions. In September 2026, the federal banking agencies jointly issued an interim final rule that expanded eligibility for an 18-month safety and soundness examination cycle for well-capitalized, well managed institutions with less than $6 billion in assets. This doubled the previous $3 billion asset threshold. Effective September 2026, this interim rule is intended to reduce regulatory burden and provide scheduling certainty for qualifying banks. The Bank is presently impacted by this change in the safety and soundness examination cycle.

Updated Examination Policies and Examination Manuals. In late August, the FDIC made updates to their Risk Management Manual of Examination Policies for safety and soundness examinations to incorporate changes to requirements in the FDIC Rules and Regulations. These updates included Section 1.1 Basic Examination Concepts, 4.5 Violations of Laws and Regulations, 16.1 Report of Examination Instructions, and 17.1 Example of Risk Management Report of Examination Pages. Concurrently, the FDIC made updates to the Consumer Compliance Examination Manual involving recent changes to Unsafe and Unsound Practices and Matters Requiring Attention. Updated sections included Documenting Earnings in II-4 under Pre-Examination Planning, II-8 Investigations and Visitations, II-11 Appeals, V-9 HMDA, and V-17 Small Dollar Lending.

Supervisory Ratings and Risk-Based Examination Focus. In May 2026, the federal banking agencies requested comment on proposed revisions to the Uniform Financial Institutions Rating System, commonly referred to as the CAMELS rating system. Separately, the OCC and other agencies have continued to emphasize risk-based supervision and the removal of reputation risk as a standalone supervisory consideration. These developments may affect the scope, focus, and documentation expectations for examinations, including greater emphasis on material financial risks, governance, internal controls, and risk management practices. The Bank continues to monitor these supervisory developments and assess related policy, procedure, and examination preparation impacts.

GENIUS Act - Payment Stablecoins. Enacted in July 2025, the GENIUS Act establishes standards for payment stablecoins issued by banks, including reserve requirements, reporting, audits, and supervisory oversight. The Bank is evaluating potential strategic and compliance implications under this framework as part of its digital asset initiatives. The Bank remains attentive to proposed rules since regulatory agencies have until 2027 to finalize implementing rules.

Bank Secrecy Act / Anti-Money Laundering and Sanctions Compliance. Federal banking agencies and FinCEN have continued rulemaking and guidance activity related to anti-money laundering, countering the financing of terrorism, sanctions compliance, customer identification, and customer due diligence expectations, including proposed changes to AML/CFT program requirements that would require financial institutions to maintain effective, risk-based, and reasonably designed AML/CFT programs. These developments may require updates to policies, procedures, risk assessments, customer due diligence processes, monitoring systems, training, and governance practices. The Bank continues to monitor these developments and evaluate potential implications for its BSA/AML and sanctions compliance program.

Credit Risk and Loan Portfolio Risk Management. The FDIC continues to emphasize safe and sound lending and loan portfolio risk-management practices through its Risk Management Manual of Examination Policies, including Section 3.2, Loans, which was updated in March 2026, and related examination documentation modules for loan portfolio review. These materials address lending policies, loan administration, credit risk rating or grading systems, loan review systems, underwriting, portfolio composition, problem credit management, allowance for credit losses considerations, and board and management

responsibilities. In addition, the interagency guidance on credit risk review systems, which applies to FDIC-supervised depository institutions, emphasizes independent, ongoing credit review and appropriate communication to management and the board regarding loan portfolio performance. These supervisory expectations may affect the Bank's credit policies, internal controls, loan review practices, allowance for credit losses processes, and documentation of credit risk management activities. The Bank continues to evaluate FDIC and interagency guidance in light of its loan portfolio composition and credit risk profile.

Executive Order on Fair Banking. An Executive Order issued in August 2025 prohibits denial of financial services based on constitutionally or statutorily protected beliefs, affiliations, or political views, and prohibits politicized or unlawful "debanking." Banking decisions must be based on individualized, objective, and risk-based analysis. The Bank continues to review and evaluate policies and practices to ensure it does not inadvertently deny financial services based on beliefs, affiliations, or political views.

Ongoing Commitment. The Company and the Bank continue to make good faith efforts to comply with applicable laws, rules, regulations, and guidance from federal agencies and remain attentive to developments that could affect operations, capital, or strategic initiatives. Changes to the laws and regulations, both at the federal and state levels, can affect the operating environment of the Company and its subsidiaries in substantial and unpredictable ways.

CRITICAL ACCOUNTING ESTIMATES

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and the Company follows general practices within the financial services industry in which it operates. At times the application of these principles requires management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements and accompanying notes.

These assumptions, estimates and judgments are based on information available as of the date of the financial statements. As this information changes, the financial statements could reflect different assumptions, estimates and judgments. Certain policies inherently have a greater reliance on assumptions, estimates and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Examples of critical assumptions, estimates and judgments are when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not required to be recorded at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability must be recorded contingent upon a future event. These policies, along with the disclosures presented in the notes to the condensed consolidated financial statements and in the management's discussion and analysis of the financial condition and results of operations, provide information on how significant assets and liabilities are valued and how those values are determined for the financial statements. Based on the valuation techniques used and the sensitivity of financial statement amounts to assumptions, estimates, and judgments underlying those amounts, management has identified the Allowance for Credit Losses (ACL) as the accounting area that requires the most subjective or complex judgments, and as such could be the most subject to revision as new information becomes available.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs. Accrued interest receivable totaled $14.3 million and $11.7 million at September 30, 2026 and December 31, 2025, respectively, and was reported in Other Assets on the condensed consolidated balance sheets and is excluded from the estimate of credit losses.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation; reserves for expected credit losses for collateral-dependent loans are based on the expected shortfall of the loan based on the discounted collateral value. This specific reserve portion of the ACL was $118 thousand at September 30, 2026 and $145 thousand at December 31, 2025.

Refer to Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information related to loans and the ACL.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for credit loss, please see Note 4 provided with the notes to consolidated financial statements.

MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company continues to focus on deposit growth in both its legacy and newer markets. Core deposits may provide opportunities for additional noninterest income for the Company through the opportunity to cross-sell additional services such as treasury management services and interchange fees. Noninterest bearing deposits increased $17.5 million from September 30, 2025 to September 30, 2026. Interest bearing deposits also increased by $193.0 million over the same time period. This was comprised of an increase in savings accounts of $90.3 million, an increase in time deposits of $70.2 million and an increase in NOW accounts of $32.5 million.

Deposits have increased $231.8 million as of September 30, 2026 since December 31, 2025 with there being increases in all interest bearing deposits and non-interest bearing being down just slightly. Cash and cash equivalents also increased $108.1 million since December 31, 2025. The Bank had net repayments of $59.5 million in FHLB Borrowings and $15.0 million in federal funds, while funding a net increase in loans of $25.5 million.

In addition to cash and cash equivalent balance increases, the Bank has access to $213 million in unsecured Federal Funds lines for overnight funds from our correspondent banking relationships, which includes a $50 million line of credit that was added in the fourth quarter of 2025. The Company also has a $15.0 million line of credit. The Bank has established four market sources for brokered CDs as additional contingent funding resources. Lastly, the Bank's secured borrowing capacity limits at the FHLB Cincinnati is $154.8 million based on current collateral pledging. Any additional borrowing over $7.9 million may require additional stock purchases. Pledged collateral included eligible 1-4 family, home equity, and specific commercial and multi-family real estate loans.

At September 30, 2026, the investment portfolio of the Bank had $280.7 million of pledged securities with $170.7 million available in unpledged securities for future borrowings. Currently, securities may be pledged to offset public deposits, our repurchase agreement portfolio or at the Federal Discount Window.

The Company continues to hold bi-weekly, what is termed "sub-ALCO", meetings along with continuing the use of a liquidity dashboard and cashflow projection. The liquidity dashboard and the five month forward looking cashflow projection are actively managed documents which continue to be enhanced to provide the most accurate forecast of liquidity positions. The cashflow projection includes loan pipeline expectations and runoffs, and maturities of both sources and uses of funds. The Company has the tools to monitor liquidity and continues to manage the risks to ensure adequate liquidity is maintained.

In comparing to the same period in 2025, the September 30, 2026 (at amortized cost) loan balances of $2.74 billion increased $79.0 million, or 3.0%, from $2.66 billion. This increase included a $66.3 million, or 36.9%, increase in Agricultural loans, a $47.5 million, or 16.1%, increase in Commercial and Industrial loans, and a $26.7 million, or 5.1%, increase in Consumer Real Estate loans. These increases were partially offset by a $34.3 million, or 2.7%, decrease in Commercial Real Estate loans, a $13.3 million, or 21.8%, decrease in Consumer loans, an $11.8 million, or 5.3% decrease in Agricultural Real Estate loans, and a $2.0 million, or 8.3% decrease in Other loans. The Company's team of lenders remain focused on growing a strong, diverse loan portfolio by providing customers valuable localized services as provided for by our deposit growth discussed above, thereby increasing our market share.

The chart below shows the breakdown by portfolio segment as of September 30, for the last three years, at amortized cost.

The Bank maintains a well-balanced, diverse and high performing commercial real estate loan portfolio. Gross commercial real estate loans, excluding deferred loan fees and costs, represented 48.23% of the Company's total gross loan portfolio as of September 30, 2026. The tables below present the commercial real estate (CRE) portfolio segment by category, location and loan grade.

The following is a contractual maturity schedule by portfolio segment at amortized cost excluding fair value adjustments related to acquisitions as of September 30, 2026.

Presented below are fixed rate loans and variable rate loans by portfolio segment as of September 30, 2026 and December 31, 2025:

Variable rate loans that have reached ceiling or floor limits are reported as fixed rate loans until such time as their rates adjust away from those limits.

Management feels confident that anticipated liquidity needs can be met through additional maturities from the security portfolio, increased deposit generating efforts and additional borrowings. While the security portfolio has been utilized to fund loan growth in previous periods, additional sources have been cultivated. The security portfolio increased in the first nine months of 2026 from year end 2025 due to net purchases of $42.4 million. During the current quarter, the security portfolio increased due to net purchases of $20.5 million. In the first quarter of 2026, sales of odd lot mortgage-backed securities were executed and generated a realized loss of $347 thousand which were replaced with purchases of higher yielding securities. The amount of pledged investment securities increased by $14.2 million as compared to year end and $13.6 million as compared to September 30, 2025. As of September 30, 2026, pledged investment securities totaled $280.7 million. The Company plans to make additional purchases of securities for the remainder of the year for the purpose of increasing our investment holdings, liquidity and contingency planning and as a means of balance sheet gap management.

As mentioned previously, an additional $154.8 million is also available to the Bank from the FHLB based on current amounts of pledged collateral. The Bank has pledged eligible 1-4 family, home equity, commercial real estate, multifamily real estate portfolios and specific securities. The CRE holdings may be adjusted quarterly to replace paydowns or increase availability of funds. Based on total asset capacity, the Bank would have more than $1.2 billion available to borrow.

With the exception of FHLB stocks, carried at cost, which is shown as other securities, all of the Company's security portfolio is categorized as "available-for-sale" and as such is recorded at fair value.

Overall total assets increased 4.8% or $164.7 million since year end 2025 and $96.9 million or 2.8% since June 30, 2026. The largest areas of growth since December 2025 occurred in the cash and due from banks and the security portfolio of $108.1 million and $33.9 million, respectively, as well as a $23.4 million increase in the loan portfolio. Although the loan portfolio did increase, the Bank continues to pursue loan growth with total new money funded in the nine months ended September 30, 2026 of $676.8 million and $231.2 million in the third quarter.

Total liabilities increased $148.6 million since year end 2025 and $94.7 million since the end on the second quarter. The largest increase was in total deposits of $231.8 million. The mix of deposits saw increases in interest-bearing NOW accounts, savings and money market deposit accounts and time deposit accounts, offset by decreases in noninterest-bearing accounts since December 31, 2025. During the first nine months of 2026, net FHLB advances of $59.4 million and federal funds purchased of $15 million have been repaid.

Shareholders' equity increased by $16.1 million as of September 30, 2026 compared to year end 2025 and $2.2 million since June 30, 2026. Accumulated other comprehensive loss increased in unrealized loss position by $6.7 million from December 2025 to an unrealized loss of approximately $18.6 million on September 30, 2026. Dividends declared increased from the prior quarter $0.23 per share to $0.25 per share and were 9.9% over third quarter 2025's $0.2275 per share. Compared to September 30, 2025, shareholders' equity increased 7.0% or $25.1 million, primarily attributable to net income generated over this period, less dividends provided to shareholders. Net income was higher for the nine months ended September 30, 2026 compared to September 30, 2025 by 40.0% or $9.4 million.

Basel III regulatory capital requirements include a capital conservation buffer of 2.5%. As of September 30, 2026, the Company and the Bank are both positioned well above the current requirement.

While the Holding Company generally has sufficient liquidity to maintain its dividend policy without relying on the upstreaming of dividends from the Bank, the Bank declared a $9 million dividend during the third quarter of 2026. A portion of the excess funds upstreamed are for sub-debt paydowns and the repurchase of shares, of which 41,500 shares were repurchased in the third quarter for approximately $1.4 million. The Company intends to pay down $7.0 million, or 20%, of its outstanding subordinated notes with its next quarterly interest payment October 30, 2026.

The Bank continues to be well-capitalized at September 30, 2026 in accordance with Federal regulatory capital requirements as the capital ratios below show:

MATERIAL CHANGES IN RESULTS OF OPERATIONS

Comparison of Results of Interest Earnings and Expenses for three month periods ended September 30, 2026 and 2025

Interest Income

When comparing third quarter 2026 to third quarter 2025, average loan balances grew $77.2 million, which represented a 2.9% increase. Interest income on loans increased just under $1.1 million or 2.6% as compared to the quarter ended September 30, 2025. Loan interest for third quarter 2025 included a one-time fee collected of $195 thousand in addition to $191 thousand from the recovery of one acquired relationship that had been fully charged off prior to acquisition. The Company's loan portfolio is 52.4% variable rate with 33.9% of total loans subject to repricing within the next three months.

The available-for-sale securities portfolio increased in average balances by $24.5 million or 5.3% when comparing to the same quarter in 2025 with the income associated with the security portfolio increasing $711 thousand over third quarter 2025. During the current quarter, maturities and paydowns of securities were $19.7 million, purchases were $40.2 million and unrealized loss increased $5.9 million. The additional income from the security portfolio can be attributed to the increased book yield of 2.97% as of September 30, 2026 from 2.32% as of September 30, 2025. Federal funds sold and interest-bearing deposits increased in average balances by $89.3 million as compared to the same quarter in 2025 with increased income of $749 thousand for the current quarter. The increased balances are primarily the result of the focus on liquidity and deposit generation offset by funding loans and repayment of other borrowed money.

The overall total average balance of the Bank's earning assets increased by $191 million and interest income for the quarter comparisons were higher for third quarter 2026 by 5.6% or $2.5 million as compared to third quarter 2025. Rate changes between periods have contributed to approximately 9.7% of the growth.

Annualized yield, for the quarter ended September 30, 2026, was 5.61% as compared to 5.62% for the quarter ended September 30, 2025. The following charts demonstrate increased loan balances accounted for 114.0% of the increased loan interest income which was offset by rate decreases of 14.0%. The yields on tax-exempt securities and the portion of the tax-exempt IDB and agricultural loans included in loans have been tax adjusted based on a 21% tax rate in the charts that follow. The tax-exempt interest income was $717 and $132 thousand for third quarter 2026 and 2025, respectively, which resulted in federal tax savings of $151 and $28 thousand, respectively, less the TEFRA adjustments of $15 and $4 thousand, respectively.

Change in Interest Income Quarter to Date September 30, 2026 Compared to September 30, 2025

Interest Expense

Contributing to the increased net interest income for the quarter was a decrease in interest expense of $531 thousand or 3.0% compared to third quarter 2025. Since September 30, 2025, average interest-bearing deposit balances have increased $186 million or 8.3% while the Company recognized $302 thousand less in interest expense for the most recent quarter. In September 2025, the Federal Reserve made its first rate change to the federal funds rate for 2025 with a reduction of 25 basis points

followed by reductions of 25 basis points in both October and December. In September 2026, the Federal Reserve increased the federal funds rate by 25 basis points. Deposit rates continue to be reviewed and adjusted with rate changes. The following charts demonstrate increased average interest-bearing deposit balances accounted for $1.3 million of additional interest-bearing deposit expense while rate decreases accounted for decreased interest-bearing deposit expense of $1.6 million. Noninterest-bearing average deposits balances increased $13.8 million compared to third quarter 2025. The Bank continues to focus on capturing the full customer relationship; however, it has sometimes resulted in more expensive deposits being brought in.

Interest expense on borrowed funds decreased $272 thousand in the third quarter 2026 over the same time frame in 2025 due to the repayment of FHLB advances. During the current quarter, FHLB borrowings of $547 thousand were repaid. Interest expense on federal funds purchased and securities sold under agreement to repurchase decreased $153 thousand compared to third quarter 2025 due to the decrease of $12.4 million in average balances. Cost of funds decreased even with growth in interest-bearing deposit balances offset by decreased borrowings and securities sold under agreement to repurchase compared to third quarter 2025. The average cost of funds decreased to 2.59% in third quarter of 2026 compared to 2.83% in third quarter 2025. Interest expense due to subordinated notes increased $196 thousand during the third quarter 2026 as compared to third quarter 2025 as the rate has changed to the Three-Month SOFR plus a spread of 263 basis points. Refer to Note 11 for additional information on subordinated notes.

Change in Interest Expense Quarter to Date September 30, 2026 Compared to September 30, 2025

As the following chart indicates, the decreased cost of funds of 24 basis points offset by a slight decrease in yields on interest earning assets of 1 basis point equated to a 23 basis point improvement in net interest spread when comparing to the same period a year ago. Competition for deposits remains intense with most competitors offering special rates for specific terms.

Net Interest Income

Net interest income increased slightly more than $3.0 million for the third quarter 2026 over the same time frame in 2025 due to the increase in interest income of $2.5 million combined with the interest expense decrease of $531 thousand as previously

mentioned. As the new loans added in 2025 and 2026 generate more income, management expects the benefits of the Company's strategy of repositioning the balance sheet to increase interest income in the long run. The Company has some opportunity for improved asset yield with loans repricing in 2026 and a greater opportunity beginning in 2027 and 2028. Loans as a percentage of earning assets decreased to 81.2% in third quarter 2026 compared to 83.7% in third quarter 2025. Loans to total assets decreased to 76.8% in third quarter 2026 compared to 79.1% for the same period 2025. The percentage of earning assets to total assets remained flat at 94.6% for the three months ended September 30, 2026 and 2025. In terms of net interest margin, the Bank recognizes competition for deposits will continue; however, there is a greater opportunity for gradual improvement with repricing loans upwards in the next year.

Comparison of Noninterest Results of Operations for three month periods ended September 30, 2026 and 2025

Provision Expense

The Allowance for Credit Losses (ACL) has a direct impact on the provision expense. The increase in the ACL is funded through recoveries and provision expense.

Total provision for credit losses increased $90 thousand for the three months ended September 30, 2026 as compared to the same period in 2025. Management continues to monitor asset quality, making adjustments to the provision as necessary, in accordance with the Bank's chosen CECL methodology. The impact of higher interest rates and inflation are taken into consideration when reviewing qualitative factors. Loan charge-offs were $15 thousand higher during the three months ended September 30, 2026 than the same period in 2025. Loan charge-offs for the current quarter were in the consumer portfolio and consumer real estate portfolio segments while 99.2% of charge-offs for the same period in 2025 were in the consumer portfolio. Of the total consumer charge-offs, $13 and $43 thousand were for automobiles and trucks for the three months ended September 30, 2026 and 2025, respectively. 2025 consumer charge-offs also included $9 thousand for recreational vehicles. Recoveries were $39 thousand higher during the three months ended September 30, 2026 as compared to same period in 2025 with 94.0% of total current quarter recoveries in the consumer portfolio compared to 78.7% for the same period in 2025. Of the total consumer recoveries, $59 thousand were for automobiles and trucks and $12 thousand were for recreational vehicles for the three months ended September 30, 2026 compared to $18 thousand for automobiles and trucks for the same period in 2025. Combined net charge-offs were $24 thousand lower in the three months ended September 30, 2026 than the same time period in 2025. All of the time periods in 2025 and 2026 had net charge-offs to total loans ratios lower than 0.1% attesting to the strong asset quality of the Bank's loan portfolio.

The provision for credit losses on loans decreased by $661 thousand or 118.7% in the third quarter of 2026 compared to the third quarter of 2025 with gross loan portfolio growth of $33.1 million or 1.2% in the third quarter of 2026 compared to gross loan portfolio growth of $33.3 million or 1.3% in the third quarter of 2025. Gross commercial real estate loan balances grew by $12.4 million or 0.9% in the third quarter of 2026 compared to gross commercial real estate loan balance growth of $9.2 million or 0.7% in the third quarter of 2025. Commercial real estate loans tend to have higher reserves; however, included in the commercial real estate loan category are construction loans, which decreased by $16.6 million in the third quarter of 2026, and typically carry higher reserves based on loss history. Likewise, the Bank has experienced reductions in consumer loans which tend to have higher reserves, and an increase in agricultural loans which tend to have a lower reserve based on loss history. Moreover, the reduction in the national unemployment rate resulted in lower expected future loss rates, as supported by the low level of net charge-off activity experienced in the third quarter of 2026. Similarly, the Bank's total Special Mention and Substandard loans decreased by $30.3 million in the third quarter of 2026 compared to the second quarter of 2026, contributing to a lower allowance for credit loss. Lastly, the specific reserve portion of the ACL for collateral dependent loans decreased in the third quarter of 2026 by $93 thousand primarily due to some principal paydowns on individually evaluated loans, compared to an increase in specific reserves of $298 thousand in the third quarter of 2025.

The provision for unfunded loan commitments increased $751 thousand in the third quarter of 2026 compared to the third quarter of 2025. Unfunded loan commitments increased $55.0 million in third quarter of 2026 compared to decreasing $3.9 million in third quarter of 2025. The majority of the increase in unfunded loan commitments in the third quarter of 2026 included $28 million in Commercial & Industrial and $27 million in Construction & Development compared to the second quarter of 2026. The former is expected to fund in the fourth quarter of 2026 and the latter carries the highest reserve percentage among unfunded loan categories due to higher funding assumptions and historical loss rates, hence the larger increase in the allowance for unfunded loan commitments in the third quarter of 2026.

Loans past due 30 or more days increased $3.8 million at September 30, 2026 as compared to September 30, 2025. The largest changes were attributed to the agricultural real estate portfolio segment which increased $2.7 million for the same time period, of which $3.0 million is attributed to one loan. The consumer real estate portfolio segment also increased $1.4 million while the commercial real estate portfolio segment decreased $430 thousand as compared to September 30, 2025.

The following table presents the activity within the ACL for each portfolio segment and shows the contribution provided by both recoveries and the provision, along with the reduction of the allowance caused by charge-offs. The time period covered is for the three months ended September 30, 2026, 2025, and 2024.

*Nonperforming loans are defined as all loans on nonaccrual, plus any loans past due 90 days not on nonaccrual.

The balance of loans, amortized cost at September 30, 2026, September 30, 2025 and September 30, 2024 within this chart does not include a fair value basis adjustment for derivatives of a $159 thousand reduction, $1.9 million and $3.0 million, respectively, or a daily average outstanding balance of $385 thousand, $1.8 million or $1.6 million, respectively. Refer to Note 7 for additional information related to derivative financial instruments.

Loans classified as nonaccrual were higher as of September 30, 2026 at $6.2 million as compared to $5.2 million as of September 30, 2025. The agricultural real estate portfolio segment increased $3.3 million as compared to September 30, 2025 with $3 million attributed to one loan with a specific allocation of $35 thousand. The consumer real estate portfolio, commercial and industrial portfolio and commercial real estate portfolio segments decreased $1.7 million, $333 thousand and $140 thousand, respectively, as compared to September 30, 2025. Nonaccrual loans in the agricultural portfolio segment increased $51 thousand while nonaccrual loans in the consumer portfolio segment decreased $36 thousand as compared to September 30, 2025.

The consumer portfolio segment accounted for the largest components of charge-offs and recoveries for both the three months ended September 30, 2026 and for the three months ended September 30, 2025. Management has factored in the continuing impact of high interest rates and inflationary pressures on borrowers' ability to make payments.

The following table presents the balances for allowance for credit losses per portfolio segment in terms of dollars, as a percentage of ACL and as a percentage of loans by category at September 30, 2026 and September 30, 2025.

Noninterest Income

Noninterest income was up $510 thousand, or 11.7%, for the three months ended September 30, 2026 over the same time frame in 2025. Customer service fees, other service charges and fees, and loan servicing were all relatively flat compared to the three months ended September 30, 2025. Interchange income increased $66 thousand for the current quarter.

The volume of total originations of loans held for sale increased while the associated gain on the sale of these loans was $45 thousand lower for the three months ended September 30, 2026 over the same period in 2025. Total originations of loans held for sale for the three months ended September 30, 2026 were $21.5 million with proceeds from sale at $22.4 million for 2026 compared to 2025's activity of $14.8 million in originations and $18.6 million in sales. The mortgages sold were both 1-4 family real estate and agricultural real estate loans originated for sale.

The cash surrender value of bank owned life insurance increased $484 thousand from the same three months ended September 30, 2025. The increase in BOLI revenue was due to more investment dollars and higher earnings due to the Bank repositioning its holdings, which we expect to continue into the future.

The impact of loan servicing rights, both to income and expense, is shown in the following table which reconciles the value of loan servicing rights. The capitalization runs through noninterest income while the amortization thereof is included in noninterest expense. For both the three months ended September 30, 2026 and 2025, loan servicing rights caused a net $99 thousand in income. Impairment of $150 thousand and $372 thousand was recognized during the three months ended September 30, 2026 and 2025, respectively. Capitalized additions of agricultural real estate loan servicing rights were $65 thousand for the three months ended September 30, 2026 compared to $141 thousand in capitalized additions for the three months ended September 30, 2025. Amortization of agricultural real estate loan servicing rights were $78 thousand and $75 thousand for the three months ended September 30, 2026 and 2025, respectively. The valuation allowance of agricultural real estate loan servicing rights was $1.4 million at September 30, 2026 compared to $454 thousand at September 30, 2025. For 1-4 family real estate loans of 15 years and less, the market value of the loan servicing rights was 1.359% in the third quarter 2026 versus 1.454% in third quarter 2025. For 1-4 family real estate loans over 15 years, the market value was 1.616% versus 1.421% for the same periods, respectively. At September 30, 2026 and 2025, the carrying value of certain strata were slightly above the market value thus requiring the establishment of a $10 and $5 thousand valuation allowance, respectively, for 1-4 family real estate servicing rights.

Noninterest Expense

For the three months ended September 30, 2026, noninterest expenses increased $479 thousand as compared to the same period in 2025. Salaries and wages, including normal merit increases, restricted stock expense and incentive payouts, increased $486 thousand in total. Of the total, base wages and incentive expense increased $472 thousand and $75 thousand, respectively, which was offset with increased deferred salary loans costs of $29 thousand and decreased restricted stock award expense of $32 thousand compared to 2025. Benefits increased from 2025 by $185 thousand due to increased 401k expense of $87 thousand, combined taxes and workmen's compensation of $123 thousand and miscellaneous expenses of $35 thousand offset with decreased medical expense of $58 thousand.

Net occupancy expense decreased $23 thousand for the three months ended September 30, 2026 as compared to the same three months in 2025. One factor that can offset occupancy expense is the receipt by the Company of building rent as it is netted out of occupancy expense. The greatest contributor to building rent comes from the division of FM Investments within the Bank. Building rent, generated from FM Investments in lieu of commissions, increased by $60 thousand in 2026 as compared to 2025. This revenue was able to partially offset increased lease expense of $56 thousand and automobile expense of $15 thousand. General insurance and utilities decreased $25 thousand and $12 thousand, respectively, in 2026 as compared to 2025.

Furniture and fixture expense increased $153 thousand for the three months ended September 30, 2026 as compared to 2025 with increased maintenance contracts of $142 thousand. Data processing and ATM expenses decreased a combined $358 thousand. Third quarter 2026 included a larger amount of flex credits utilized, with our core processor, as compared to third quarter 2025. Advertising increased $156 thousand with increased mailings, digital display and paid advertising for checking promotions in the third quarter of 2026 as compared to the same quarter in 2025 while community involvement expenses increased $76 thousand for the same time period.

FDIC assessments decreased $15 thousand in 2026 from 2025 due to a decrease in the quarterly assessment multiplier. Servicing rights amortization included $150 thousand for impairment of agricultural loan servicing rights in the three months ended September 30, 2026 as compared to $372 thousand in the three months ended September 30, 2025. Loan expense included a one-time payment of $173 thousand related to an incorrect interest rate during the third quarter of 2026. Consulting fees increased $70 thousand over the same period in 2025 due to placement fees and market studies. Of the $69 thousand decrease in professional fees, $52 thousand was attributed to reduced auditing and exam expenses in the three months ended September 30, 2026 as compared to 2025. The decrease of $140 thousand in intangible asset amortization was due to the Bank of Geneva core deposit intangible being fully amortized at the end of 2025.

Income Taxes

Income tax expense was $296 thousand higher for the three months ended September 30, 2026 compared to the same period in 2025 based mainly on pretax higher earnings of $3 million. Amortization of qualified affordable housing projects caused income tax expense to increase $113 and $111 thousand for the three months ended September 30, 2026 and 2025, respectively, as presented in Note 8. Effective tax rates were 18.83% and 21.19% for 2026 and 2025, respectively. Excluding the additional $113 and $111 thousand income tax expense for the respective periods, the effective tax rates would have been 18.03% and 20.20% for the three months ended September 30, 2026 and 2025, respectively.

Net Income

Overall, net income in the three months ended September 30, 2026 was up $2.7 million or 30.3% to $11.5 million as compared to last year's approximately $8.9 million. The biggest contributor to the improvement was net interest income. Net interest income was up $3.0 million or 11.3% due to both increased interest income of approximately $2.5 million and decreased interest expense of $531 thousand. Provision for credit losses for loans and unfunded commitments increased $90 thousand compared to 2025. Noninterest income increased by $510 thousand which was offset with an increase of $479 thousand to noninterest expense as described above. The Company remains strong, stable, and well capitalized and has the capacity to continue to cover the increased costs of expansion. The Company is optimistic about continued improvement in profitability due to the opportunity for continued expansion in the net interest margin.

Comparison of Results of Interest Earnings and Expenses for nine month periods ended September 30, 2026 and 2025

Interest Income

When comparing the nine months ended September 30, 2026 and 2025, average loan balances grew $90.5 million, which represented a 3.5% increase in a one-year time period. Interest income on loans increased $5.1 million or 4.3% as compared to the nine months ended September 30, 2025. Loan interest for third quarter 2025 included a one-time fee collected of $195 thousand in addition to $191 thousand from the recovery of one acquired relationship that had been fully charged off prior to acquisition. The Company's loan portfolio is 52.4% variable rate with 33.9% of total loans subject to repricing during the remainder of 2026 and 47.7% of total loans subject to repricing within the next twelve months.

The available-for-sale securities portfolio decreased in average balances by $1.8 million or 0.4% when comparing to the same period in 2025 with the income associated with the security portfolio increasing $1.2 million over the nine months ended September 30, 2025. During first quarter 2026, security sales of $5.4 million generated a realized loss of $347 thousand which is projected to be recouped from security purchases with a higher yield over 30.55 months. The additional income from the security portfolio can be attributed to the increased book yield of 2.97% as of September 30, 2026 from 2.32% as of September 30, 2025. Federal funds sold and interest-bearing deposits increased in average balances by $40.7 million as compared to the same nine month period ended September 30, 2025 with increased income of approximately $667 thousand for the current period. The increased balances are primarily the result of deposit generation offset by funding loans and repayment of other borrowed money.

The overall total average balance of the Bank's earning assets increased by $129.4 million and interest income for the period comparisons was higher for the nine months ended September 30, 2026 by 5.4% or approximately $7 million as compared to the nine month period ended September 30, 2025. Rate changes between periods have contributed to approximately 23.5% of the growth.

Annualized yield, for the nine months ended September 30, 2026, was 5.50% as compared to 5.42% for the comparable period ended September 30, 2025. The following charts demonstrate loan rate increases accounted for 20.4% of the increased loan interest income while increased loan balances accounted for the remaining 79.6%. The yields on tax-exempt securities and the portion of the tax-exempt IDB and agricultural loans included in loans have been tax adjusted based on a 21% tax rate in the charts that follow. The tax-exempt interest income was $1.6 million and $401 thousand for the nine months ended September 30, 2026 and 2025, respectively, which resulted in federal tax savings of $341 and $84 thousand, respectively, less the TEFRA adjustments of $32 and $12 thousand, respectively.

Change in Interest Income Year to Date September 30, 2026 Compared to September 30, 2025

Interest Expense

Contributing to the increased net interest income for the first nine months of 2026 was a decrease in interest expense of $2.8 million or 5.4% compared to the same period in 2025. Since 2025, average interest-bearing deposit balances have increased $161.1 million or 7.4% while the Company recognized $1.4 million less in interest expense for the most recent nine months. In September 2025, the Federal Reserve made its first rate change to the federal funds rate for 2025 with a reduction of 25 basis points followed by reductions of 25 basis points in both October and December. In September 2026, the Federal Reserve increased the federal funds rate by 25 basis points. Deposit rates continue to be reviewed and adjusted with rate changes. The following charts demonstrate increased average interest-bearing deposit balances accounted for $3.1 million of additional interest-bearing deposit expense while rate decreases accounted for decreased interest-bearing deposit expense of $4.5 million. Noninterest-bearing deposits balances decreased $12 million compared to the first nine months of 2025. The Bank continues to focus on capturing the full customer relationship; however, it has sometimes resulted in more expensive deposits being brought in.

Interest expense on borrowed funds decreased $1.2 million in the nine months ended September 30, 2026 over the same time frame in 2025 due to the repayment of FHLB advances. During the current nine months, FHLB borrowings of $91.7 million were repaid and proceeds from new borrowings were $32.2 million compared to repayment of borrowings of $58.2 million in 2025. Interest expense on federal funds purchased and securities sold under agreement to repurchase decreased $433 thousand compared to the first nine months of 2025 due to the decrease of $11.7 million in average balances. Cost of funds decreased even with growth in interest-bearing deposit balances offset by decreased borrowings and securities sold under agreement to repurchase compared to 2025. The average cost of funds decreased to 2.56% for the nine months ended September 30, 2026 compared to 2.84% for the nine months ended September 30, 2025. Interest expense due to subordinated notes increased $196 thousand during the year-to-date comparisons as the rate has changed to the Three-Month SOFR plus a spread of 263 basis points. Refer to Note 11 for additional information on subordinated notes.

Change in Interest Expense Year to Date September 30, 2026 Compared to September 30, 2025

As the following chart indicates, the improvement in yields on interest earning assets of 8 basis points combined with the decreased cost of funds of 28 basis points equated to a 36-basis point improvement in net interest spread when comparing to the same period a year ago. Competition for deposits remains intense with most competitors offering special rates for specific terms.

Net Interest Income

Net interest income increased $9.8 million for the nine months ended September 30, 2026 over the same time frame in 2025 due to the increase in interest income of approximately $7.0 million combined with the interest expense decrease of $2.8 million as previously mentioned. As the new loans added in 2025 and 2026 generate more income, management expects the benefits of the Company's strategy of repositioning the balance sheet to increase interest income in the long run. The Company has some opportunity for improved asset yield with loans repricing in 2026 with a greater opportunity beginning in 2027 and 2028. Loans as a percentage of earning assets decreased to 81.9% for the nine months ended September 2026 compared to 82.4% for the nine months ended September 2025. Loans to total assets decreased to 77.4% for the nine months ended September 2026 compared to 78.1% for the same period 2025. The percentage of earning assets to total assets decreased to 94.5% for the nine months ended September 2026 compared to 94.8% for the nine months ended September 2025. In terms of net interest margin, the Bank recognizes competition for deposits will continue; however, there is a greater opportunity for gradual improvement with loans repricing upwards in the next year.

Comparison of Noninterest Results of Operations for nine month periods ended September 30, 2026 and 2025

Provision Expense

The Allowance for Credit Losses (ACL) has a direct impact on the provision expense. The increase in the ACL is funded through recoveries and provision expense.

Total provision for credit losses decreased $520 thousand for the nine months ended September 30, 2026 as compared to the same period in 2025. Management continues to monitor asset quality, making adjustments to the provision as necessary, in accordance with the Bank's chosen CECL methodology. The impact of higher interest rates and inflation are taken into consideration when reviewing qualitative factors. Loan charge-offs were $45 thousand lower during the nine months ended September 30, 2026 than the same period in 2025. For the current nine month period, 92.8% of all charge-offs were in the consumer portfolio and consumer real estate portfolio segments while 95.6% charge-offs for the same period in 2025 were in the consumer portfolio segment. Of the total consumer charge-offs, $217 and $223 thousand were for automobiles and trucks for the nine months ended September 30, 2026 and 2025, respectively. 2025 consumer charge-offs also included $157 thousand for recreational vehicles. Recoveries were $78 thousand higher during the nine months ended September 30, 2026 as compared to same period in 2025 with 93.7% of total current quarter recoveries in the consumer portfolio and agricultural portfolio segments. Of the total consumer recoveries, $110 thousand were for automobiles and trucks and $17 thousand were for recreational vehicles for the nine months ended September 30, 2026 compared to $25 thousand for automobiles and trucks and $50 thousand for recreational vehicles for the same period in 2025. All of the time periods in 2025 and 2026 had net charge-offs to total loans ratios lower than 0.1% attesting to the strong asset quality of the Bank's loan portfolio.

The provision for credit losses on loans decreased by $1.7 million or 81.7% in the first nine months of 2026 compared to the first nine months of 2025 with gross loan portfolio growth of $25.5 million or 0.9% in the first nine months of 2026 compared to gross loan portfolio growth of $97.2 million or 3.8% in the first nine months of 2025. Moreover, gross commercial real estate loan balances declined by $34.6 million or 2.5% in the first nine months of 2026 compared to gross commercial real estate loan balance growth of $44.4 million or 3.4% in the first nine months of 2025, and commercial real estate loans tend to have higher reserves. Likewise, the Bank has experienced reductions in consumer loans which tend to have higher reserves, and an increase in agricultural loans which tend to have a lower reserve based on loss history. Lastly, net charge-offs in the first nine months of 2026 are also down $123 thousand or 32.4% compared to net charge-offs in the first nine months of 2025, which contributes to a lower provision for credit losses on loans.

The provision for unfunded loan commitments increased $1.1 million in the first nine months of 2026 compared to the same time period of 2025. Unfunded loan commitments increased $39 million in 2026 compared to decreasing $26.6 million in 2025.

Loans past due 30 or more days increased $3.8 million at September 30, 2026 as compared to September 30, 2025. The largest changes were attributed to the agricultural real estate portfolio segment which increased $2.7 million for the same time period, of which $3.0 million is attributed to one loan. The consumer real estate portfolio segment also increased $1.4 million while the commercial real estate portfolio segment decreased $430 thousand as compared to September 30, 2025.

The following table presents the activity within the ACL for each portfolio segment and shows the contribution provided by both recoveries and the provision, along with the reduction of the allowance caused by charge-offs. The time period covered is for the nine months ended September 30, 2026, 2025, and 2024.

*Nonperforming loans are defined as all loans on nonaccrual, plus any loans past due 90 days not on nonaccrual.

The balance of loans, amortized cost at September 30, 2026, September 30, 2025 and September 30, 2024 within this chart does not include a fair value basis adjustment for derivatives of a $159 thousand reduction, $1.9 million and $3.0 million, respectively, or a daily average outstanding balance of $980 thousand, $1.6 million or $1.3 million, respectively. Refer to Note 7 for additional information related to derivative financial instruments.

Loans classified as nonaccrual were higher as of September 30, 2026 at $6.2 million as compared to $5.2 million as of September 30, 2025. The agricultural real estate portfolio segment increased $3.3 million or 708.9% as compared to September 30, 2025 with $3.0 million attributed to one loan with a specific allocation of $35 thousand. The consumer real estate portfolio, commercial and industrial portfolio and commercial real estate portfolio segments decreased $1.7 million, $333 thousand and $140 thousand, respectively, as compared to September 30, 2025. Nonaccrual loans in the agricultural portfolio segment increased $51 thousand while nonaccrual loans in the consumer portfolio segment decreased $36 thousand as compared to September 30, 2025.

The consumer portfolio segment accounted for the largest components of charge-offs and recoveries for both the nine months ended September 30, 2026 and for the nine months ended September 30, 2025. Management has factored in the continuing impact of high interest rates and inflationary pressures on borrowers' ability to make payments.

Noninterest Income

Noninterest income was up $2.8 million, or 22.8%, for the nine months ended September 30, 2026 over the same time frame in 2025. Customer service fees increased by $326 thousand as compared to the nine months ended September 30, 2025 which was due primarily to increases of $120 thousand in miscellaneous customer service fees, $78 thousand in merchant service referral fees, $58 thousand in mortgage release fees, $35 thousand in monetization fees and $31 thousand in credit card fees. Other service fees increased by $236 thousand compared to the same period in 2025, which includes overdraft and returned check fees of $117 thousand and combined service charges on DDA, savings accounts, ATM and miscellaneous of $113 thousand. Interchange income increased $246 thousand, which included an additional $58 thousand received for support fees from Mastercard. Loan servicing income increased $305 thousand which included increased servicing rights income for 1-4 family real estate loans of $262 thousand offset by a decrease of $31 thousand for those associated with agricultural real estate loans as compared to the same period in 2025.

The volume of total originations of loans held for sale increased and the associated gain on the sale of these loans was $672 thousand higher for the nine months ended September 30, 2026 over the same period in 2025. Total originations of loans held for sale for the nine months ended September 30, 2026 were $71 million with proceeds from sale at $74 million for 2026 compared to 2025's activity of $45 million in originations and $46 million in sales. The mortgages sold were both 1-4 family real estate and agricultural real estate loans originated for sale.

The cash surrender value of bank owned life insurance increased $1.3 million from the same nine months ended September 30, 2025. The increase in BOLI revenue was due to more investment dollars in addition to higher earnings due to the Bank repositioning its holdings, which we expect to continue into the future.

The gain on sale of other assets owned for the nine months ended September 30, 2026 included a $139 thousand gain on the sale of the Ossian branch which the Bank is leasing back and a loss of $111 thousand on the sale of other real estate owned properties.

The loss on available for sale securities was $347 thousand for the nine months ended September 30, 2026. Management estimates that this loss is expected to be recouped over the next 30.55 months, as the sale proceeds were redeployed into purchases of higher yielding securities.

Noninterest Expense

For the nine months ended September 30, 2026, noninterest expenses were $1.5 million or 2.6% higher than for the same period in 2025. Salaries and wages, including normal merit increases, restricted stock expense and higher incentive payouts, increased $1.7 million in total. Of the total, base wages and incentive expense increased $1.1 million and $700 thousand, respectively, and was offset with increased deferred salary loans costs of $54 thousand and decreased restricted stock expense of $61 thousand as compared to 2025. Benefits increased from 2025 by $233 thousand due to increased combined taxes and workmen's compensation of $206 thousand and additional 401k expense of $154 thousand offset with a reduction in medical expense of $142 thousand.

Net occupancy expense decreased $197 thousand for the first nine months of 2026 as compared to 2025. One factor that can offset occupancy expense is the receipt by the Company of building rent as it is netted out of occupancy expense. The greatest contributor to building rent comes from the division of FM Investments within the Bank. Building rent, as generated from FM Investments in lieu of commissions, increased by $141 thousand in 2026 as compared to 2025. This revenue was able to partially offset increased lease expense of $95 thousand due to the opening of a new branch in third quarter 2025, building depreciation of $30 thousand and automobile expense of $27 thousand. With the sale of the Ossian branch, the remaining building fair value of $212 thousand from the acquisition was accreted into income.

Furniture and fixture expense increased $621 thousand for the nine months ended September 30, 2026 as compared to 2025 with increased maintenance contracts of $607 thousand. Data processing and ATM expenses decreased by a combined $315 thousand. The first nine months of 2026 included a larger amount of flex credits utilized from our core provider as compared to the first nine months of 2025. Advertising increased $116 thousand with increased mailings, digital display and paid advertising for checking promotions in the first nine months of 2026 as compared to 2025 while community involvement expenses increased $92 thousand for the same time period.

FDIC assessments decreased $143 thousand in 2026 from 2025 due to a decrease in the quarterly assessment multiplier. Servicing rights amortization included $541 thousand for impairment of agricultural loan servicing rights in the nine months ended September 30, 2026 compared to $359 thousand for the same time period in 2025. Loan expense included one-time payments of $169 thousand related to an acquired loan during the second quarter of 2026 and $173 thousand related to an incorrect interest rate during the third quarter of 2026. Consulting fees decreased $590 thousand over the same period in 2025 and is primarily attributable to lower non-recurring fees related to assistance with negotiations for the data processing contract and time spent on additional ancillary products related to our core banking operating system.

Of the $205 thousand decrease in professional fees, $148 thousand was attributed to reduced auditing and exam expenses in 2026 as compared to 2025. The decrease of $420 thousand in intangible asset amortization was due to the Bank of Geneva core deposit intangible being fully amortized at the end of 2025. General and administrative expense decreased $107 thousand. The items on this line of significance include increases in postage of $163 thousand, charitable contributions of $116 thousand, CDARS/ICS fees of $49 thousand and bank correspondent expenses of $42 thousand. Travel and entertainment also increased $58 and $38 thousand, respectively, in the first nine months of 2026 as compared to the same period in 2025. Offsetting the higher expenses were decreased NSF check losses of $215 thousand, out of state obligations of $210 thousand, and miscellaneous expenses of $161 thousand which included $126 thousand for the Modified Endowment Contract (MEC) penalty owed on the gain on cash surrender of bank owned life insurance policies in first quarter 2026.

Income Taxes

Income tax expense was $2.2 million higher for the nine months ended September 30, 2026 compared to the same period in 2025 based mainly on pretax higher earnings of $11.6 million in addition to a taxable $1.3 million gain on cash surrender value of bank owned life insurance policies. Amortization of qualified affordable housing projects caused income tax expense to increase $337 and $335 thousand for the nine months ended September 30, 2026 and 2025, respectively, as presented in Note 8. Effective tax rates were 20.33% and 20.80% for 2026 and 2025, respectively. Excluding the additional $337 and $335 thousand income tax expense for the respective periods, the effective tax rates would have been 19.52% and 19.67% for the nine months ended September 30, 2026 and 2025, respectively.

Net Income

Overall, net income in the nine months ended September 30, 2026 was up $9.4 million or 40.0% to $32.9 million as compared to last year's $23.5 million. The largest contributor to the improvement was net interest income. Net interest income was up $9.8 million or 12.8% due to both increased interest income of approximately $7.0 million and decreased interest expense of $2.8 million. Provision for credit losses for loans and unfunded commitments decreased $520 thousand compared to 2025. Noninterest income increased $2.8 million, which was offset with an increase of $1.5 million in noninterest expense as described above. The Company remains strong, stable, and well capitalized and has the capacity to continue to cover the increased costs of expansion. The Company is optimistic about continued improvement in profitability due to the opportunity for continued expansion in the net interest margin.

FORWARD-LOOKING STATEMENTS

This report, including the sections entitled Management's Discussion and Analysis of Financial Condition and Results of Operations, may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are not historical facts and can be identified by words such as "anticipate," "believe," "could," "expect," "forecast," "goal," "guidance," "intend," "likely," "may," "objective," "outlook," "plan," "project," "seeks," "should," "target," "will," "would," and similar expressions, as well as their negatives. These statements include, among other things, statements regarding our strategy, future operations, financial condition, results of operations, capital and liquidity levels, margins, asset quality, loan and deposit growth, noninterest income, expense trends, capital management, dividends, share repurchases, and the timing and effects of regulatory or accounting developments and are based on current expectations and assumptions of management.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that could cause actual results to differ materially include, but are not limited to, the following:

The foregoing list of factors is not exclusive. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial also may adversely affect the Company's business, financial condition, results of operations, or cash flows.

Any forward-looking statement speaks only as of the date it is made. The Company undertakes no obligation to update any forward-looking statements, whether written or oral, to reflect events or circumstances after the date of this report, except as required by law. Readers should not place undue reliance on forward-looking statements, which are not guarantees of future performance and involve risks, uncertainties, and assumptions.